CH 2 FURTHER LOOK AT STATEMENTS
– things that equal cash listed in order of value, include cash investments
receivables inventories supplies and prepaid expenses.
$ due from
Inventory stuff we sell.
Supplies used to run office.
Prepaid expenses ***
will get into later
Long term investments – corp invests in another corporation, buying and holding,
include land and buildings for operations, used for functionality typically
Property plant and equipment – long life used to run business, land buildings
machines delivery furniture fixtures, different for all businesses (depends on
kind), SW type of these would include irrigation systems (equipment)
long-term asset spread over x amount years
, each year this
thing is used costs a certain amount, land and buildings sometimes appreciate so
this would not be listed, allocated full purchase price over a number of yrs instead
of expensing full cost in year of purchase
Accumulated depreciation – shows all depreciation that company has expensed so
far in asset’s life, seen on BALANCE SHEET, reduces value of assets,
COST different than VALUE.
COST LESS is accumulated depreciation.
not exact, solely for accounting records, generally worth more than what records say,
appraisers all give different answers so it is best to list it as lower price, NOT MARKET
VALUE IS ACCOUNTING VALUE ch 10
– not current assets, no physical substance-- like patents
copyrights trademarks franchise (LEGAL rights owned to do whatever), ie manufacture
Velcro or own the rights to something, solely a piece of paper usually from gov’t
things we expect to pay within a year, accounts payable
wages payable bank loans payable interest payable taxes payable
long term bank loans payable.
Current maturities car loans next year 5 payments to make
(5 current 48 long term),
assets = liabilities + equity
, accounts payable $ owed to
customers on short term basis (cell phone expense is a liability to accounts payable, $
regularly written checks)
Long term liabilities
debts paid after a year.
Bonds payable (limited life, separate
interest rate, certain restrictions ch 10) mortgages payable, long term notes payable, lease
liabilities (cars), obligations under employee pension plans.
Bonds very common for
– 2 accounts,
($ people invested in business),
(kept $ for use in the business).
RETAINED EARNINGS beginning
add net income less dividends = retained earnings.
**** very important equation
Net income = revenues – expenses