BUS 251Ch 1–2

The accounting equation, and four statements.

Name: Business Tutor
Address: Burnaby, BC, CA
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Ten short steps, from who reads financial statements to recording a real month, how the four statements link, and three profitability ratios. Then practise with worked solutions.

Part 1 · The big picture · Step 1 of 10

Financial accounting is written for outsiders

Financial accounting produces general-purpose statements for people outside the company who cannot ask for custom reports: investors, lenders, suppliers and others. Managerial accounting serves people inside. Each user reads the same statements with a different question in mind.

Try it: Tap each user card. Notice that only management is internal, and that every external user is really judging future cash flows.

Shareholders and investors (external): Is the company profitable and growing? Will it pay dividends? Should I buy, hold or sell? Looks at: Statement of income, statement of changes in equity, ratios such as ROE.

External users → financial accounting

Shareholders and the board of directors, lenders, suppliers, the CRA, unions and the public.

Internal users → managerial accounting

Management, who can ask for any report it wants.

Practise

Practise like it is the midterm

Answer first, then check. Fresh numbers writes a new question of the same type every time, so you can drill one topic until it is routine.

Score

0 / 0

Transaction effectsQuestion 1 of 18

A company buys equipment for $8,000 cash. What happens to total assets?

Midterm coming up and journal entries still feel shaky?

Bring your practice problems. We work through them together until every type feels routine.

Book a session Next toolNext: Debits, credits and the trial balance

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The accounting equation, and four statements.

Financial accounting is written for outsiders

Practise like it is the midterm

Midterm coming up and journal entries still feel shaky?

Questions, answered.

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