Accounting 101 notes final.docx

Accounting 101 notes final.docx - Accounting 101 notes...

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Accounting 101 notes Lecture 1 10 Q- quarterly financial report 10 K- annual financial report Balance Sheet - end of reporting period snapshot of what is owned, what is owed and what is left for owners Income statement - summary of inflows and outflows over a period Cash flow statement - summary of change in cash or hand from beginning to end of period Audit opinion: unqualified- everything’s good Qualified-Some issues Adverse- very bad errors Assets= liabilities + owner’s equity Shareholders’ equity= preferred stock+ common stock+ earnings retained Preferred stockholders get dividends before commons stockholders and in case of insolvency also get paid before common stockholders. The dividends for preferred stockholders are paid at regular intervals (while for common stock they only get dividends when board decides so). Thus preferred stock are a fixed income security (like treasury bills and corporate bonds). Gains- increases in value of firm’s assets Losses- decreases in value of firm’s assets Net income= Revenue- expenses+ gains- losses Gains and losses are associated with tangential transaction e.g In N’out Burgers sale of burgers generates revenues while their sale of a delivery truck might generate a gain or a loss. Lecture 2 Shareholders’ equity represents amounts invested in the firm by its owners either directly, when they purchase shares from the company or indirectly, when firm retains earnings rather than pay up dividends. Assets are recorded at historical cost (book value) which is original cost adjusted for improvement or aging. - Tangible assets (inventory, property, equipment) Lecture 16 Liabilities -obligations to pay cash or to provide goods or services in the future as a result of past transactions or events. Current liabilities- obligations that fall due within 1 year (e.g accounts payable, dividends payable, unearned revenue, salaries payable, short term debt, interest payable, sales tax payable, current portion of long term debt). Sales Tax Payable are taxes collected by the firm on behalf of the government (e.g the 8% tax on food you pay at restaurants). It does not impact income statement.
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So basically at the beginning of the year they knew they had $17,500 that they had to pay. By the end of the year they incurred another 4000 that they had to pay, and paid up 3800 of it, so the enging balance was 17,500+4000-3800=17,700 that they still have to pay. Long-term liabilities are those that fall due more than 1 year beyond the balance sheet date Bonds payable- spreads credit risk among many investors, often transferable after issue Face value (or par value)- principal amount that must be repaid on the specified date of maturity. Stated rate- annual interest rate for a bond
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Unearned revenue - A liability account that reports amounts received in advance of providing goods or services.
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