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Investing and Financing Decisions and the Balance Sheet

After studying this chapter, you should be able to:

1. Define the objective of financial reporting, the elements of the balance sheet, and the related key accounting assumptions and principles.

2. Identify what constitutes a business transaction and recognize common balance sheet account titles used in business.

3. Apply transaction analysis to simple business transactions in terms of the accounting model: Assets = Liabilities + Stockholders' Equity.

4. Determine the impact of business transactions on the balance sheet using two basic tools, journal entries and T-accounts.

5. Prepare a simple classified balance sheet and analyze the company using the current ratio.

6. Identify investing and financing transactions and demonstrate how they are reported on the statement of cash flows.

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