accounting test 1

operating activities

earning cash for business, paying for office space, deprecation, salaries, paying taxes, keep business going

financing

obtaining cash from financiers and lenders or repaying them, paying cash dividend to stockholders, borrowing money from bank, investing cash from savings to start business

investing

acquring long term assets or investments, land of buildings, selling a buildings

assets

things you own on control that provide future benefit, tangible like cash, buildings, or like copymark, buy it, use it, rent, insurance, 401k

liabilities

obligations to provide economic benefits to someone in future. mortgage, line of credit, deferred revenue

balance sheet

snapshot of liabilities, equity, assets

income statement

results of operation at certain time, shows activties

accounting equation

equity = assets - liability

revenue

inflow of assets, increases total equity

expenses

Outflows or using-up of assets, or increases in liabilities as a result of operating the business, decreases total equity

current assets

converted into cash or used in 1 year, cash, short term investments, inventory, prepaid

long term assets

takes more than a year, equipment, buildings, intangible assets, long term investments

short term investments

government securities, certificates of deposit, and money market funds

accounts receivable

pay within a period following a sale, amount expected to be received (asset)

retained earning

stockholders, paid in capital, (equity)

asset account balance increases

liability or equity must increase

asset account decreases

liability or equity account must decrease

liability account increases

equity decrease or asset increase, liability decrease

retained earnings

equity balance sheet, increased by reveune, decrease by expense, decrease by withdrawl

dividends

withdrawl to pay shareholder

usually need adjusting journal entries

supplies, prepaid expenses, unearned revenue, accrued liabilities

adjusting journal entries NEVER

increase or decrease cash, but usually increase revenue or expense

steps in creating a business

create idea, arranging financing, make investments, develop operations

examples of stakeholders

Investors, Creditors, Government, Suppliers, Management, Employees, Regulators

equity

owner's interest in the net assets of the business

income statement nonoperating

interest income, dividend income, interest expense, loss from lawsuit or sale of land

equity can come from

earnings retained from business, capital paid in by owners, common stock

assets =

liability + equity

equity

assets minus liabilities

on balance sheet when subtracting expsnes it falls into

equity

account receivable

amount customer will owe following a sale, iou, (seller) (asset)

accumulated deprecation

loss of value from product over time, contra asset, negative balance

accounts payable

operating liability, supplier giving time period to pay for purchase (buyer) (liability)

accured liabilities

liabilities that build that you dont pay until later, like electric bill, or wages

fianacning liabilities

long term, payable over years, notes payable, bonds payable

notes payable

business agrees to pay up at certain date

common stock/paid in capital

paid into business by owners, equity

retained eranings equation

beginning retained plus net income minus withdrawals

retained earnings

total earnings by business since its start