c1 - 1 learning objectives 1.nature of a business 2.the role of accounting in business 3.business...
TRANSCRIPT
C1 - 1
Learning Objectives
1. Nature of a Business
2. The Role of Accounting in Business
3. Business Ethics
4. Profession of Accounting
5. Generally Accepted Accounting Principles
6. Assets, Liabilities, and Owner’s Equity
7. Business Transactions
8. Financial Statements
9. Financial Analysis and Interpretation.
Power Notes Introduction to Accounting and Business Introduction to Accounting and Business
Chapter F1
C1
C1 - 2 Note: To select a topic, type the slide # and press Enter.
• Accounting – An Information Process• Users of Accounting Information• Profession of Accounting• The Accounting Equation• Business Transactions• Financial Statements• Ratio of Liabilities to Stockholders Equity
Slide # Power Note Topics
Power Notes Introduction to Accounting and Business Introduction to Accounting and Business
Chapter F1
39
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Accounting — An Information Process Accounting — An Information Process
Accounting — An Information Process Accounting — An Information Process
Identificationof Users
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UserInformation
Needs
Accounting — An Information Process Accounting — An Information Process
Accounting — An Information Process Accounting — An Information Process
Identificationof Users
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Identificationof Users
UserInformation
Needs
AccountingSystem
Accounting — An Information Process Accounting — An Information Process
Accounting — An Information Process Accounting — An Information Process
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Identificationof Users
UserInformation
Needs
AccountingSystem
Economic Dataand Activities
Accounting — An Information Process Accounting — An Information Process
Accounting — An Information Process Accounting — An Information Process
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Identificationof Users
UserInformation
Needs
AccountingSystem
Economic Dataand Activities
Reports
Accounting — An Information Process Accounting — An Information Process
Accounting — An Information Process Accounting — An Information Process
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a. Chris Clark deposits $25,000 in a bank account for NetSolutions in return for shares of stock in the
corporation.
ASSETS
=
Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
Cash Cash 25,00025,000
LIABILITIES
Capital Stock Capital Stock 25,00025,000
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
b. NetSolutions buys land for $20,000.
ASSETS
=
LIABILITIES
Cash Cash (20,000)(20,000)
Land Land 20,00020,000
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future.
Accounts PayableAccounts Payable1,3501,350
Supplies Supplies 1,3501,350 STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash 7,5007,500
Fees Earned Fees Earned 7,5007,500
d. NetSolutions earns fees of $7,500, receiving cash.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash (3,650)(3,650)
ExpensesExpenses(3,650)(3,650)
e. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash (950)(950)
Accounts PayableAccounts Payable(950)(950)
f. NetSolutions pays $950 to creditors on account.
STOCKHOLDERS’ EQUITY
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Identificationof Users
UserInformation
Needs
AccountingSystem
Reports
Economic Dataand Activities
UserDecisions
Accounting — An Information Process Accounting — An Information Process
Accounting — An Information Process Accounting — An Information Process
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash (2,000)(2,000)
DividendsDividends(2,000)(2,000)
h. NetSolutions pays $2,000 to stockholders (Chris Clark) as dividends.
STOCKHOLDERS’ EQUITY
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EXTERNAL USERS
Financial AccountingFinancial Accounting
• investors• creditors• regulators• customers• competitors
Users of Accounting InformationUsers of Accounting InformationUsers of Accounting InformationUsers of Accounting Information
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EXTERNAL USERS
Financial AccountingFinancial Accounting
• investors• creditors• regulators• customers• competitors
• owners• managers• employees
INTERNAL USERS
ManagerialManagerial AccountingAccounting
Users of Accounting InformationUsers of Accounting InformationUsers of Accounting InformationUsers of Accounting Information
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Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
NetSolutionsIncome Statement
For the Month Ended November 30, 2002
Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050
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NetSolutionsRetained Earnings Statement
For the Month Ended November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
Net income for November $ 3,050Less dividends 2,000Retained earnings, November 30, 2002 $ 1,050
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NetSolutionsBalance Sheet
November 30, 2002
AssetsCash $ 5,900Supplies 550Land 20,000Total assets $26,450
LiabilitiesAccounts payable $ 400
Stockholders’ EquityCapital stock $25,000Retained earnings 1,050 26,050Total liabilities and stockholders’ equity $26,450
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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NetSolutionsStatement of Cash Flows
For the Month Ended November 30, 2002
Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000Cash flows from financing activities: Cash received from sale of stock $25,000 Deduct cash dividends 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900
)
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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Ratio of Liabilities to Stockholders’ EquityRatio of Liabilities to Stockholders’ EquityRatio of Liabilities to Stockholders’ EquityRatio of Liabilities to Stockholders’ Equity
Ratio of liabilitiesto stockholders’ equity =
FormulaFormula
Objective: Use the ratio of liabilities to stockholders’ equity to analyze the ability of a business to withstand poor business conditions and to pay its creditors.
Total liabilities
Total stockholders’ equity
NetSolutions =
ExampleExample
$400
$26,0500.015
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What are the starting rates for new graduates?
GovernmentGovernment IndustryIndustry CPA FirmsCPA Firms
College Graduates
The Accounting Profession The Accounting Profession
AuditorStaff
Accountant Junior
Accountant
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GovernmentGovernment IndustryIndustry CPA FirmsCPA Firms
StaffAccountant
JuniorAccountantAuditor
College Graduates
How soon would I get promoted?
The Accounting Profession The Accounting Profession
SeniorAccountantSupervisor Chief
Accountant
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What are the top positions in each category?
GovernmentGovernment IndustryIndustry CPA FirmsCPA Firms
ChiefAccountant
StaffAccountant
SeniorAccountant
JuniorAccountant
Supervisor
Auditor
College Graduates
The Accounting Profession The Accounting Profession
Controller ManagerDirector
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What is the fastest path to top management?
GovernmentGovernment
Administrator
IndustryIndustry
Vice PresidentFinance
CPA FirmsCPA Firms
ChiefAccountant
StaffAccountant
Controller
Partner
Manager
SeniorAccountant
JuniorAccountant
Director
Supervisor
Auditor
College Graduates
The Accounting Profession The Accounting Profession
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10 to 20 years of experience1
GovernmentGovernment
The Accounting Profession The Accounting Profession
Administrator
IndustryIndustry
Vice PresidentFinance
CPA FirmsCPA Firms
1
6 to 8 years of experience2
ChiefAccountant
StaffAccountant
Controller
Partner
Manager
SeniorAccountant
JuniorAccountant
2
Director
Supervisor
Auditor
College Graduates
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Resources
The Accounting EquationThe Accounting Equation
What are an organization’s resources called?
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Assets
Resources = Sources
The Accounting EquationThe Accounting Equation
What are the sources of the assets?
Cost of resources usedin the business
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Assets
Liabilities
Stockholders’Equity
Resources = Sources
Cost of resources usedin the business
Resources supplied by
creditors and owners
The Accounting EquationThe Accounting Equation
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ASSETS
=
Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
STOCKHOLDERS’ EQUITY
LIABILITIES
a. Chris Clark deposits $25,000 in a bank account for NetSolutions in return for shares of stock in the
corporation.
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ASSETS
=
Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
Cash Cash 25,00025,000
LIABILITIES
a. Chris Clark deposits $25,000 in a bank account for NetSolutions in return for shares of stock in the
corporation.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
b. NetSolutions buys land for $20,000.
ASSETS
=
LIABILITIES
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
b. NetSolutions buys land for $20,000.
ASSETS
=
LIABILITIES
Cash Cash (20,000)(20,000)
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Supplies Supplies 1,3501,350
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
d. NetSolutions earns fees of $7,500, receiving cash.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash 7,5007,500
d. NetSolutions earns fees of $7,500, receiving cash.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
e. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash (3,650)(3,650)
e. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
f. NetSolutions pays $950 to creditors on account.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash (950)(950)
f. NetSolutions pays $950 to creditors on account.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
g. At the end of the month, the cost of supplies on hand is $550.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Supplies Supplies (800)(800)
g. At the end of the month, the cost of supplies on hand is $550.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Supplies Supplies (800)(800)
Supplies ExpenseSupplies Expense(800)(800)
g. At the end of the month, the cost of supplies on hand is $550.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
h. NetSolutions pays $2,000 to stockholders (Chris Clark) as dividends.
STOCKHOLDERS’ EQUITY
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Business TransactionsBusiness TransactionsBusiness TransactionsBusiness Transactions
ASSETS
=
LIABILITIES
Cash Cash (2,000)(2,000)
h. NetSolutions pays $2,000 to stockholders (Chris Clark)as dividends.
STOCKHOLDERS’ EQUITY
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Transaction SummaryTransaction SummaryTransaction SummaryTransaction Summary
ASSETS
=
LIABILITIES
CashCash 5,9005,900SuppliesSupplies 550550LandLand 20,00020,000
STOCKHOLDERS’ EQUITY
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Transaction SummaryTransaction SummaryTransaction SummaryTransaction Summary
ASSETS
=
LIABILITIES
CashCash 5,9005,900SuppliesSupplies 550550LandLand 20,00020,000
Accts. PayableAccts. Payable 400400
STOCKHOLDERS’ EQUITY
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Transaction SummaryTransaction SummaryTransaction SummaryTransaction Summary
ASSETS
=
LIABILITIES
CashCash 5,9005,900SuppliesSupplies 550550LandLand 20,00020,000
Accts. PayableAccts. Payable 400400
Capital StockCapital Stock 25,00025,000DividendsDividends (2,000)(2,000)Fees EarnedFees Earned 7,5007,500Wages ExpenseWages Expense (2,125)(2,125)Rent ExpenseRent Expense (800)(800)Supplies ExpenseSupplies Expense (800)(800)Utilities ExpenseUtilities Expense (450)(450)Misc. ExpenseMisc. Expense (275)(275)
STOCKHOLDERS’ EQUITY
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STOCKHOLDERS’ EQUITY
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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decreased bydecreased by
STOCKHOLDERS’ EQUITY
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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decreased bydecreased by
STOCKHOLDERS’ EQUITY
Dividends
Expenses
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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STOCKHOLDERS’ EQUITY
increased byincreased by
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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STOCKHOLDERS’ EQUITY
increased byincreased by
Stockholders’ investments
Revenues
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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STOCKHOLDERS’ EQUITY
Dividends
Expenses
decreased bydecreased by increased byincreased by
Stockholders’ investments
Revenues
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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STOCKHOLDERS’ EQUITY
decreased bydecreased by increased byincreased by
NET INCOME
Dividends
Expenses
Stockholders’ investments
Revenues
Effects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ EquityEffects of Transactions on Stockholders’ Equity
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Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
NetSolutionsIncome Statement
For the Month Ended November 30, 2002
Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050
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Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
NetSolutionsIncome Statement
For the Month Ended November 30, 2002
Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050
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Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
NetSolutionsIncome Statement
For the Month Ended November 30, 2002
Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050
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Net income for November $ 3,050Less dividends 2,000Retained earnings, November 30, 2002 $ 1,050
NetSolutionsRetained Earnings Statement
For the Month Ended November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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Net income for November $ 3,050Less dividends 2,000Retained earnings, November 30, 2002 $ 1,050
NetSolutionsRetained Earnings Statement
For the Month Ended November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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Net income for November $ 3,050Less dividends 2,000Retained earnings, November 30, 2002 $ 1,050
NetSolutionsRetained Earnings Statement
For the Month Ended November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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AssetsCash $ 5,900Supplies 550Land 20,000Total assets $26,450
LiabilitiesAccounts payable $ 400
Stockholders’ EquityCapital stock $25,000Retained earnings 1,050 26,050Total liabilities and stockholders’ equity $26,450
NetSolutionsBalance Sheet
November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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AssetsCash $ 5,900Supplies 550Land 20,000Total assets $26,450
LiabilitiesAccounts payable $ 400
Stockholders’ EquityCapital stock $25,000Retained earnings 1,050 26,050Total liabilities and stockholders’ equity $26,450
NetSolutionsBalance Sheet
November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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AssetsCash $ 5,900Supplies 550Land 20,000Total assets $26,450
LiabilitiesAccounts payable $ 400
Stockholders’ EquityCapital stock $25,000Retained earnings 1,050 26,050Total liabilities and stockholders’ equity $26,450
NetSolutionsBalance Sheet
November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
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NetSolutionsStatement of Cash Flows
For the Month Ended November 30, 2002
)
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000Cash flows from financing activities: Cash received from sale of stock $25,000 Deduct cash dividends 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900
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NetSolutionsStatement of Cash Flows
For the Month Ended November 30, 2002
)
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000Cash flows from financing activities: Cash received from sale of stock $25,000 Deduct cash dividends 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900
C1 - 69
NetSolutionsStatement of Cash Flows
For the Month Ended November 30, 2002
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements
Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000Cash flows from financing activities: Cash received from sale of stock $25,000 Deduct cash dividends 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900
)