What type of account is land and where is it reported?
Asset & balance sheet
What type of account is wage expense and where is it reported?
Expense & income statemen
What type of account is Accounts receivable and where is it reported?
Asset & balance sheet
What type of account is rent revenue and where is it reported?
revenue & income statement
What type of account is Contributed capital and where is it reported?
stockholder's equity & balance sheet
What type of account is note payableand where is it reported?
liability & balance sheet
revenue - expense = _____.
net income
beginning retained earnings + net income - dividends = ______.
Ending retained earnings
Sarbanes-Oxley Act (SOX):
A set of laws established to strengthen corporate reporting in the United States.
Statement of Retained Earnings
reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period.
What goes at the top of the statement of retained earnings, balance sheet, etc...?
Who (company name), what (statement of retained earnings), when (the date).
What does the statement of retained earnings begin with?
last period's retained earnings balance
statement of retained earnings equation
Beginning of Retained Earnings + Net Income - Dividends = Ending Retained Earnings
A = __ + ___
L + SE
Aroma Pizza purchases $18,000 worth if equipment. They paid $16,000 in cash and promise to pay $2,000 on account. (Assets) ____ = (Liability)_____ + (SE) _____.
Assets (cash) -16,000 (equipment) +18,000 = (accounts payable) +2,000
Aroma Pizza orders $630 worth of cookware. (Assets) ____ = (liability) _____ + (SE) _____. None have been received yet.
(Assets) no change = (liability) no change + (SE) no change
Pizza Aroma pays $2,000 to the equipment supplier .
Assets (cash) -2,000 + (equipment) 0 =
(accounts payable) -2,000
Accounting fraud requires ____, ____, and _____.
incentive, opportunity, and character
Net Sales - COGS = _____.
Gross Profit
Gross Profit
-Operating expenses:
Selling Expenses
General & Admin. Expenses = _______.
Income from operations
Income from Operations
Other Revenues and Expenses =
Income before Taxes
Income before Taxes
Income tax expense =
Net Income
Income from operations
The income from core business activities.
Income before taxes
not all companies pay the same tax rate.
Debt-to-assets ratio (DTA) = _____ / _____
#NAME?
Asset turnover ratio (ATO) = _____ / _____
#NAME?
Net profit margin ratio (NPM) = _____ / _____
#NAME?
Generally Accepted Accounting Principles (GAAP)
Rules of accounting created by the Financial Accounting Standards Board for use in the United States.
International Financial Reporting Standards (IFRS)
Rules of accounting created by the International Accounting Standards Board for International use.
Debit
the left side of an account, or the act of entering an amount into the left side of an account.
Credit
the right side of an account, or the act of entering an amount into the right side of an account.
If Mauricio Rosa incorporates Pizza Aroma, Inc., and the company issues stock to Mauricio and his wife as evidence of their contribution of $50,000 cash, which is deposited in the company's bank account?
Assets: = liabilities + Stockholder's equity
+50,000 (cash) = +50,000
If Pizza Aroma borrows $20,000 from a bank, depositing those funds in its bank account and signing a formal agreement to repay the loan in two years.
Assets: +20,000 (cash) = liabilities (notes payable) +20,000 + Stockholder's equity
Current Ratio equation
Current Asset / Current Libilities.
Current Ratio
tells you whether current assets are sufficient to pay current liabilities. A higher ratio means better ability to pay..
Current assets
to be used up or converted into cash within 12 months of the balance sheet date.
current liabilities
debts and obligations that will be paid, settled, or fulfilled within 12 months of the balance sheet date.
noncurrent (long-term)
assets and liabilities that do not meet the definition of current.
accrued liabilities
amounts owed to others for advertising, utilities, interest, etc.
contributed capital
amount of cash (or other property) contributed in exchange for the company's stock.
intangible assets
trademarks, brand names, goodwill, and other assets that lack a physical presence
accrual basis accounting
reports revenues when they are earned and expenses when they are incurred, regardless of the timing of cash receipts or payments; required under GAAP.
revenue principle
the requirement under accrual basis accounting to record revenues when they are earned, not necessarily when cash is received for them.
unearned revenue
a liability representing a company's obligation to provide goods or services to customers in the future.
matching principle
the requirement under accrual basis accounting to record expenses in the same period as the revenues they generate, not necessarily the period in which cash is paid for them.
CEO Bernie Ebbers, 65
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ZZZZ Best
adjustments
entries made at the end of every accounting period to report revenues and expenses in the proper period and assets and liabilities at appropriate amounts.
contra-account
an account that is an offset to, or reduction of, another account
temporary accounts
accounts that track financial results for a limited period of time by having their balances zeroed out at the end of each accounting year.
permanent account
accounts that track financial results from year to year by carrying their ending balances into the next year.
2/10, n/30
discount percentage offered / number of days in discount period, "net" sales (after sales and allowances) / maximum credit period
gross profit percentage equation
net sales - CGS / net sales x 100
gross profit percentage
a ratio indicating the percentage of profit earned on each dollar of sales, after considering the cost of products. sold. A higher ratio means that greater profit is available to cover operating and other expenses.
cost of goods sold equation
BI + P - EI
First in, first out (FIFO)
assumes that the costs of first goods purchases are the costs of the first goods sold.
Last in, first-out (LIFO)
Assumes that the costs of the last goods purchased are the costs of the first sold.
weighted average cost
an inventory costing assumption that uses the weighted average unit cost of the goods available for sale for both cost of goods sold and ending inventory.
weighted average cost equation
cost of goods available for sale / number of units available for sale
inventory turnover ratio
cost of goods sold / average inventory
days to sell
365 / inventory turnover ratio
inventory ratio
the process of buying and selling inventory. a higher ratio means faster turnover.
days to sell
a measure of the average number of days from the time inventory is bought to the time it is sold. a higher number means a longer time to sell.
accounts receivable
amounts owed to a business by its customers
pros and cons of extending credit
1. increase wage cost
2. bad debt cost
3. delayed receipt of cash
notes receivable
a promise that requires another party to pay the business according to a written agreement
bad debt expense
reports the estimated amount of this period's credit sales that customers will fail to pay.
write-off
the act removing an uncollected account and its corresponding allowance from the account records.