ACCT Final

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Receipt from dividend revenue

Operating activity

Receipt of interest revenue

Operating activity

Received cash interest on a note

Operating activity

Recorded depreciation expense

Operating activity

cash paid for inventory purchases

Operating activity

income tax

Operating activity

interest

Operating activity

wage expense

Operating activity

Service Company Income Statements

Revenue - expenses = net income

Order of financial statements

1. Trial balance 2. Income statement 3. Statement of retained earnings 4. Balance sheet 5. Statement of cash flows

Accounting equation 2

Assets = liabilities + common stock - dividends + revenues - expenses

Accounting equation 1

Assets = liabilities + contributed capital + retained earnings

Paying loans

Financing

Issuing common and preferred stock

Financing activity

Issuing short and long-term debt

Financing activity

Issuing stocks or bonds

Financing activity

Notes and bonds payable

Financing activity

Pay dividends

Financing activity

Pay off short term or long term debt

Financing activity

Purchase treasury stock

Financing activity

Reissuing treasury stock

Financing activity

How to prepare statement of cash flows for investing/financing activities

Good things are added, bad things are subtracted

Paid cash interest on outstanding notes

Operating activity

Pay interest owed

Operating activity

Pay operating expenses

Operating activity

Investing activities

Include those transactions and events that affect long-term assets

Financing activities

Include those transactions and events that affect long-term liabilities, equity, and debt

Operating activites

Include transactions and events that determine net income, also impacted by changes in current assets and liabilities

Things on financial statements

Income statement: merchandiser and service companies Statement of retained earnings: dividends Balance sheet: accounting equation Statement of cash flows: operating, investing, financing activites, net change in cash

How to prepare the statement of cash flows for operating activities

Indirect method: 1. Adjustments for income statement NOT affecting cash: Bad things are added; Expenses and losses are ADDED to net income. (depreciation, amortization, loss on sale of asset) Good things are subtracted; Revenues and gains are SUBTRACTED from net income. 2. Adjustments for changes in current assets and current liabilities: Bad things are added; Decreases in current assets and increases in current liabilities are ADDED to net income. Good things are subtracted; Increases in current assets and decreases in liabilities are SUBTRACTED from net income. (Doing the opposite of what we originally did, making them as if they never happened)

Pay salaries and wages

Operating activity

Buy intangible assets

Investing activity

Buy long-term investments

Investing activity

Buy property, plant, and equipment

Investing activity

Buy short-term investments, except trading

Investing activity

Buying stocks or bonds

Investing activity

Collecting principal on notes receivable

Investing activity

Received cash from sales of land at a loss

Investing activity

Selling intangible goods

Investing activity

Selling long-term investments

Investing activity

Selling property, plant, and equipment

Investing activity

Selling short-term investments, except trading

Investing activity

sale or purchase investment securities

Investing activity

sale or purchase of principal of loans

Investing activity

sale or purchase of property and equipment

Investing activity

Pay suppliers for goods and services

Operating activity

Pay taxes and fines

Operating activity

Prepaid expenses increased in the year

Operating activity

Cash receipts from customers

Operating activity

Cash sales to customers

Operating activity

Collections on credit sales

Operating activity

Paid cash for property taxes on building

Operating activity

Purchased inventories for cash

Operating activity

Merchandiser Income Statement

Sales - COGS = gross profit - expenses = net income


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