Bài giảng Fundamental Financial Accounting Concepts - Chapter 3: The Double-Entry Accounting System

Chapter ThreeThe Double-Entry Accounting SystemMcGraw-Hill/IrwinMcGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Debit/Credit Terminology=+DebitCreditAssetsDebitCreditLiabilitiesDebitCreditEquityClaims+++---In every transaction, the total dollar value of all debits equals the total dollar value of all credits.3-*The General JournalAccountants initially record data from source documents into a journal.Special JournalsGeneral Journals3-*3-*3-*3-*3-*3-*3-*3-*3-*3-*Return on Assets RatioNet IncomeTotal AssetsEvaluating performance requires considering the size of the investment base used to produce the income.This ratio measures the relationship between the level of income and the size of the investment. A larger ratio means the company did a better job of managing its assets. 3-*Debt to Assets RatioTotal DebtTotal AssetsBorrowing money is risky business. This ratio helps evaluate the level of debt risk.A smaller ratio indicates that there is less debt risk for the company.3-*Return on Equity RatioNet IncomeStockholders’ EquityOwners are interested in this ratio to determine their return on their investment in the company.A larger ratio indicates that the owners have a higher return on their investment. 3-*Stockholders like a lot of debt if the company can take advantage of positive financial leverage.Creditors prefer less debt and more equity because equity represents a buffer of protection.Stockholders vs. Creditors3-*3-*End of Chapter Three3-*