Finances 1 Flashcards
(37 cards)
Assets
- Definition
Resources owned / controlled by an entity
- Has value
- Can be used to generate revenue
Assets
- Examples
- Cash
- Accounts Receivable
- Bank Account
- Inventory
- Goodwill
Current Assets
Assets that will be converted into cash within 12 months
Non-Current Assets
Assets that when held for longer than 12 months will depreciate over time
Liability
- Definition
An obligation that you owe to someone else
- Debt
Liability
- Examples
- Accounts Payable
- Line of credit
- Loans
- Overdraft
- Income taxes
Current Liabilities
Claims that will be paid off in 12 months
Non-Current Liabilities
Claims that take longer than 12 months to pay off
Accounts Receivable
- Definition
Money owed to the business (Pharmacy does not physically have the money yet)
- Patient owes you money
- ABBC owes you money
Accounts Payable
- Definition
Bills that the pharmacy own
- Have not physically payed and removed cash from assets yet
Equity
Equity = Assets - Liability
Funds invested by owner + retained earnings - losses
Equity Increases / Decreases
Increase in equity means:
- Profits are made
- Shareholders contribute (if not a loan)
Decrease in equity means:
- Losses are made
- Shareholders remove money from the business (dividend)
Contributed Capital
Shareholders providing money to the business
Retained Earnings
Earned from profits
Balance Sheets
- Definition
Financial position at a defined point in time
- Can be used to compare with other balance sheets
- Used to measure performance, risk, and returns
Assets should be equal to Liabilities + Equity
Balance Sheets
- What does it include?
Assets:
- Current Assets
- Long Term Assets
- Capital Assets
- Goodwill
Liabilities
- Current Liability
- Long Term Liabilities
Owner’s Equity
Income
- Definition
Money coming into the business
- Given in response to the provision of goods or services
Source of Income
- Prescription Sales
- Front Store Sales
- Rental of Equipment
- Clinical Service Fees
- Early Payment Discounts
- Rebates / Allowances
Expenses
- Definition
Money going out of the business
- Costs required to purchase something for use by the business
- Costs of operating a business in order to generate income
Helps support and generate revenue for the business
Expenses
- Examples
- Wages and Utilities
- Interest and Bank Charges
- Utilities
- Advertising
- Dividends
- Insurance
- Rent
- Repair Fees
Expenses
- Balance Sheet
Do not appear on the balance sheet as they are not an asset or liability, instead appear on the income statement
Are Products considered an Asset or Expense
Considered as purchasing INVENTORY
- This is considered an ASSET
When the pharmacy SELLS a product it is then recognized as an EXPENSE related to COST OF GOODS SOLD
- Also considered COST OF SALES
COGS
Cost of goods before applying Upcharges and Dispensing Fee
- Is the amount the pharmacy pays for
- Upcharge 1: 3%
- Upcharge 2: 7%
- Dispense Fee: $12.15
Gross Profit
How much the money the business makes after a product is sold (Dollar Value)
- Gross Profit ($) = How much the product is sold for - COGS
