BADMO01 ecture 2
BADM001 Lecture 2
Overview o Basic reports o where does money come from? n Where does money go?
Overview Basic Reports Where does money come from? Where does money go?
Basic reports n Accounting System provides a scorecard on the company identifies areas of concern generates information for decision making n Basic two financial statements Balance sheet Income statement
Basic reports Accounting System – provides a scorecard on the company – identifies areas of concern – generates information for decision making Basic two financial statements – Balance Sheet – Income Statement
Balance sheet (see exhibit 1.5 in notes) n Assets: essentially anything of value which the company owns n Liabilities: anything the company owes to others n Owner's Equity: the part of the business owned by the investors; another way to look at owners equity is the part of the business owed to the owners or stockholder
Balance Sheet (see exhibit 1.5 in notes) Assets: essentially anything of value which the company owns Liabilities: anything the company owes to others Owner’s Equity: the part of the business owned by the investors; another way to look at owners equity is the part of the business owed to the owners or stockholder
Balance sheet o Assets Liabilities+ Owners equity towed to= tOwed to +i Owed to others] the stockholders] o Therefore what is owed to the company always equals what is owed by the company. o a Balance sheet provides a picture of a company's assets liabilities and owner's equity at a single point in time
Balance Sheet Assets = Liabilities + Owners Equity {Owed to} = {Owed to + { Owed to Others } the stockholders} Therefore, what is owed to the company always equals what is owed by the company. A Balance Sheet provides a picture of a company’s assets, liabilities and owner’s equity at a single point in time
Income statement o Income: Revenues (or promises of revenues) produced by a company usually through sales to others n Expenses: The costs associated with the generation of revenues n Net Income: The difference created when expenses are subtracted from the corresponding income
Income Statement Income: Revenues (or promises of revenues) produced by a company usually through sales to others. Expenses: The costs associated with the generation of revenues. Net Income: The difference created when expenses are subtracted from the corresponding income
Income statement Revenues Expenses Net Income
Income Statement Revenues - Expenses Net Income
Basic interaction between Balance sheet income Statement n The income statement provides a calculation of net income for a period of t ime n The balance sheet shows a picture"of the company before and after that period of time n Any effects on the Balance sheet are detailed by the Income Statement. If assets go up or down we know why If liabilities go up or down, we know why ow wh ity aoi
Basic Interaction Between Balance Sheet & Income Statement The Income Statement provides a calculation of net income for a period of time. The Balance Sheet shows a “picture” of the company before and after that period of time. Any effects on the Balance Sheet are detailed by the Income Statement. – If assets go up or down, we know why – If liabilities go up or down, we know why – If owner’s equity goes up or down, we know why
Basic interaction between Balance sheet income Statement Year 1 Year 2 Balance Income Balance Sheet Statement Sheet Period of time can be monthly, quarterly, annually
Basic Interaction Between Balance Sheet & Income Statement Balance Sheet Balance Sheet Year 1 Year 2 Income Statement Period of time can be monthly, quarterly, annually
Scorecards (exhibit 1.14) n Companies are compared by size of raw numbers atios of certain assets liabilities and owner's equIty variances from predictions n Examples of raw numbers revenues cash on hand
Scorecards (exhibit 1.14) Companies are compared by: – size of raw numbers – ratios of certain assets, liabilities and owner’s equity – variances from predictions Examples of raw numbers – revenues – cash on hand
