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Financial Accounting Cheat Sheet (DRAFT) by

Accounting Principles,

This is a draft cheat sheet. It is a work in progress and is not finished yet.

What is Accoun­ting?

- The language of business
- Process of recogn­izing, measuring, recording, and disclosing economic events and transa­ctions
- It is crucial for informed decision making and business activities

Who wants inform­ation about a company?

Internal Group
External Group
- Managers
- Investors, Other Lenders
- Employees
- Suppliers, Customers
 
- Govern­ment, Public

Different Types of Accounting

Management Accounting
Financial Accounting
- provides info for the company itself
- provides info for users outside the company
- true and objective picture of the company's situation
- picture of company might not be true and objective
- no need to keep inform­ation secret
- incentive to keep inform­ation secret
- provided more frequently
- only provided once a year

Balance Sheet

Assets
Equity + Liabil­ities
 

Business activities

1. Financing Activities
2. Investing Activities
3. Operating Activities

Financing Activities

primarily two sources for funding
1. Borrowing money from third-­­pa­rties
• Liabil­ities are the amounts owed
• Creditors are who we owe
• Interest is the payment to creditors

2. Issuing shares & selling stocks
• Equity is the share of stockh­olders
• Dividends are the payments to stockh­olders

Investing Activities

purchase of resources a company needs to operate
1. Property, plant and equipment
• Trucks, machinery, computers, furniture, buildings, material etc.

2. These resources are called assets.

Operating Activities

sales of product or provision of service
• Revenue: Amount of money earned from the sales during the accounting period
• Finished good inventory: Goods available for sale to a customer
• Accounts receiv­able: Right to receive money from a customer as a result of a sale
• Parties who owe amounts to our company are debtors
• Expenses: All cost associated with the production of the product or the provision of the service
• Net income or profit: revenue > expenses
• Net loss: revenue < expenses