Transactions- economically speaking- we live our lives through our transactions w/ other people.
Not a world of self sufficiency, it’s a world of transactions.
Biggest part of our economic lives is the tool of exchange. Think more deliberately about the transactions entered into.

Second tool- the accounting equation. We take the transaction entered into and put it into the accounting equation.
Accounting is making a record of transactions, so they can be understood.
Accounting equation Is the balance sheet. It is the most important financial statement. All other statements come back to BS in the end.
Assets= liabilities + equity GAAP vs IFRS- international
Two types of assets- current and long term.
Current assets- cash, inventory, AR around for a year or under.
Value in sale
Long term assets- plant, equipment, land, vehicles. Anything that can be depreciated. around for longer than a year.
Value in use.
Current Liability- due within a year.
Accounts payable
Mortgage payment next 12 months
Long Term Liability- due after a year
Bonds payable
Mortgage payment next 29 years

Contributed Equity- what investors have put into the company
Common stock
Preferred stock

Earned Equity- Net income (amount made as a result of operations of company)
Revenues-expenses=net income
Net income can be paid out in dividends
Keep in company as retained earnings.

Framework-
Accounting at its very heart is very simple. Taking every transaction entered into and put it into accounting transaction.

Statement of Cash Flows- the cash flow earned from everyday operations of the company. Colgate is making 3.2 billion per year.
Operating Activities- current assets, current liabilities, earned revenue
Investing Activities- long term assets (capital expenditures)
Financing Activities- Long term liabilities, dividends, contributed equity

Cost