Accounting 1001
What qualifies as a current liability?
- Accounts payable - Accrued expenses payable - Unearned revenue (gift cards) - Notes payable - Capital lease obligations
What qualifies as a non-current liability?
- Notes payable when the obligation is due beyond the next 12 months
What qualifies as a non-current asset?
- PP&E - Intangible assets (trademarks, patents, goodwill, etc...) - Long-term investments
What qualifies as a current asset?
- cash and cash equivalents - short-term or long-term marketable securities - Accounts receivable - Notes receivable - Inventory (merchandise, supplies, etc...) - prepaid expenses
Purchased a machine for $32,000 on January 1, 2011. The company estimates annual depreciation at $3,200
1/1/2011 PP&E(+A) $32,000 Cash(-A) $32,000 Passive entries on 12/31/2015 Depreciation Expense(+E,-SE) $3,200 PP&E(-A) $3,200
collected $1,200 rent for the period from December 1, 2015 to April 1, 2016, which was credited to Unearned Rent Revenue on December 1, 2015
12/1/2015 Cash(+A) $1,200 Unearned Rent Revenue(+L) $1,200 Passive entries on 12/31/2015 Unearned Rent Revenue(-L) $300 Rent Revenue(+R,+SE) $300
Paid $5,000 for two year insurance premium on July 1, 2015; debited prepaid insurance for that amount
7/1/2015 Prepaid insurance(+A) $5,000 Cash(-A) $5,000 Passive entries on 12/31/2015 insurance expense(+E, -SE) $1,250 prepaid insurance(-A) $1,250
On 9/1/2015, loaned $6,000 to an officer who will repay the loan principle and interest in one year at an annual rate of 14%
9/1/2015 ST notes receivable(+A) cash(-A) passive entries on 12/31/2015 Interest Receivable (+A) Interest revenue(+R,+SE) 9/1/2016 Cash(+A)-------6,000+(6,000*.14) ST notes receivable (-A)--------6,000 Interest receivable(-A)---------280 Interest Revenue(+R,+SE)------560
paid $32,074 cash on accounts payable
Accounts payable(-L) Cash(-A)
Form 10-k
Annual report filed by public companies with the SEX that contains additional detailed financial information
Provided $39,323 in service to customers during the year, with $28,558 on account and the rest received in cash
Cash (+A) Accounts receivable(+A) Service Revenue(+R, +SE)
Issued 100 shares of stock worth $2 each for $345 cash
Cash(+A) Common Stock(+SE) Additional P.I.C.(+SE)
Sold $4,313 in ST investments for cash
Cash(+A) ST investments(-A)
Received $39,043 on account paid by customers
Cash(+A) Accounts receivable(-A)
Borrowed $181 from a bank, signing a short-term note
Cash(+A) ST notes payable (+L)
Borrowed $50,000 from the local bank on a 10%, one-year note
Cash(+A) ST notes payable (+L)
Current Ratio
Current Assets ÷ Current Liabilities
Current liabilities
Debts payable within the next 12 months
How is retained earnings affected by Dividends?
Decreases in RE due to payments back to shareholders
How is retained earnings affected by Expenses?
Decreases in RE from operations
Depreciation for the year on equipment, $10,000
Depreciation expense(+E,-SE) Accumulated depreciation(+XA,-A)
Purchased and used fuel of $750 in delivery vehicles during the year (paid for in cash)
Fuel expenses(+E,-SE) Cash(-A)
Gross Profit Percentage (or margin)
Gross Profit ÷ Net Sales
How is retained earnings affected by Revenues?
Increases in RE from delivering goods
Purchased $32,305 inventory on account
Inventory(+A) Accounts payable(+L)
Return on Assets (ROA)
Net Income ÷ Average Total Assets
Net Profit Margin
Net Income ÷ Net Sales
Earnings per share
Net income ÷ Average number of common shares
purchases $442 worth of equipment. Paid $432 in cash and signed long-term note for the rest
PP&E(+A) Cash(-A) LT Notes Payable(+L)
purchased plant and equipment for $636
PP&E(+A) Cash(-A)
Revenue Realization Principle
Principle in accounting that states that revenue will not be recognized unless four condiments are present: 1) Goods or services are delivered 2) There is evidence of an arrangement for customer payment 3) Prices are fixed or determinable 4) Collection is reasonably assured
Form 10-Q
Quarterly report filed by public companies with the SEC that contains additional unaudited financial information
Annual report
Report containing the four basic statements for the year, related notes, and often statements by management and auditors
Form 8-k
Report of special events (such as auditor changes, mergers, etc...) filed by public companies with the SEC
Declared $145 in dividends to be paid in the following year
Retained earnings(-SE) Dividends payable(+L)
Declared and paid $597 in dividends for the year
Retained earnings(-SE) Cash(-A)
Purchased additional ST investments for $7,616
ST investment(+A) Cash(-A)
Paid payroll, $3,500 during the year
Salary expenses(+E,-SE) Cash(-A)
Total Asset Turnover
Sales (or operating) Revenues ÷ Average Total Assets
Treasury stocks
Shares that have been repurchased by the company; reduces total stockholders' equity
Retained earnings
The accumulated amount of past earnings of a corporation that has not been distributed to shareholders as dividends. RE= cumulative reinvested profits
Incurred $68 in utility usage during the year; paid $55 in cash and owed the rest on account
Utility expense(+E,-SE) Cash(-A) Accounts payable(+L)
wages earned by employees since the December 24 payroll but not yet paid, $16,000
Wage expense(+E,-SE) Wages payable(+L)
Current assets
assets which the company expects to convert to cash, sell, or consume within the next 12 months
Long term (non-current) assets
assets which the company expects to hold longer than 12 months
financing activities
borrowing and repaying debt, including short-term bank loans, issuing and repurchasing stock, and paying dividends
Quarterly report
brief unaudited report for the quarter normally containing summary income statement and balance sheet
Investing activities
buying and selling non-current assets and investments
Non-current liabilities
debts due beyond the next 12 months
The effect of recording an adjustment of not yet paid wages of $2,000
decrease in stockholders' equity and an increase in liabilities
Total asset turnover ratio
helps us determine how efficient management is in using assets to generate sales
Income tax expense, $11,000 payable in 2016
income tax expenses(+E,-SE) income tax payable(+L)
several Nike investors sold their own stock
nothing happens
Estimated electricity usage at $450 for December; to be paid in January 2016
passive entries on 12/31/2015 utilities expense (+E,-SE) utilities payable (+L)
Operating activities
primarily with customers and suppliers, and interest payments and earnings on investments
Stockholders' equity
stockholders' ownership of the assets of the business; consists of the following categories: - Contributed capital - Retained earnings - Treasury stock - Accumulated other comprehensive income (loss)
Contributed capital
the amount invested in the company by the owners. - Common stock (par value) - Additional paid-in-capital
Press release
written public new announcement that is normally distributed by major news services