Long term debt or non current liabilities wwwhris Owners Equity Amount owners

Long term debt or non current liabilities wwwhris

This preview shows page 76 - 93 out of 123 pages.

Long-term debt or non-current liabilities.
Image of page 76
Owners’ Equity Amount owners’ invested in entity. = Assets – Liabilities = Net assets For a corporation: shareholders’ or stockholders’ equity . Shares of stock evidence ownership interest. Could be invested in any assets on Balance Sheet.
Image of page 77
Two Categories of Shareholders’ Equity Paid-in or contributed capital. Retained earnings.
Image of page 78
Paid-in Capital Capital stock (at stated or par value) + additional paid-in-capital. Amount owners have paid in to purchase shares of stock.
Image of page 79
Retained Earnings Reinvested earnings from inception to date less dividends to date. If negative, deficit. Residual interest in assets. No necessary relation between RE and Cash.
Image of page 80
Unincorporated Businesses Proprietorship. Business owned by one person. Partnership. Business owned jointly by two or more persons. Capital (not SE) account. Separate for each partner. Drawings. Withdrawals by owner(s).
Image of page 81
Ratios One number divided by another. Example: Current ratio. Current Assets / Current liabilities A measure of liquidity or ability to pay short-term obligations. For some industries, 2 to 1 is believed desirable.
Image of page 82
Balance Sheet Changes Music Mart Start Up Assets = liabilities + Paid-in capital + Retained earnings Dual effect of transactions. Transactions: On 1/1 Owner invests $25,000 for stock. On 1/2 borrows $12,500 from bank. On 1/3 purchases $5,000 of mdse for cash. On 1/4 sells mdse for $750 cash that cost $500.
Image of page 83
The Income Statement
Image of page 84
3-85 Balance Sheet - Review Status report. Financial position at point in time. Assets = liabilities + shareholders’ equity.
Image of page 85
3-86 Basic Concepts Money measurement. Entity. Going concern. Cost. Dual aspect.
Image of page 86
3-87 Basic Concepts Accounting period. Conservatism. Realization. Matching. Consistency. Materiality.
Image of page 87
3-88 Nature of Income Summarizes results of operations for a period of time. Flow report. Flows are continuous. Focuses on earnings activities (or operating activities). Reports nature and magnitude.
Image of page 88
3-89 Elements of Income Statement Revenues Inflows or creation of assets that result from sales of goods or services. Expenses Outflows or consumption of resources to generate revenues. Revenues - expenses = income = net income (loss) = earnings = profit = net earnings (loss).
Image of page 89
3-90 Concept #6: Accounting Period Net income for life of company: = Money in - money out. Accounting period: Specified arbitrary interval of time. Accounting year = fiscal year = calendar year (if fiscal YE is 12/31). Natural business year (1/31 for retailers).
Image of page 90
3-91 Interim Reports Reports on periods less than fiscal year. SEC requires quarterly. Management may require monthly (or weekly, or daily).
Image of page 91
3-92 Income and Owners’ Equity Owners’ equity = Stockholders’ equity (for a corporation) = Paid-in-capital + Retained earnings.
Image of page 92
Image of page 93

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture