ARBUS102 Chapter Notes - Chapter 2: Financial Statement, Trial Balance, Current Liability
16 Feb 2017
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Two sources of financing and equity financing and debt financing. Equity financing: refers to financing that a business obtains through owners" contributions and reinvestments of profit. A business is not obligated to repay equity financing. Debt financing: refers to financing that the business obtains through loans. A business is obligated to repay debt financing. There are three features that are important when understanding how accounting works: companies document activities, the company always receives something and gives something. Because the accounting system captures both what is received and what is given, it is often referred to as a double-entry system: each exchange is analyzed to determine a dollar amount called cost. Transactions: business activities that affect the basic accounting equation a=l+se. Transactions include two types of events: external exchanges: these are exchanges involving assets, liabilities, and/or shareholders" equity that you can see between the company and someone else, internal events: occur within the business.
