Financial Accounting Part 1

Introduction

• Key topics in accounting

1. The Accounting Equation

• Clay tokens, sheep, and the Italians
• Basic equation
• Expanded accounting equation: SCF
• Expanded accounting equation: IS

2. Assets

• Assets: Planes, trains, and automobiles
• Definition of an asset
• Types of assets: Current
• Types of assets: Long-term

3. Liabilities

• Obligations to suppliers, employees, governments, and customers
• Definition of a liability
• Types of liabilities: Current
• Types of liabilities: Long-term
• Contingent liabilities

4. Owners' Equity

• Owners' equity: Paid-in capital and retained earnings
• Definition of equity
• Book value vs. net worth
• Other components of owners' equity

5. Financial Statements: Balance Sheet

• Financial statements: Balance sheet for Walmart
• Where financial statements come from
• The Microsoft balance sheet
• Notes from Microsoft on the balance sheet
• Limitations of the balance sheet

6. Financial Statements: Income Statement

• The balance sheet vs. the income statement
• Evaluating an income statement
• Components of the income statement
• Revenues, expenses, gains, and losses
• Earnings per share
• The Walmart income statement

7. Financial Statements: Statement of Cash Flows

• What makes a business a cash cow?
• Statement of cash flows
• Statement of cash flows: Examples

8. How Financial Statements Are Made

• The importance of routine bookkeeping
• Transaction analysis
• Impact of events on assets and liabilities
• Reporting assets and liabilities on the balance sheet
• The expanded accounting equation
• Impact of events on revenues and expenses
• Revenues and expenses with the expanded accounting equation
• Recapping the balance sheet and expanded accounting equation

9. Debits and Credits

• The accuracy of debits and credits in the days of real “books”
• Debits and credits
• Understanding journal entries
• Preparing a journal entry
• Impacts of journal entry on accounts
• T-accounts and posting
• Trial balance: The raw material for financial statements

10. Accrual Accounting

• The market value of accounting adjustments
• Net income vs. cash flow
• Four general types of adjustments
• Adjusting journal entries
• Classifying adjusting journal entries
• Adjusting journal entries and the balance sheet
• Computing retained earnings account after adjusting journal entries
• Closing revenue, expense, and dividend accounts
• Making the financial statements

Conclusion

• Next steps