Accounting Flashcards
Assets = Liabilities + Equity
Assets are the items of value a business owns. Liabilities are claims on the business by nonowners, and equity is the owners’ claim on the business.
Total Capital Contributed
Sum of the liabilities and equity is the total capital contributed to the business
Income Statement
The income statement measures a firm’s profitability over a period of time. It shows revenues, expenses, and income.
Cost of Goods Sold
COGS consist of the labor, materials, and overhead expenses allocated to those goods and services sold during the year
S&A (Selling and Administrative) Expenses
S&A includes marketing and salespeople’s salaries, and expenses that are difficult to associate directly with sales for a specified time period. These would include office support, insurance, and security
Operating Income, or EBIT
The profit that the firm receives from its business operations before subtracting any financing expenses.
Tax-Deductible Line Items
Depreciation, Interest, S&A. the IRS allows firms to subtract these expenses from their gross income before computing the tax they owe.
Earnings Per Share (EPS)
Net Income/Number of shares of common stock outstanding
The Asset Accounts
The asset accounts contain both current and fixed assets. Current assets provide short-term benefits, whereas fixed assets provide long-term benefits to the firm.
Working Capital
The sum of all current assets: cash, marketable securities, net accounts receivable, inventory, and prepaid expenses.
Accrued Expenses
Business expenses that have not been paid yet
Net Working Capital
Current Assets - Current Liabilities
Current Liabilities
Accounts Payable, Notes Payable, Accrued expenses
Content of Equity Section of Balance Sheet
Common Stock, Capital in excess of par, and retained earnings
Capital in Excess of Par
Capital in excess of par is the original market price per share value of the stock sold minus that stock’s par value times the number of shares issued.
