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Accounting
- The systematic presentation and interpretation of financial information.
- Two type: managerial and financial
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Financial Statements
- There are three types:
- Balance sheet
- Income Statement
- Cask flow
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Balance Sheet
A formal statement of the assets, liabilities, and equity for one day.
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Income Statement
A formal statement of the Revenue, Cost of Operations, and expenses over a period of time
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Cash Flow
The formal statement of the sources and uses of cash from operations, investments,and financial activities over a period of time.
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Cash Flow Statement
- Operations= doing our thing. This is usually defined by the name of the company. For example: Overnight auto service would have operations of autoservice . Cash effect on revenue and expenses in the Income statement
- Investment- Making cash on your own cash. Getting back a dividend.
- Financial -Using other people money or money that is borrowed.( e.f. like from the bank, the government, and family)
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Asset
Valuable item owned by a business
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Liability
Money that is owed.Claims of creditors on assets
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Equity
Owners of the business . Included profit from operations and owners investment in the busines
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Dividend
Part of earnings given out to stockholders.
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The accounting equation
Assets= liabilities + Equity
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Low leverage
Equity is high and liabilities are low
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High leverage
Liabilities are high and Equity is low
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Revenue
- selling what you are in business to sell
- The money that is made from operations.
- Increase in equity from operations
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Merchandise
Anything bought to be resold for profit
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Expense
- Necessary cost of operations
- Decrease in equity from cost of operations
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Net income
- Take homes pay:
- revenue minus expenses
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