Balance Sheet At December 31, 20A (In thousands of dollars) Assets Cash $ 4,895 Accounts receivable 5,714 Inventories 8,517 Plant and equipment 7,154 Land 981 Total assets $ 27,261 Liabilities and Stockholders' Equity Liabilities Accounts payable $ 7,156 Notes payable 9,000 Amounts owed to suppliers for prior purchases. $ 27,261ġ6 Accounts payable Notes payable MAXIDRIVE CORP. Retained equipment earnings 9,105 Total stockholders' equity 11,105 Total Land liabilities Property and stockholders' on which equity factories are located. Equity Contributed Plant and capital $ 2,000 Factories and production machinery. Partial and completed but unsold Total liabilities $ 16,156 Inventories Stockholders' product. Liabilities Accounts payable $ 7,156 Notes payable 9,000 receivable Amount of cash in the company s bank Amounts owed by customers from prior sales. Balance Sheet At December 31, 20A (In thousands of dollars) Assets Cash $ 4,895 Accounts receivable 5,714 Inventories 8,517 Plant and equipment 7,154 Land 981 Total assets $ 27,261 Liabilities and Stockholders' Equity Cash account. resources = Liabilities: from creditors Equity: from stockholders.ġ5 Assets are listed by their ease of conversion into cash. Stockholders Equity Amount of of financing provided by by owners of of the the business and and operations.ġ4 The Balance Sheet Basic Accounting Equation Assets = Liabilities + Stockholders Equity Economic Sources of financing. Liabilities Debts Debts or or obligations of of the the business that that result result from from past past transactions. Specific and Stockholders' date Equity Liabilities (financial snapshot at a specific Accounts payable $ 7,156 point in time) Notes payable 9, Unit measure Total liabilities $ 16,156 (thousands of dollars) Stockholders' Equity Contributed capital $ 2,000 Retained earnings 9,105 Total stockholders' equity 11,105 Total liabilities and stockholders' equity $ 27,261ġ3 The Balance Sheet Assets Body of the Statement Economic benefits owned owned by by the the business as as a result result of of past past transactions. Title assetsof statement $ 27,261 Liabilities 3. and Name equipment of entity 7,154 Land (the separate-entity assumption) 981 Total 2. Balance Sheet At December 31, 20A (In thousands of dollars) Assets Cash $ 4,895 Accounts receivable 5,714 Inventories 8,517 Plant 1. s financial statements.ġ2 MAXIDRIVE CORP. Statement of Cash Flows Statement of Retained Earnings Balance Sheet Income Statementġ0 Information Conveyed in Financial Statements Most companies prepare financial statements at the end of the quarter (called quarterly reports) and the end of the year (called annual reports) Xġ1 Let s look at MAXIDRIVE CORP. Internal Decision Makers (managers throughout the organization).ĩ Information Conveyed in Financial Statements The four basic financial statements. External Decision Makers (investors, creditors, suppliers, customers, etc.). Managerial Accounting System (preparation of detailed plans, forecasts and reports). Business managers (internal) Investors (external)Ĩ Understanding Business Operations Accounting System Financial Accounting System (preparation of four basic financial statements). Collects and processes financial information about an organization. Manufacturer Product Customerħ Understanding Business Operations All businesses have an accounting system that. Loan Interest Dana s DinerĦ Understanding Business Operations Manufacturers either make the parts needed to produce its products or buy the parts from suppliers. Receive a portion of the company s earnings in cash (dividends).ĥ Business Background Creditors lend money to a company for a specific length of time and gain by charging interest on the money loaned. Balance Sheet Income Statement StakeholdersĤ Business Background Business owners (called investors or stockholders) look for two sources of possible gain: Sell ownership interest in the future for more than they paid. ShortĢ Chapter 1 Financial Statements and Business Decisionsģ The Objectives of Financial Accounting Financial statements are the primary means of communicating financial information to parties outside the business organization. 1 FINANCIAL ACCOUNTING Robert Libby Patricia A.