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    1. Accounting provides key financial reports including the statement of financial position (balance sheet), income statement, and statement of cash flows. These reports give owners and managers important information about the company's performance, financial position, and cash flows. 2. The statement of financial position provides a snapshot of a company's assets, liabilities, and net worth on a given date. It shows whether the company is solvent and liquid. 3. The income statement shows the revenues and expenses over a period of time, with the net income indicating whether the company made a profit. Profits increase the company's net worth and long-term viability.

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    CHAPTER 1INTRODUCTION TO ACCOUNTINGAND BUSINESSNET WORTH AND ACCOUNTING

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    1. Accounting provides key financial reports including the statement of financial position (balance sheet), income statement, and statement of cash flows. These reports give owners and managers important information about the company's performance, financial position, and cash flows. 2. The statement of financial position provides a snapshot of a company's assets, liabilities, and net worth on a given date. It shows whether the company is solvent and liquid. 3. The income statement shows the revenues and expenses over a period of time, with the net income indicating whether the company made a profit. Profits increase the company's net worth and long-term viability.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    1 views2 pages

    Chapter 1introduction To Accountingand Businessnet Worth and Accounting

    Uploaded by

    22-0188c
    1. Accounting provides key financial reports including the statement of financial position (balance sheet), income statement, and statement of cash flows. These reports give owners and managers important information about the company's performance, financial position, and cash flows. 2. The statement of financial position provides a snapshot of a company's assets, liabilities, and net worth on a given date. It shows whether the company is solvent and liquid. 3. The income statement shows the revenues and expenses over a period of time, with the net income indicating whether the company made a profit. Profits increase the company's net worth and long-term viability.

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    © All Rights Reserved
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    of 2

    CHAPTER 1INTRODUCTION TO business by preparing fourfinancial

    ACCOUNTINGAND BUSINESSNET reports which are calledGeneralPurpose


    WORTH AND ACCOUNTING Financial Statements:STATEMENT OF
    FINANCIAL POSITION (Wealth
    Budgeting – the process of
    accumulated)• Formerly called
    receivingmoney, planning and allocating
    thebalance sheet• Progress report
    it accordingto one’s need
    showing alist ofassets and liabilities as
    Net Worth – represents wealth and well as thenet value or net worth of the
    financewhich is made up of properties firmwhich belongs to the
    and assets.Financial status measured in owner(owner’s equity). • Shows how
    wealth orassets owned less liabilities healthy or robust theenterprise is• The
    owed. statement shows balancedfinancial
    structures (A=L+OE)• Shows whether
    NET WORTH = ASSETS – LIABILITIES the enterprise is: Solvent – has enough
    Profit – the amount of revenue left assets to takecare ofall the
    afterdeducting the expenses obligationsLiquid – ability of the
    enterprise topay promptly for
    • It is only profit that will make yournet obligations that aredue(current
    worth grow liabilities) • Account form – two
    • With profit asset will grow and sowill column format.Assets are listed in the
    net worth Say for example, you borrow 1st columnwhile liabilities and owner’s
    cash of Php50,000.00 – your net worth equityare listed in the 2nd column•
    will not improve.Although your asset Report form – vertical format.Liabilities
    will grow, so does yourliability. The and Owner’s Equity will
    creditor then will have aclaimover your bepresented/display below the asset•
    asset.Bookkeeping – first part of the As of a specific dateINCOME
    accountingprocess1. Tracks down and STATEMENT(Wealth produced)• Also
    analyse businessactivities2. Measures calledprofit or loss
    or calculates and records3. Prepares a statementorstatement of earnings•
    progress reportFinancial Analysis – Performance report of revenuesagainst
    Interpretation offinancial costs and expenses • Listing
    reportsBUSINESS AND therevenues earned andexpenses
    ACCOUNTINGAccountants – will show incurred by the business • Profit or net
    how the businessactivities are shaped income – results whenrevenues exceed
    into relevant financialreports to provide expenses. Profitensures long life for
    much neededinformation so the users business andboost it financial strength.
    can arrive atcorrect and timely It is alsothe basis for tax, salaries
    decisions.• From accounting, you will andbonuses. • For a specific period of
    get theinformation needed to ensure timeSTATEMENT OF CASH
    thatthe business is in the right FLOWS(Change in cash)• Cash report
    directionand is performing which showswhatcaused the change in
    profitably.ACCOUTING the cashaccount• Shows the cash
    INFORMATIONAccounting provides inflows (frominvestment and sales) and
    financial informationregarding the outflows(from purchases of assets
    andpayment of expenses) • Shows the
    three kinds of
    businessactivities :financing, investing
    andoperating

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