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47 terms

exam 1 wood

STUDY
PLAY
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