2-1 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright © 2012 The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Basic Financial Statements Chapter 2

2-2 Describes where the enterprise stands at a specific date. Income Statement Balance Sheet Statement of Cash Flows Introduction to Financial Statements

2-3 Depicts the revenue and expenses for a designated period of time. Income Statement Balance Sheet Statement of Cash Flows Introduction to Financial Statements

2-4 Depicts the ways cash has changed during a designated period of time. Income Statement Balance Sheet Statement of Cash Flows Introduction to Financial Statements

2-5 A Starting Point: Statement of Financial Position

2-6 The Concept of the Business Entity Vagabond Travel Agency A business entity is separate from the personal affairs of its owner.

2-7 Assets Assets are economic resources that are owned by the business and are expected to benefit future operations.

2-8 Assets Cost Principle Going-Concern Assumption Going-Concern Assumption Objectivity Principle Objectivity Principle Stable-Dollar Assumption Stable-Dollar Assumption These accounting principles support cost as the basis for asset valuation.

2-9 Liabilities Liabilities are debts that represent negative future cash flows for the enterprise.

2-10 Owners Equity Owners equity represents the owners claims on the assets of the business.

2-11 The Accounting Equation Assets = Liabilities + Owners Equity $300,000 = $80,000 + $220,000 Assets = Liabilities + Owners Equity $300,000 = $80,000 + $220,000

2-12 Relationships Among Financial Statements Date at beginning of period Date at end of period Balance Sheet Time Income Statement Statement of Cash Flows

2-13 Financial Statement Articulation

2-14 Statement of Cash Flows Balance Sheet Income Statement Other Information: Nonfinancial disclosures Management interpretation Industry Competitors National economy Financial Reporting and Financial Statements Financial statements are just one source of financial accounting information.

2-15 Reporting Ownership Equity in the Statement of Financial Position Sole Proprietorships Partnerships Corporations

2-16 End of Chapter 2