Accounting Formulas
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