A explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements; Flashcards
Explain the relationship between financial statement elements and accounts,and classify accounts into the financial statement elements.
Explain the relationship of financial statement elements and accounts
Financial statement elements are the major classifications of assets, liabilities, OE, R, E
Accounts are where financials transactions are entered into the element
Contra accounts offset some part of the value of another account
Classify accounts as elements
Assets Liabilities Owners Equity Revenues Expenses
Assets: A firms economic resources
Cash, accounts receivable, Allowance for doubtful accounts, interest receivable, inventory, supplies, prepaid insurance, prepaid rent, land, equipment, accumulated Depreciation expense, buildings, accumulated depreciation Buildings, copyright, goodwill, patent
Cash and Cash Equivalents
Liquid securities with maturities of 90 days or less
Accounts Recievable
“Amounts customers owe the company for
products that have been sold as well as amounts that may be due from suppliers (such as for returns of merchandise). Also called commercial receivables or trade receivables.”
Inventory
“The unsold units of product on hand.”
Financial Assets
.
Prepaid Expenses
Items that will be expenses on future income statements
Property, Plant, and Equipment
“Tangible assets that are expected to be used for more than one period in either the production or supply of goods or services, or for admin- istrative purposes.”
Investment in affiliates
.
Deferred Tax assets
“A balance sheet asset that arises when an excess amount is paid for income taxes relative to account- ing profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recover the difference during the course of future operations when tax expense exceeds income tax payable.”
Intangible assets
Economic resources of the firm that do not have a physical form, such as patens ,trademakrs, licenses, and goodwill. Except for goodwill, these values may be reduced by “accumulated amortization.”
Liabilities Accounts: Creditor claims on the company’s resources
Notes Payable, accounts payable, unearned service revenue, salaries and wages payable, interest payable, dividends payable, income taxes payable, bonds payable, discount on bonds payable, premium on bonds payable, mortgage payable
Accounts payable and trade payables
“Amounts that a business owes to its vendors
for goods and services that were purchased from them but
which have not yet been paid.”
Financial Liabilities
.
Unearned Revenue
Items that will show up on future income statements as revenues
Income taxes payable
The taxes accrued during the past year but not yet paid
Long-term debt
Bonds payable
Deferred tax liabilities
“A balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit. The taxable income is less than the accounting profit and income tax payable is less than tax expense. The company expects to eliminate the liability over the course of future operations when income tax payable exceeds tax expense.”
Owners Equity: The owners’ residual claim on a firm’s economic resources, which is the amount by which assets exceed liabilities
Common stock, paid-in capital in excess of par value-common stock, preferred stock, paid in capital in excess of par value-preferred stock, Treasury stock - common, retained earnings, dividends, income summary
Capital
Par value of common stock
Wtf is “par value” of common stock?
“The amount of principal on a bond.”
Additional paid-in capital
Proceeds from common stock sales in excess of par value
Retained Earnings
Cumulative net income that has not been distributed as dividends
Other comprehensive income
Changes resulting from foreign currency translation, minimum pension liability adjustments, or unrealized gains and losses on investments.
Revenue: Inflows of economic resources
Service revenue, sales revenue, sales discounts, sales returns and allowances, interest revenue, Gain on Disposal of Plant Assets
Sales
Revenue from day to day activities
Gains
Increases in assets from transactions incidental to the firm’s day-to-day activities.
Investment Income
Interest and Dividend income
Expenses: Outflows of economic resources
Administrative expenses, amortization expense, bad debts expense, COGS expense, Depreciation Expense, Freight-out, Income Tax Expense, Insurance Expense, Loss on Disposal of Plant Asset, Maintenance and Repairs Expense, Rent Expense, Salaries and Wages expense, Supplies expense, Utilities expense
Cost of Goods Sold
“For a given period, equal to beginning inventory minus ending inventory plus the cost of goods acquired or produced during the period.”
Selling, General, and administrative expenses
advertising, management salaries, rent, utilities
Depreciation and amortization
To reflect the ‘using up’ of tangible and intangible assets
Tax Expense
“An aggregate of an entity’s income tax payable (or
recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabilities. It is essentially the income tax payable or recoverable if these had been determined based on accounting profit rather than taxable income.”
Interest Expense
Payment for borrowing funds
Losses
Decreases in assets from transactions incidental to the firm’s day-to-day activities.
