INFO. FOR BUSINESS DECISIONS - ACTG. 011 - SPRING 2007Slide 3-1

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Session 3Business Transactions and Mechanics
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Competencies by Session 3

• What are the primary financial statements in the
  F/S Package?
• What are their uses?
• What are the other key components of the F/S
  Package?
• What are their uses?
• Describe the Financial Accounting Model.
• What is the accounting equation?
• Relate it to the Balance Sheet.
• Relate it to the Income Statement.
• What is Statement of Financial Accounting
  Concepts 1 (SFAC 1)?
• What are the financial accounting assumptions?
• What are the financial accounting principles?

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Historical Cost versus Relevant Information

• What is NOT on the balance sheet.
• Land at current value.
• Intellectual property.
• Off-balance sheet liabilities
• Measurement bias
• Management bias

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Two Other Factors

• Materiality
• Conservatism

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Transactions

• External events
• Internal events
• ...a measurable exchange or change in value,
  generally recorded AFTER the fact.

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Key Accounts

• Assets
• Liabilities
• Equity
• Revenues
• Expenses

Know the table on page 56. Be able to describe
each element in your own words.
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Measuring Transactions-The Basics

• At least two account
• The integrity of the accounting equation
• Debits (left-side entries) Credits (right-side
  entries

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Measuring Transactions-Methodology

• Determine the accounts
• Determine the direction of the exchange
• Determine the amounts
• Note pages 62 - 74 very carefully

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The T-Account
ASSETS EXPENSES LIABILITIES,
EQUITY REVENUES
Debit Credit
Debit Credit
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Financial Statement Preparation

• Headings are IMPORTANT
• Company, Title and Date
• Note how the T-Account balances track to the
  actual financial statements