financial statements Flashcards
financial statements
-balance sheet
-income statement
-cash flow statement
two methods for recording transactions
-cash base accounting
-accrual basis accounting
cash basis accounting
recognizes a tranaction at the time when cash exchanges hands, simple not accurate
accrual basis accounting
revenue when it is earned, regardless of when cash is received
recognizes expenses when they are incurred regardless of when payment is made
income statement known as
profit and loss statement
shows whether an operation has made of lost money over a specfic period of time
profit or loss =
sales (revenues) - expenses
3 major elements of income statements
- total revenue (income)
- total expenditures by category
- profit or loss for statement period
income statment: revenues
- sales
-misc
interest/devidends
other donations grants
income statment: expenses
COGS
labor costs- salaries and wages
employee benefits
supplies
employee benefits
services
rent utilities
depreciation
balance sheet
**portrays the financial condition of the enterprise at any particular time
time it was start to current time **
assets=
liabilities + owners’ equity
balance sheet: Assets
cash, inventory, accounts receivable (funds due to you) deposits, equipment -depreciation
balance sheet: liabilities
accounts payable (obligations), accrued salaries/benefits
loans
taxes
balance sheet: equity
owners’ investment
accumulated profits or losses from the beginning of the business
GAAP
-Generally
-Accepted
- Accounting
-Principles
– Makes the financial reporting process
transparent and standardizes assumptions.
double entry bookkeeping
every action has an opposite reactions
credits offset by debits
you must record it somewhere else
ASSETS = LIABILITIES + OWNERS EQUITY
Assets (+)
* Liabilities (-)
* Shareholder’s Equity (-)
balance sheet
Revenue (-)
* Expenses (+)
income statment
signs – except contra accounts
Assets (+)
– Depreciation (-) to Equipment
– COGS (-) to Inventory
* Liabilities (-)
* Shareholder’s Equity (-)
* Revenue (-)
* Expenses (+)
equity
monetary value
beyond what you owe
owners or shareholders
equity =
total assets- total liabilities
decay in price of piece of equipment, record depreciation monthly
$10k equipment that lasts 10 years
$10,000 / 10 years / 12 months per year
= $83.33 expense every month
depreciation
prepaid expenses
could be paid 1/12 months
in January, wrote. check from assets 1200, it costs $100 a month for this contract, you have $1100 left of that contract
income statment: every month you will have an $100 expense
prepaid expense monthly statment
will be listed as an asset of balance sheet
insurance expense every month of $100
I buy $100 meal
i collect 8% sales tax
cash + 108 (deposited into checking account)
liability sales tax owed -$8
sales revenue -100
sales tax
Where did I get FOOD to make your $100 dinner?
* FROM INVENTORY
* That’s what the 30% food cost means
CoGS
Over times
hourly x 1.5
- WHERE DO I DOCUMENT COGS??
– Contra account to Asset Inventory -$30
* $100 x 30% = $30
– COGS Expense +$30
employer tax matches?
matches SS (FICA) currently 7.65 % comes out of our check, employer is also paying 7.65 % to SS
how much SS does self emplyed person pay
pays 15.3%
employees taxes includes
-FIT federal income tax
-FICA federal insurance contributions act (social security and medicare)
-state
city
what does the employer pay?
Unemployment
workers comp
FICA
what does the employee pay
Federal Income Tax
* State Income Taxes
* City Income Taxes
FICA
