Midterm Flashcards
(46 cards)
If Sources of Cash > Uses of Cash, que pasa?
$ added to Checking Account
List some Assets (5)
Accounts Receivable, Cash, Inventory, Prepaid rent, PPE, Goodwill
List some Liabilities (4)
Accounts Payable, Accrued Salaries, Accrued Interest, Utilities Payable
Cash Inflow examples (4)
aka How you might finance stuff
Sales $$, taking out loans, issuing stock, selling used/old PPE
Cash Outflow examples (10)
Producing inventory, paying salaries, rent, paying off loans (/interest), taxes, buying PPE, acquiring companies, buying intangible assets, buying back stock, paying dividends
THE INCOME STATEMENT!
- earnings statement*
- sum total revenues for year (or accounting period)
- prepared using Accrual Accounting
- bottom line is Net Income
THE BALANCE SHEET
- statement of financial position
- shows ending balances of that year
- point in time!
Accrual Basis Accounting
recognizes receivables from making sales on credit &; liabilities for unpaid expenses (?)
Financial condition
assets vs. liabilities at end of period (measure this quickly by amt in checkbook at end of year)
Is COGS an expense?
Yes
Leasehold Improvements
improvements made to make space better for lessees (check this)
Salvage value and depreciation value…
If there’s a salvage value to be had from selling old PPE, we take that off before we calculate the depreciation value
Example of Impairment of Assets?
Blockbuster’s VHS tapes!
def: Intangible Asset
Provide economic value to the company for > 1 year, like a patent (that was purchsed)
def: Capital Stock (Common Stock)
$ investors paid to invest in the company. Like the original price of stock shares
Three sources of financing
- Borrowing / 2. Issuing shares of stock / 3. Reinvesting profits
Treasury Stock
when a company buys back its own stock
Advantages of Sole Proprietorships (3)
Disadvantages (2)
- easy to start up
- no incorporation fees to pay
- owner receives all profits
- hard to raise capital (can’t issue stocks/bonds)
- riskier - it’s all on the owner. in bankruptcy, creditors can take the personal assets of the owner
Advantages of Partnerships
Disadvantages
- relatively easy and inexpensive to form
- wider pool of knowledge, skills, contacts so better mgmt
- each partner is personally liable for all debts
- in bankruptcy, creditors can take the personal assets of the owner
- less stability - a partner cannot transfer interest in the business w/o unanimous consent of partners
Stuff about corporations
- ownership divided into shares of stock.
- in founding charter, authorized to issue a maximum number of shares of stock
- in bankruptcy, the most they will lose is the amt they paid for their shares
- obvi, easy to raise capital by selling shares of stock
Diff between investors and creditors
investors: don’t get paid back but share in the profits of the company (dividends)
creditors: will get paid back in full (+ interest)
External parties
Internal parties
E: creditors, investors
I: owners, employees
GAAP Four Assumptions
- Separate Entity
- Going Concern
- Measurement and Units of Measure
- Periodicity
GAAP Four Basic Accounting Principles
- Historical Cost
- Revenue Recognition
- Matching
- Full Disclosure
