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Summary COMM1101 Full Textbook Chapter Summaries
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Accounting 1101 Chapter SummariesChapter 1
LO1
• Accounting - provides useful information for the 2 kind of decision makers, internal and
external.
• Internal Users - managers that run and manage the business.
• External Users - investors and creditors, deciding whether to buy, hold or sell shares.
LO2
• Three Types of Business Organizations: Proprietorship, partnership and corporation.
LO3
• Three Types of Business Activities
• Financing: involve obtaining the necessary funds (through the issue of equity or the
assumption of debt) to support the business. Repayment of the debt, declaration and
payment of dividends and share repurchases are also financing activities.
• Investing: primarily involve purchasing the long term assets (such as property, plant and
equipment) that are needed to run the business. Includes the disposition of those items.
• Operating: involve putting the resources of the business into action to generate net
income. Involves day to day activities of the business as it earns revenues and incurs
expenses doing so.
LO4
• Types of Financial Statements:
• Statement of Income - presents the revenues and expenses of a company for a specific
period of time. Indicates the success of failure of companies operating activities.
• Statement of Changes in Equity - summarizes the changes in shareholders equity that
have occurred for a specific period of time including those related to the issues of shares,
generation of net income and declaration of dividends.
• Statement of Financial Position - reports the assets, liabilities and shareholders equity of a
business at a specific date.
• Statement of Cash Flows - summarizes info about the cash inflows (receipts) and outflows
(payments) for a specific time period.
• All included in the annual report
• Notes to Financial Statement - add explanatory detail where required.
Chapter 2
LO1
• Classi ed Statement of Financial Position - in it you classify assets and liabilities as current
or not current.
• Non Current Assets - the company does not expect to convert into cash, sell or use up
within one year of the financial segment date. further classified as long term investments
(property, plant and equipment, intangible assets, goodwill)
fi
, • Current Assets - are expected to convert to cash in the next year (ex. Cash, trading
investments, accounts receivable, notes receivable, inventory, supplies, prepaid expenses)
• Non Current Liabilities - obligations that are expected to be paid or settled after one year
(ex. Notes payable, bonds payable, mortgage payable, lease liabilities, pension and benefit
obligations, deferred liabilities)
• Current Liabilities - obligations the companies pay or settle within one year of the financial
statement date or operating cycle, whichever is longer. (Ex. Bank indebtedness, accounts
payable, deferred revenue, notes payable, current portion of long term debt)
Chapter 3
LO1
• Analyze the Effect of Transactions on the Accounting Equation - each accounting
transaction has a dual effect on the accounting equation: assets = liabilities + shareholders
equity. (Ex. If an individual asset is increased, there must be a corresponding decrease in
another asset, an increase in a specific liability and/or an increase in shareholders equity.
LO2
• Explain How Accounts, Debits & Credits are used to record transactions - an account is an
individual accounting record of increases and decreases in a specific asset, liability and
shareholders equality (common shares, retained earnings, revenues, expenses and dividends
declared) amounts.
• Debits & Credits - debt is left, credit is right.
• Assets, Expenses and Dividends Declared - increased by debits and decreased by credits.
The normal balance of these accounts is a debit balance (increase side)
• Liabilities, Common Shares, Retained Earnings and Revenues - increased by debts and
decreased by debits. Normal balance is a credit balance increase side)
LO3
• Journalize the Transactions in the General Journal - the initial record of an accounting
transaction is entered in a general journal. The journal discloses in one place the complete
effect of a transaction, provides a chronological record of transactions and help prevent or
find errors because the debit and credit amount for each entry can be readily compared.
LO4
• Post Transactions to the General Ledger - posting is the process of transferring journal
entries from the general journal to the general ledger. This accumulated the effect of the
journalized transactions in the individual accounts (T accounts) in the general ledger.
LO5
• Prepare a Trial Balance - a trial balance is a list of general ledger accounts and their balances
at a specific time. The main purpose of the trail balance is to prove the mathematical equality
of debits and credits after posing. Can help uncover errors in journalizing and posting and is
useful in preparing financial statements.
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