pfa notes

interest formula

(principal) ** (annual rate) * (time/12)*

owing interest looks like:

Dr. Interest Expense (+E, -SE) xxxx

       Cr. Interest Payable (+L) xxxx

XYZ sol inventory that cost $8000 to various customers for $14000 on credit during July 2022. The customers have no right of return and XP expects to collect whole amount from its customers.

Dr. A/R (+A) $14000

Cr. Sales Revenue (+R, +SE) $14000

\
Dr. COGS (+E,-SE) $8000

Cr. Inventory (-A) $8000

XYZ collected $5000 cash from customers for goods sold on account in Sep 2022.

Dr. Cash (+A) $5000

Cr. A/R (-A) $5000

When you use an asset

the value of an asset decreases, expenses increases

Asset reduction/is used

Cr. Asset (-A)

Cr. Accumulated Depreciation (+XA, -A)

Dr. Depreciation Expense (+E, -SE))

depreciation expense

(O.G. worth of item) / (life span of item) \* (time the equipment has been used)

The customer made a down payment of $5,000 out of a 25,000 order and will pay the remainder when the order is fulfilled in the future.

Dr. A/R (+A) 5000

Cr. Unearned Rev (+L) 5000

cash

asset, debit

short term investments

asset

Accounts Receivable

asset

inventory

asset

supplie

asset

Property, plant, and equipment (PP&E)

assets

When cash is negative in B/S, it becomes \_____________ in Journal Entry

Cr. Cash (A)

prepaid expenses

assets

Unearned Revenue / advances from customers

liabilities

loans from bank

notes payable

requirements for revenue: 1 & 2

1. firm performed/delivered all or almost all the good/services
2. seller has received cash or an A/R

B/S

assets \= liabilities + contributed capital + retained earnings

common stock is

amount invested in the business by shareholders (SE)

retained earnings

past earning by corporation, not given to shareholders (SE)

PPE example

production machinery

income statement formula

revenues - expenses = net income

revenues, in a simple way, can also be

cash and promises

cost of goods sold

expense (SE)

income taxes

expenses (SE)

Selling, General, and Administrative

expense, I/S

company’s current ratio =

total current assets / total current liabilities

INTEREST EXPENSE

cost of using borrowed funds

Ending Retained Earnings \=

beginning retained earnings + net income - dividends

income statements has

revenue

statement of shareholders' equity has

beginning retained earnings

* net income (FROM INCOME STATEMENT)
* DIVIDENDS

\
=ENDING RETAINED EARNINGS

balance sheet has

cash, liabilities, common stock and ending retained earnings

at the end of the first year of operations

common stock = 0

beginning retained earnings = 0

stock issuance is in

shareholders' equity formula

\
and ONLY FILLS the common stock column

operating activities

earning income (increase/decrease in revenues or liabilities)

CURRENT ASSETS ORDER

1. Cash
2. Short term investments
3. accounts receivable
4. inventories
5. supplies
6. prepaid expenses (rent, insurance, advertising paid in advance)
7. other current assets

noncurrent assets order

property, plant, and equipment:

\

1. land
2. buildings
3. equipment
4. accumulated depreciation
5. operating lease right of use assets
6. intangible assets

Current Liabilities order

1. accounts payable
2. unearned revenue
3. accrued expenses payable


1. wages payable
2. utilities payable
3. interest payable
4. current lease liabilities
5. income tax payable
6. other current liabilities

Noncurrent Liabilities order

1. notes payable
2. long term lease liabilities

SE order

1. common stock
2. additional paid in capital
3. treasury stock
4. retained earnings
5. contributed capital

what is contributed capital

shareholders invest in the company with cash or other assets and receive shares of stock

long term investments

asset

equipment

asset

buildings

asset

leased assets

asset

land

asset

intangibles

asset

prepaid expense examples

future insurance coverage, rental of property, adverisiting

prepaid expenses is

amounts paid in advance by the company to other future benefits

common stock category

SE

additional paid in capital

SE

retained earnings

SE

ACCOUNTS PAYABLE

liability

ACCRUED EXPENSES LIABILITIY

LIABILIITY

NOTES PAYABLE

liability

LEASE LIABILITES

LIABILIITY

UNEARNED REVENUE

liability

anything UNEARNED is

liability

bonds payable

liability

unearned means

amounts paid in the past to the company by others who expect future goods or services

follow these steps to make balance sheet

1. what was received? increase or decrease?
2. what was given?
3. make A = L + SE

Company ISSUES means

Company SOLD

how to find COMMON STOCK (SE) in word problem

par value * \# of shares

how to find ASSETS from word problem about stocks

market value * \# of shares

how to find APIC (SE)

(market value - par value) \* # of shares

shareholders' equity formula

\= common stock + apic + retained earnings

net income \=

Revenues - expenses + gains - losses

price paid > assets - liabilities =

shows up in Goodwill

requirements for an ASSET

1. What is given
2. RIGHT TO USE? Y OR N
3. PAST TRANSACTION OCCURRED?
4. IS THE THING TANGIBLE/MEASURABLE?

CUSTOMER PROMISES ARE NOT

ASSETS

ASSET OR NOT: $4m purchase order signed (for drinks). $400k deposit delivered to vendor

YES, you have the right to use $400k worth of the inventory

ASSET OR NOT: $2m of advertising expenditures incurred

No, bc incurred is PAST and assets are FUTURE

requirements for an LIABILITY

1. What is owed in the future?
2. Was there a past transaction?
3. Is it measurable/tangible?
4. Need to pay it back?

invoice means

a bill that needs to be paid/

LIABILITIY OR NOT: $10M received for newspaper subscriptions

YES newspaper are owned

this is UNEARNED REVENUE

LIABILITIY OR NOT: $4M invoice received for past advertising services

yes. you owe $4m

the liability with "ADVANCES FROM CUSTOMERS" is

the amount received

contributed capital is DIVIDED INTO

COMMON STOCK AND APIC

RETAINED EARNINGS MEANS

what did the firm actually earn

customer pays $3000 for merch to be delivered in the future

\+3000 cash (A)

\+3000 unearned revenue (L)

deferred revenue is also known as

unearned revenue

Positive on which side? Dr or Cr? ASSETS

Dr

Positive on which side? Dr or Cr? LIABILITIES

CR

Positive on which side? Dr or Cr? SE

CR

Positive on which side? Dr or Cr? CONTRIBUTED CAPITAL (SE)

CR

Positive on which side? Dr or Cr? RETAINED EARNINGS (SE)

CR

receiving money on credit

accounts receivable (A)

acquiring/buying something ON CREDIT or ON ACCOUNT

accounts payable (L)

Positive on which side? Dr or Cr? EXPENSES (SE)

DR

Positive on which side? Dr or Cr? REVENUES (SE)

CR

Positive on which side? Dr or Cr? DIVIDENDS (SE)

DR

EXPENSE IS WHAT CATEGORY

SE

DIVIDIENDS IS WHAT CATEGORY

SE

REVENUES IS WHAT CATEGORY

SE

requirements for revenue

1. all or most of services/goods has been performed or delivered
2. seller has received cash or A/R

deferrals

cash was received or paid in the past, has been exchanged in prior transaction

accruals

cash will be received or paid in the future, & not exchanged in the prior transaction