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Chapter Summary

Section 2.1: Describe the Income Statement, Statement of Owner's Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate​

  • Four primary financial statements: Income Statement, Statement of Owner's Equity, Balance Sheet, Statement of Cash Flows
  • Income Statement shows performance over a period (revenues, expenses, net income)
  • Statement of Owner's Equity shows changes in equity
  • Balance Sheet shows position at a point in time (assets, liabilities, equity)
  • Statement of Cash Flows shows cash movements
  • Statements are interconnected: Net Income flows to Statement of Owner's Equity, which flows to Balance Sheet

Section 2.2: Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses​

  • Assets: Resources owned (current: <1 year, noncurrent: >1 year)
  • Liabilities: Obligations owed (current: <1 year, noncurrent: >1 year)
  • Equity: Owner's interest (Assets - Liabilities)
  • Revenues: Increases in equity from operations
  • Expenses: Decreases in equity from operations
  • Net Income = Revenues - Expenses

Section 2.3: Prepare an Income Statement, Statement of Owner's Equity, and Balance Sheet​

  • Income Statement: Revenue - Expenses = Net Income
  • Statement of Owner's Equity: Beginning Equity + Net Income - Withdrawals = Ending Equity
  • Balance Sheet: Assets = Liabilities + Equity (must balance)
  • Statements must be prepared according to PCN format in Luxembourg
  • All statements must connect and balance

Section 2.4: Luxembourg PCN Account Classifications (Classes 1-7)​

  • Class 1: Capital, Provisions, Financial Debts
  • Class 2: Fixed Assets and Establishment Costs
  • Class 3: Inventory Accounts
  • Class 4: Third-Party Accounts (Payables, Receivables, VAT, Social Charges)
  • Class 5: Financial Accounts (Cash, Banks)
  • Class 6: Expense Accounts
  • Class 7: Revenue Accounts
  • All financial statements must use PCN classifications
  • SA (SociĂ©tĂ© Anonyme): Public limited company, €30,000 minimum capital
  • SARL (SociĂ©tĂ© Ă  ResponsabilitĂ© LimitĂ©e): Private limited company, €12,000 minimum, most common for SMEs
  • SNC (SociĂ©tĂ© en Nom Collectif): General partnership, unlimited liability
  • SCS (SociĂ©tĂ© en Commandite Simple): Limited partnership, mixed liability
  • Each form has different equity presentation and requirements
  • All must comply with PCN and filing requirements