BSNS 115 Financial Accounting

Define Assets

Resources controlled by an entity from past events, from which future economic benefits are expected to flow to the entity. Can be current or non-current.

Define Liabilities

External sources of funds; Present obligation from past events, the settlement of which is expected to result in an outflow of economic benefits. Can be current or non-current.

Define Equity

Internal sources of funds (from owners); Residual interest in the assets after deducting liabilities (net assets); Consists of share (contributed) capital and retained earnings.

Define Income

Inflows or enhancements of economic benefits that increase assets or reduce liabilities; Consists of both revenues and gains.

Define Expenses

Decrease in economic benefits in the form of outflows of assets or incurrence of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

What is the Accounting Equation?

Assets = Liabilities + Equity

What is an Income Statement?

Reports income, expenses, and profit in a period.

Formula for Gross Profit

Revenues - Cost of Sales

What is EBIT?

Earnings Before Interest and Tax

What is EBT?

Earnings Before Tax

What is the Statement of Changes in Equity?

Shows changes/movements in the equity components during the period.

Formula for Retained Earnings (Ending)

Retained Earnings (Beginning) + Profit (or - Loss) - Dividends

What is a Balance Sheet?

Shows assets, liabilities, and equity on a specific date.

What is a Statement of Cash Flows?

Shows the sources and uses of cash for a period; Consists of three activities: operating, investing, and financing.

Define Depreciation

Systematic allocation of the cost of a tangible asset over its useful life.

Straight Line Depreciation Expense Formula

(Cost - Residual Value) / Useful Life

What is Accumulated Depreciation?

A contra asset account that shows the total depreciation accumulated for an asset.