exam 1 wood

Created by mloeffelholz 

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47 terms

transaction

act that creates an exchange of something for something else

record

enter each transaction into the system. increasing and decreasing

summarize (total)

net the impact of the increases and decreases

report

provide useful info to internal management, investors, and creditors regarding cash flows, resources, and obligations

4 required reports are...

1.balance sheet
2. income statement (statement of operations)
3. statement of stockholders equity (statement of owner's equity)
4. cash flow statement

balance sheet

shows what business owns (assets) and owes (liabilities) on a specific date. cumulative. initially reported at historical cost. listed in order of liquidity.

income statement

shows how much a business earned during a period of time. revenues (providing goods and services to customers) less expenses (what it costs to provide the goods and services to the same customers). earned - incurred

statement of owner's equity

shows the activity related to owners (stockholders) during a period of time. shows receipt of funds from the owners and payments back to the owners (dividends)

statement of cash flows

where the company's cash comes from and what the cash was used for in specific period. selling assets, borrowing from banks or investors, or from owners.

asset

company's economic resources used to operate business. what company HAS

liability

company's debts and obligations. what company OWES

owner's equity

earnings kept in the company and financing provided by the owners

retained earnings

part of owner's equity. amount of cumulative profits and losses kept by the company since the first day of operations

revenues

provided goods or services in exchange for an asset. when goods/services are provided to the customer, NOT when cash is collected

expenses

it is INCURRED. cost to company to provide goods/services to customers

accounting equation

assets = liabilities + owner's equity

balance sheet: assets

cash
AR
inventory
supplies
prepaid expenses
Short-term
=total current assets
+Long-term

with PPE and Intangible Assets

balance sheet: Property/Plant equipment

land
building
furniture and fixtures
equipment
vehicles
-less accum depreciation
=net PPE

with assets and intangible assets

balance sheet: intangible assets

goodwill
patents
copyrights
trademarks
=total IA

with assets and PPE

balance sheet: total assets

assets + PPE + intangible assets + long term assets

balance sheet: liabilities

current:
AP
accrued expenses
unearned revenue
income taxes payable
short term notes payable

long term:
bonds payable
L-T debt
pension liabilities

with SE

Stockholder's equity

perferred stock
common stock
Additional paid in capital
retained earnings
other comprehensive income
-less treasury stock

with current and LT liabilities

cash

money: checks, money orders, and bank drafts

cash equivalents

investments with maturities of 3 months or less

accounts receivable

amounts customers owe the company for goods or services provided. received by the company in 30-90 days

inventory

items held only for sale to the customer

prepaid expenses

amounts the company pays in advance before the service is provided to the customer

supplies

items that are used up in day to day operations

notes receivable

amounts owed to the company. longer than 3 months

investments

purchased for the purpose of earning money on the investment

PPE

assets used in long-term day to day operations to generate revenues

accumutated depreciation

(-) total amount of all prior years depreciation expense

intangible assets

no physical substance

accounts payable

amounts owed to suppliers. paid in 30-60 days

accrued

owed, not yet paid

unearned revenue

cash received from customers before goods or services are provided

treasury stock

(-) cost of its own stock the company buys to hold temporarily.

multi-step income statement

sales- cogs = gross profit
-operating expenses
+- other revenues and expenses
=income before taxes-income tax expense
+- discontinued operations
+- extraordinary items
=net income

Operating Expenses on multi-step income statement

services, general, administrative, bad debt, utilities, supplies, wages, salaries, insurance, rent, depreciation, advertising, research and development

cash basis

cash in - cash out

accrual basis

earned - incurred. revenue when good/service is provided. report expenses when asset is used or service provided to the company

matching principle

1. record the revenues earned for the period,
2. record ALL expenses that were incurred to produce the revenues during the period

accrual basis: when cash is received

BEFORE revenue is earned: cash increases and unearned revenue increases.
SAME PERIOD the revenue is earned: cash increases and sales revenue increases
AFTER the period the revenue is earned: accounts receivable increases and revenue increases in the period earned

accrual basis: when cash is paid

BEFORE the expense is incurred: cash decreases and prepaid expenses increase
SAME PERIOD the expense is incurred: cash decreases and the expense increased
AFTER the period the expense is incurred: expense increases and ____ payable increases in the period incurred

Capital stock and APIC

amounts contributed to the company by stockholders

dividends paid

amounts paid to stockholders

Cash Flow Statement: 3 activities

operating- day to day operations
investing- long term assets
financing- long term liabilities and owners

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