Advanced Accounting Flashcards
What is the Income Statement
The income statement lists a company’s revenues, expenses, and taxes, with its after tax-profit over a period of time
What are the requirements for something to appear on the Income Statement?
1) It must correspond to the current period shown on the income statement
2) It must affect the company’s taxes.
What is the difference between COGS and Operating Expenses?
COGS are linked directly to the sale of products and services.
Operating Expenses are items not linked directly to product sales.
What is revenue?
The value of the products/services provided and sold in the given period.
What are some items that NEVER appear on the Income Statement
CapEx, Purchases of PPE, Investments, Dividends, Issuing or Repaying Debt Principal, Issuing or Repurchasing Shares, Changes to Working Capital
What is the Balance Sheet?
The Balance Sheet shows the company’s resources and obligations, or Assets and Liabilities and Equity, for a specific point in time.
What is an asset?
An asset is an item that will result in additional cash in the future
What is a liability?
A liability is an item that will result in less cash in the future
What is equity?
Equity is a line that refers to the ways to fund company’s internal operations rather than through external parties
What are short-term investments?
Certificates of deposits and money-market accounts (less liquid than cash)
What are accounts receivable?
The company has recorded this as revenue on its income statement but has not received it in cash yet. This will turn into cash when the customer pays.
What are prepaid expenses?
The company has paid these expenses in cash but has not recorded them as expenses on the Income Statement yet.
What is inventory?
Inventory are the goods needed to manufacture and sell products.
What are PP&E?
Items that last over a year and contribute to the company’s core business (factories, buildings, land, equipment).
What are other intangible assets?
Patents, trademarks, IP, usually received through acquisitions but AMORTIZE due to their definite lifetime value
What are long-term investments?
Less liquid and longer lasting that cash or short-term investments
What is Goodwill?
Goodwill is the excess of the cost of an entity over the net of the amounts assigned to assets acquired and liabilities assumed.
What is a Revolver?
It acts as a way for companies to borrow money as needed, with the obligation for quick repayment.
What are Accounts Payable?
The company has recorded these expenses on the Income Statement but has yet to pay them out in cash yet. Typically used for one-time items with specific invoices.
What are accrued expenses?
The company has recorded these as expenses on the Income Statement but hasn’t paid yet - used for recurring monthly items such as invoices, wages, rent, utilities.
What is Deferred Revenue?
The company has collected cash in advance from its customers but has yet to deliver the product or service and will recognize these over time.
What is a Deferred Tax Liability?
The company has paid lower taxes that what it really owes for a specific period (accounting/tax discrepancy), and needs to pay additional taxes to the government in the future
What is long-term debt?
This is debt that is due and must be repaid in over a year
What is Common Stock and Additional Paid in Capital?
This represents the market value of shares at the time those shares issued by the company. The total dollar value of shares issued at IPO/listing.