2-3 Accounting and Financial Statements

Accounting equation accounting assets liabilities

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Unformatted text preview: g Equation Accounting Assets = Liabilities + Owner’s Equity Owned = Owed + Owner’s Claims The “Typical” Balance Sheet The Assets Liabilities Current assets Cash Accounts Receivable Notes Receivable Inventory Fixed assets Accounts Payable Notes Payable Accrued Taxes Accrued Salaries Land Buildings Depreciation Capital equipment Depreciation Current liabilities Long-term liabilities Notes payable Bonds payable Owner’s Equity Stock shares Retained earnings Balance Sheet - Definitions Current Assets Items that can be converted to cash within one year; Fixed Assets Items such as land, building and equipment that are relatively permanent; Current liabilities Payments that are due in one year or less; Long-term liabilities Payments not dues for one year or longer; Owners’ equity (or stockholders’ equity) The value or what stockholders own in a firm The balance sheet allows us to ascertain the true value of a business firm business a) True True b) False False The “Typical” Income Statement The - Net Sales Cost of Goods Sold Gross Profit Operating Expenses Net Profit Before Interest and Taxes Interest Taxes Net Profit After Taxes Income Statement - Definitions Revenue Value of what is received from goods sold, services rendered, and other financial sources; Cost of goods sold (CGS) Cost of merchandise sold or cost of raw materials or part used for producing items for resale Directly dependent on volume of sales (not revenue) Operating expenses Cost incurred in operatin...
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