UNIT THREE

BUSINESS TRANSACTIONS BUSINESS TRANSACTIONS AND FINANCIAL STATEMENTSAND FINANCIAL STATEMENTS

BUSINESS TRANSACTIONS BUSINESS TRANSACTIONS AND FINANCIAL STATEMENTSAND FINANCIAL STATEMENTS

Two kinds of assetsCurrent assets: exist in a short time.

(Cash,checks, money orders…)

Fixed assets: exist in a long time .

(land, buidings and machinery)

Assets can be

• Tangible

• Intangible

Two kinds of store

1. Chain stores belong to the parent company.

2. Franchise stores do not belong to the parents company. They buy the license from the parents company and set up a business.

Two kinds of Accounting Period

Company Last month of fiscal year

American Greetings February

Caesar ‘s World July

Coleco Industries December

Walt Disney Productions September

Fiscal year

Calendar year

A SERVICE COMPANY

Lachong university HCMC University Medical Center

Hawaii Travel Agency New World Hotel

A MERCHANDISING COMPANY

FAHASA BOOK STORE

COOP MART SUPERMARKET

A MANUFACTURING COMPANY

KINHDO BAKERY

NOKIA FACTORY COTTON MILL

Three principles of accounting• An accounting system must provide

consistency in the accumulation and recording of financial data.

• An accounting system must make it possible to compare the data issued to management, government and the public.

• An accounting system must provide the basis for arriving at decisions and solution in handing the coperational and financial problem of the organization.

The Income StatementA financial statement that summarizes the amount of revenues earned and expenses incurred by a business over a period of time

The Statement of Owner’s equityShows the changes in the owner’s capital account over a period of time

The Balance SheetThe purpose of the balance sheet is to show the financial position of a business on a certain date. Note that the capital account on the balance sheet comes from the ending balance shown on the statement of owner’s equity

Assets Liabilities Owner’s Equity

Balance sheet

= +

Capital Account

WithdrawalsAccount

Investments(recorded directly in capital account)

ExpenseAccounts

RevenueAccounts

Shown on Statement ofOwner’s Equity

Shown onIncome Statement

Shannon Realty

Income Statement

Revenues

Commissions Earned $3,500

Expenses

Equipment Rental Expense $1,000

Wages Expense 400

Total Expenses 1,400

Net Income $2,100$2,100

Shannon Realty

Statement of Owner’s Equity

Add: Investments by John $50,000

Net income for the month 2,100

Subtotal $52,100

Less: Withdrawals by John 600

John , capital $51,500

Shannon Realty

Balance Sheet

Assets Liabilities

Cash $22,100 Accounts payable $600

Accounts Receivable 2,000 Owner’s Equity

Buiding 28,000 John, capital 51,500

Total $52,100 Total $52,100

To whom are financial statements sent?

They are sent to owners, management personnel, labor unions, appropriate government bureaus, creditors and the general public.

Give an example of a financial report distributed within the company?

A cash report, for example, may be required daily by some companies, but only weekly or monthly by others.

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