ACCOUNTING 200

cash, accounts receivable inventory, prepaid expense, investment securities (money to invest temporarily)

Property, plant, rights (intangible assets)

accounts payable, short term loan payable, current portion of L.T. Debt

LT debt, capital lease obligation (debt financed purchases), and deferred income tax liability--> income tax texpected to be paid in future years on income already reported on income statement

ccmmon stock at par (minimum value of contributors) PLUS additional paid in capital (whatever exceeds the par value of the issued shared stock

It isnt better, just different: give up some rights for exchange for some protection
ALL issue common, some issue preferred

BANK (receive money on LOANS)

Merchandise/Retail

amount paid to acquire an asset

Assume hypothetical sale, assuming hypothetical price for that sale, using all the skills and expertise you have

Any joe could sale land at that price in the current market

Goodwill is value of certain KEY relationships
Such as trust with company, trust of banks
Distribution process experiences
Favorable government relations
Assembled trained workforce
High credit Standing
Reputation for superior products and services
BUT NOT INCLUDED ON BALANCE SHEET SINCE SELF-PRODUCED

Balance sheet shows assets and liabilities of all the companies they own (Berkshire and Hathaway

Own more than 50% of company or company shares, then you would have to report that on your balance sheet

patents, trademarks, copyrights, franchises, and goodwill a company BUYS from another company.

Keep separate what you own and what company owns: VERY IMPT

liabilities with no interest (accounts payable and accrued expenses like wages)

wage, tax, utility, interest payable

Amount of asset inflows from the sale of goods or service to customers. (sales price or service fee)

Amount of asset outflows or amount of obligations incurred requiring the future outflow of asset, that result from costs incurred in running a business

capital contributions and Retained Earnings

change A=change L+change OE
change in OE=Change cc+changeRE
RE=NI-div.

ability of business to pay off liablities in short term--> look at current asset vs. current long term asset.

gains or losses that result from transactions that are both unusual in nature and infrequent in occurrence. They are separated from continuing operations so that investors can better use the income statement to predict future income. they are not included in Operation income nor the income of continuing operations

they are below the line...included from income of continuing operations . these results from a discontinued are reported separately, along with any gain or loss associated with the disposed segment.

EIBT-interst tax expense income tax expense that will help predict how well a company will perform in the future.
it excludes income from discontinued operations and extraordinary items.

net income includes below-the-line operations, while income from continuing operations do not.

Reported in interest section of the income statement, it is earned on temporary investments of excess cash and is NOT part of primary business operations. FOR banks, it is a primary source of revenue

gross profit divided by sales. It is the number of pennies of gross profit made from each dollar of sale.

Advertising expense, wages paid to employees, rent expense, and many more. It also includes cost of running the corporate office, and salaries of executives ; can be listed separately on income statement

ALWAYS report as an expense on the income statement, no matter what.

it is not a govt agency but established by US business community

Amount of uncollected accounts is reported as a bad debt expense. For banks, it is one of the largest expense

is the rent paid to use someone else's money. and it is NOT an operating expense.

all recenues are grouped together and all expenses are grouped together, and net income is computed as revel-expense. Income tax expense shown separately.

It does not highlight the differnt measures of PRofit or INCOME

Revenue and expense items are arranged to highlight the important profit relationships such as gross profit and operating income.

process of adjusting raw transaction data into refined measures of a firm's economic performance (so not cash...say $20,000 contract, and collected only $3000 in cash. so, you would say that you had $20,000 on your income statement.

net income/sales; number of pennies left from each dollar of sales

no economic value is created..it is only created when work is DONE.

change in net sales of two years,divided by initial year

cost of good sold/sales

1. Meet internal targets
2. Meet external expectations
3. Income Smoothing
4. Window Dressing for an IPO/ LOAN

Carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next

1.Savvy transaction timing-->strategic Matching
2. aggressive accounting-->change in methods or estimates with full disclosure
3. deceptive accounting-->change in methods but with little or no disclosure
4. fraudulent reporting--> non GAAP accounting
4. FRAUD-->Ficticious transactions

The cost of obtaining external financing

list of all assets, liabilities, and owners equity (capital stock, retained earnings, revenues, expenses, and dividen, noting their ending general ledger balance
DR=CR

has separated asset, liability, oE including each type of revenue and expense, and dividen.

it means an increase in assets

summarize the effect of all transactions on each account by POSTING onto a general ledger

should have DR: Account receiveable and Cost of Good sole.
CR: Sales and Inventory

it will be the amount in your statement of retained earnings.

It is a liability, so any positive will be counted as a CREDIT

it is an ASSET, and so it will be counted as a debit

If it is understated, net income will also be understated

Account that requires to be closed and are those on INCOME STATEMENTS ONLY (revenues and expenses and DIVIDENds)

all accounts that appear on a balance sheet (Assets and Liabilites, and OE...) and they are a cumulative running balance

Revenue, Expense, and Dividend accounts must be set to zero
Retained earning must be updated....

it determines which long-term projects are profitable to undertake. Good financial statements reduce the cost of capital

Acting ethically and in the public interest is also in the best long-run interest of the client.

when company makes or loses money that are preipheral to primary operations, it is reported as goains or loss.

All expense are operating EXCEPT interest, and income tax.

Earnings before interest and taxes (EBIT)

allows you to evaluate company's overall ability to perform in activities unique to the business

something that you got in income or loss...calculate for net income ONLY below the line