Unit 3 module 4- financial statements Flashcards
financial statements
- balance sheet
- income statement
- cash flow statement
- statement of owners equity
balance sheet
The balance sheet lists all of the company’s assets and all of the ways it uses to pay for those assets (liabilities, debts) and owners equity.
balance sheet equation
Total Assets = total liabilities + owners equity.
statement of cash flows
explains the change in cash of revenue and expenses from one period to the next
- cash flow operation
- cash flow from investing
- cash flow from financing
statement of owners equity
explain the change from one period to another of owners equity section of the balance sheet.
income statements
contains all of the revenue, expenses, interest, and taxes that the company pays and reflects the result of that as the NET income
equity
residual claim or interest to investors in assets after all liabilities are paid. If liabilities exceed assets, negative equity exists and can be purchased through stock.
net income
the difference between net sales and the cost of goods sold.
amortization
records the accounting use of any intangible asset (patent, good will) that we have on the balance sheet
4 principals of GAAP
- historical cost
- revenue recognition
- matching principle
- full disclosure
matching principle
revenue recorder when cash is given, recorder with expenses (ex.company paid for shipping)
revenue recognition principle
recognizes revenue when product is delivered/ received.
working capital management
is to ensure that the firm is able to continue its operations and that it has sufficient cash flow.
working capital
a measure of how liquid are a business current assets and current liabl
historical record
records assets at the lower/original cost of the market
GPM (gross profit margin)
revenue- cost of good sold
earnings before interest and taxes
Gross profit- Operating expense - depreciation/ amortization expense
NET income
revenue- expenses
or
EBT - taxes
multi step income statemet
- subtract non operating expenses from income
- subtract income tax from income before taxes
- subtract operating expenses form GP to determine income from operations
single step income statement
add all revenues then subtract all expenses
depreciation
records the accounting use of any of the fixed assets
obselence
when an asset is not productive due to spoilage, breakage etc.
3 sections of Cash flow
- operations
- investing
- financing
operations
your income statement –> what you use from an operations standpoint
investing
looks at how the company invested in fixed assets.
or any investments that the company has made like bonds, stocks, etc.
financing
represents the amount of additional net, short term debt, long term debt preferred stock and common stock a company has either sold, borrowed or repaid.
