Financial Accounting Transaction Analysis

Expense

Equity

Revenue

Equity

Dividend

Equity

Worker's Wage

Equity

Common Stock

Equity

Investments into the business

Equity

Cash

Assets

Short-term investments

Assets

accounts recievable

Assets

notes recievable

Assets

Inventory (to be sold)

Assets

Supplies

Assets

Long-term Investments into another company

Assets

investment into your own company

equity

Equity Vs. Assets in investments

If your company buys stock into another company, that is an asset. However, if an investor gives your company money in exchange for a piece of your company, that money creates equity.

Equipment

Assets

Buildings

Assets

Leased Assets

Assets

Land

Assets

Intangibles

Assets

Accounts Payable

Liabilities

Accrued expenses Payable

Liabilities

Notes Payable

Liabilities

Taxes Payable

Liabilities

Additional paid in capital

Stockholder’s equity

Retained Earnings

Stockholder’s equity

What is an Asset?

something you own that has value

What is an Expense?

something you paid for to help you earn income

What is a Liability?

something you owe to someone else

What is equity?

earnings from operations that have not been dispersed

What is Revenue?

money you made for providing a good or service

revenue that has been earned/accrued but not received is an ____.

Asset

expenses that have been accrued but not paid are _______.

liabilities

_____ and ________ are income statement accounts and are converted into equity (as retained earnings) when the books are closed

Revenue and Expenses

Separate Entity Assumption

Transactions of the businss are accounted for separately from transactions of the owner

going concern assumption

A business is expected to operate into the forseeable future

historical cost principle

financial statements should be recorded at the cash-equivalent cost on the date of the transaction; however, these values may be adjusted to other amounts, such as market place value, depending on certain conditions.

monetary unit assumption

financial information is reported in the national monetary unit without adjustment for changes in purchasing power

how do assets prevent cash outflows in the future?

generate internal revenue streams that cover operating costs without needing to use outside loans

Stockholders’ Equity

Residual interest of owners in the assets of the entity after settling liabilities; the financing provided by the owners (contributed capital) and by business operations (earned capital)

Residual Owner

Common stockholders hold a claim to a company's remaining assets and profits only after all debts, obligations, and preferred shareholders are fully paid.

Contributed Capital

The total amount of cash and other assets that investors give to a company in exchange for ownership shares

Earned Capital

The total value a business generates and accumulates through its own operational profits rather than from direct investor contributions

Business transaction

An exchange of goods between a businesses, or a measurable internal event