Accounting Formulas

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Ledger

All Accounts of a company taken together

Examples of long term assets

Land, buildings, equipment, patents, trademarks, copyrights

Assets

Liabilities + Equity

Margin definition

% of sales dollars that end up in pockets

Acid Test Ratio

(Cash + Accounts Receivable)/Current Liabilites

Current Assets

Assets which can be converted within a year

Long Term Assets

Assets which will be converted in more than a year

Accrued Expenses

Debit Expenses, Credit Liabilities

Average Equity Formula

Equity on Jan 1 + Equity on Dec 31 divided by 2

Costs of goods sold

Expense that does not say "expense"

ROE Formula

Net Income/Average Equity

Margin

Net Income/Sales

EPS: Earnings per share formula

Net income / # of outstanding Shares

Retained Earnings

Net income earned by company, reinvested back into company to expand

Dividends

Not an expense, no obligation to be paid; do not affect income statement, just statement of owners' equity

Net Income

Revenues - Expenses

Contributed Capital

Stock sold to owners/shareholders

Working Capital formula

current assets-current liabilities

ROE Definition

Amount of profit earned per dollar of invested capital

ROE: Return on Equity

Amount of profit earned per dollar of invested capital

Ending Contributed Capital formula

Beginning Contributed Capital plus change in capital stock

Ending Retained earnings formula

Beginning Retained Earnings + Net Income - Dividends

Ending Retained Earnings

Beginning Retained Earnings + net income - dividends

Deferral definition

Cash paid/recieved, work undone (paid in advance) Expense not recorded

Examples of Current Assets

Cash, Accounts Receivable, Inventory, Supplies,

Categories of Equity

Contributed Capital & Retained Earnings

Total Equity

Contributed Capital + Retained Earnings

Current Ratio

Current Assets/Current Liabilities

Accrued Revenues

Debit assets, Credit revenues

Balance Sheet

Diplays: Assets, Liabilities, Equity

Income Statement

Displays Revenues and Expenditures

Turnover Definition

Efficiency with which firms' assets are used to generate sales

Journal Entry

Means used to record journal transactions

Jornal

Place where all transactions are initially recorded

Gross Profit

Sales Revenue - Cost of Goods Sold

Gross Profits

Sales Revenue - Cost of goods Sold

Turnover

Sales/Average Total Assets

Liquidity ratios

Short-term ability of a company to pay debts as they come due

Statement of Ownership

Shows changes in equity for the same period of time shown in income statement

Gross Profit Definiton

Total profit earned from selling product to customer

Accrual Definition

Work Done, cash not paid/recieved, expense recorded

Statement of Cash Flows

shows changes in cash for a period of time


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