BUSINESS Flashcards
INCOME STATEMENT (same as)/ THE STATEMENT OF EARNINGS
Reports financial PERFORMANCE for one accounting period.
An accounting period is generally one year in length
Revenue Categories
- Gross Sales
- Net Sales (Gross sales - Discounts & Returns)
- Other Revenue
Expense Categories
- Cost of Goods Sold (COGS)
- Operating Expenses
- Other Expenses
Profit Categories
Gross Profit: Revenue subtract COGS
Operating Profit: Gross Profit subtracted from Operating Expenses
Net Profit: Operating Profit subtract Other Expenses, Plus other Income.
Income Statement: General Form
Gross Sales
subtract Returns & Discounts
= Net Sales
Subtract Cost of Goods Sold
= Gross Profit
subtract Operating Expenses
= Operating Profit
+/- Other Revenue/Expenses
= Net Profit Before Tax
- Tex
= Net Profit
Cost of Goods Sold (COGS)
Beginning Inventory
+ Purchases
= Cost of Goods available for sale
- Ending Inventory
= COGS
How to Figure Out Purchases
Cost of Goods Sold
+ Ending Inventory
= Cost of Goods Available for Sale
Beginning Inventory
= Purchases
Operating Expenses
Other than COGS, the costs that are regularly incurred in the normal courses of operating your business
EXAMPLES:
Selling expenses, rent, advertising office salaries & equipment, etc
Depreciation
- The “using up” or expiration of a fixed asset’s usefulness
How to Figure out Depreciation
EXAMPLE:
You buy a machine that costs $10,000 that will last for 10 years on Januray 1, 2000
Depreciation Pre Year: Cost of Asset
Therefore, $10,000/10 years = $1,000/year
Assets
What the firm owns
Liabilities
What the firm owes
Shareholder’s Equity or Net Worth
The difference Between assets and liabilities, owners claim in the company
Assets =
Assets = Liabilities + Equity
ALWAYS
Current Assets (CA)
- Assets expected to be converted into cash or used up within one year form the balance sheet date
EXAMPLES:
- Cash
- Marketable Securities
- Accounts Receivable
- Inventory
These are ALAWYS listed in order of liquidity “how easy it is to transfer into actually $$$”
Fixed Assets (FA)
Physical items are expected to last more than one year.
Examples:
- Land
- Buildings
- Equipment
- Automobile
these are listed in order of permanence
Intangible Assets (IA)
Non-physical items, such as rights or privileges, etc., are owned by a company. Seldom converted into cash in normal operations
EXAMPLES:
- Organizational Expenses
- Goodwill
- Patents
Other Assets (OA)
Current Liabilities (CL)
Debts that are normally expected to be paid within one year of the date of the balance sheet
EXAMPLES:
- Accounts Payable
- Notes Payable
- Accrued Expenses
- Taxes Payable
- Working Capital Loan
Long Term Liabilities (LTL)
Debts that are due in more than one year from the date of the balance sheet.
EXAMPLES:
- Mortgage
- Long-Term Loan
SHAREHOLDERS EQUITY (SE)
The difference between total assets and total liabilities. Shareholders Equity (Net Worth) can include three types of accounts:
Shareholders’ Equity (SE) 3 type of accounts
1.) Capital or Capital Stock
2.) Capital Surplus or Deficit
3.) Retained Earnings
Main Types of Stock
Common Stock
- voting rights:
- Dividends:
- Liquidation during bankruptcy:
Preferred Stock
- voting rights:
- Dividends:
- Liquidation during bankruptcy:
