Accounting Video Lectures - Financial Statements

Financial Statements

A set of accounting reports that convey economic and financial information to outside users such as creditors and investors

Cash Accounts Receivable Inventory Supplies

Assets in order of liquidity

Long Term Assets

Assets that are expected to be used in business operations for longer than one year

Current Assets - Cash - Accounts Receivable - Inventory - Supplies

Assets that are expected to either be converted into or expire (be used up) w/in one year. Give Example

Financing Activities

Cash inflows and Cash outflows associated with the sources of funding the business - Include: - Obtaining cash from and paying cash to: - Creditors - Stockholders (owners)

Operating Activities

Cash inflows and cash outflows associated with the primary operations of the business - Include: The cash effects of transactions that create revenues and expenses and thus enter into the determination of net income

Investing Activities

Cash inflows and cash outflows associated with the purchase or sale of long-term assets such as P-P-E

Operating Activities Investing Activities Financing Actiivites

Cash inflows and outflows are categorized as this/these

1) Property-Plant-Equipment (P-P-E) 2) Intangibles

Categories of Long Term Assets

Beginning Balance (Jan 1) + Additional sales of Common Stock _______________________________________________ = Ending Contributed Capital (Dec 31)

Common Stock Equation

Contributed Capital (Common Stock) Retained Earnings

Components of Equity

Expenses Ex. Cost of Goods Sold (cost of inventory sold) Salaries Expense Rent Expense Utilities Expense Interest Expense Advertising Expense Income Tax Expense

Costs incurred in the process of earning revenues Give Examples

Long-Term Liabilities EXs. 1. Long Term Notes Payable 2. Mortgage Payable 3. Bonds Payable

Debts that will be paid in longer than one year. Give example

1) Contributed Capital 2) Retained Earnings

For a corporation, what types of equity are there

1. Contributed Capital

For sole proprietorships and partnerships, what component(s) of equity is/are there

Assets = Liabilities + Equity

Fundamental Accounting Equation

Net Loss

If expenses > revenues, it is referred to as a _______

Net Gain

If revenues> Expenses, it is referred to as a __________

Revenues - Expenses = Net Income Sales Revenue - Cost of Goods Sold = Gross Profit

Income Statement Equations

1) Revenues 2) Expenses

Items found on the Income Statement

Supplies

Items used in the normal course of business

- Assets = Liabilities + Equity - Revenues - Expenses = Net Income - Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings - Sales Revenue - Cost of Goods Sold = Gross Profit - Total Equity for a corporation = Contributed Capital + Retained Earnings

Key Financial Statement relationships -> Equations

Current Liabilities EXs. 1. Accounts Payable 2. Short-Term Notes Payable 3. Salaries Payable 4. Income Taxes Payable 5. Utilities Payable

Liabilities expected to be paid within one year Give Examples

Property-Plant-Equipment EXs. - Land - Buildings - Equipment

Long-term assets that have a physical substance (i.e., you can touch, feel, and see these assets) - Give Example

Intangible assets EXs. 1) Trademark 2) Patent 3) Copyright

Long-term assets that lack a physical substance (i.e., you can not touch, feel, and see these assets) - Give Example

1. Balance Sheet 2. Income Statement 3. Statement of Owners' Equity 4. Statement of Cash Flows

Major Financial Statements

1) Current Assets 2) Long-Term (Non-current) Assets

Major categories of assets

1) Current Liabilities 2) Long-Term Liabilities

Major categories of liabilities

Accounts Receivable

Represent amounts owed to the company by its customers

Revenues Ex. Sales Revenue Service Revenue Rental Revenue Interest Revenue Dividend Revenue

Represent amts. earned during the accounting period (year). - May result from sale of merchandise, services, rental of property, or lending money Give Examples

Contributed Capital AKA -> Common Stock

Represents investments made by owners into the business through the purchase of the organization's stock.

Retained Earnings

Represents net income earned by the corporation that is kept within the company for growth and expansion (rather than given to the stockholders in the form of a dividend)

Beginning Balance (Jan 1) + Net Income - Dividends __________________________________ Ending Retained Earnings (Dec 31)

Retained Earnings Equation

Statement of Cash Flows - Provides: - Cash Receipts (Inflows) - Cash Payments (outflows)

Simply shows the changes in cash for a period of time (the same period of time as that covered by the income statement). - It provides what?

Statement of Owner's Equity

Simply shows the changes in equity for a period of time (the same period of time as that covered by the income statement).

Contributed Capital: Beginning Balance (Jan 1) + Additional investments by owners + Net Income - Withdrawals _____________________________________ Ending Balance (Dec 31)

Statement of Owner's Equity for a sole proprietorship and partnership

Equity

The amount of the owners investment in the business =

Liabilities

The debt owed by a business =

Assets

The economic resources owned by a business =

Income Statement

The financial statement that shows the profitability of the company for a period of time

Inventory

This is the product the company sell to its customers

Liabilities

- Debts owed by the business - Represent creditor claims against the company's assets

Balance Sheet

- The economic resources owned by a business - The debts owed by a business - The amt. of the owners investment in the business *At a specific point in time (a 'snapshot')