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Creditors
Managers
1. Purchase parts
and labor
2. Manufacture
product
The
Business
Operatio
ns
4. Collect cash from
customers and pay
creditors
3. Sell products
to customers
1-3
3
Reports
information
to decision
makers
Managers
(internal
decision
makers)
Investors
and
Creditors
(external
decision
makers)
1-4
4
Investors, creditors,
suppliers, customers, etc.
1-5
5
Cash
Inventory
Equipment
Notes
Payable
1-6
6
A = L + SE
(Assets)
Economic
Resources
(Liabilities)
(Stockholders
Equity)
1-8
8
Liabilities
Cash
Short-Term Investment
Accounts Receivable
Notes Receivable
Inventory (to be sold)
Supplies
Prepaid Expenses
Long-Term Investments
Equipment
Buildings
Land
Intangibles
Accounts Payable
Accrued Expenses
Notes Payable
Taxes Payable
Unearned Revenue
Bonds Payable
Stockholders
Stockholders Equity
Equity
Contributed Capital
Retained Earnings
1-9
9
Balance Sheet
1-10
10
Expenses
Sales Revenue
Fee Revenue
Interest Revenue
Rent Revenue
1-11
11
Income Statement
1-12
12
1-13
13
MAXIDRIVE CORP.
Statement of Retained Earnings
For the Year Ended December 31, 2009
(in thousands of dollars)
Retained earnings, January 1, 2009
$6,805
Net income for 2009
3,300
Dividends for 2009
(1,000)
Retained earnings, December 31,
2009
$9,105
1-14
14
1-15
15
Income Statement
$
Revenues 15,500
Expenses (8,500)
Net
$
income
7,000
7,000
Dividends
Ending retained
earnings
(2,500)
$
63,500
1-16
16
Cash
Net income
Other assets
7,000
Dividends
(2,500)
$
Ending retained earnings 63,500
Balance Sheet
Total assets
Liabilities
Stockholders' Equity
Common stock
Retained earnings
Total liabilities and
$
14,000
171,500
$
185,500
$
42,000
80,000
63,500
$
1-17
17
$
Increase in cash
8,500
Balance Sheet
Cash
Liabilities
171,500
$
185,500
$
42,000
Stockholders' Equity
5,500
$
14,000
Retained earnings
Total liabilities and
equity
Other assets
$
14,000
Total assets
Common stock
80,000
63,500
$
185,500
1-18
18
Notes
All financial statements
should be accompanied
by notes which provide
the reader with
supplemental
information about the
financial condition and
results of operations of
the company.
1-19
19
Effective
Effective communication
communication means
means
that
that the
the recipient
recipient understands
understands
what
what the
the sender
sender intends
intends to
to convey.
convey.
1-22
22
1-23
23
1-24
24
1-25
25
International Perspective
Since
Since 2002,
2002, there
there has
has been
been substantial
substantial
movement
movement to
to develop
develop international
international financial
financial
reporting
reporting standards
standards by
by the
the International
International
Accounting
Accounting Standards
Standards Board
Board (IASB).
(IASB).
1-26
26
1-27
27
Independent Auditors
Auditors
express an
opinion as to the
fairness of the financial
statement
presentation.
Independent auditors
have responsibilities
that extend to the
general public.
Overall, I believe
these financial
statements are
fair.
1-28
28
Independent Auditors
An audit involves . . .
Examining
1-30
End of Chapter 1
McGraw-Hill/Irwin