Financial Statements and Percentage Analysis

A set of vocabulary flashcards defining common size financial statement analysis, account classifications, and basic accounting formulas based on the lecture transcript.

Common Size Income Statement

An income statement format where every line item is divided by total sales to present each item as a percentage of sales.

Common Size Balance Sheet

A balance sheet format where every line item is divided by total assets to present each item as a percentage of total assets.

Four Integrated Financial Statements

The complete set of core accounting statements consisting of the Income Statement, Statement of Stockholders' Equity, Balance Sheet, and Statement of Cash Flows.

Cost of Sales Formula

The percentage ratio calculated on a common size income statement as $\frac{\text{Cost of Sales}}{\text{Total Sales}}$.

Gross Profit Formula

The percentage ratio calculated on a common size income statement as $\frac{\text{Gross Profit}}{\text{Total Sales}}$.

Fees Earned

Revenue generated from providing services to customers, which is categorized as income on the income statement.

Dividends

Distributions paid to shareholders out of accumulated earnings, which are deducted from retained earnings on the statement of stockholders' equity rather than classified as an expense.

Expense

A cost incurred or resource consumed within $1\,year$ during normal operations, itemized on the income statement and subtracted from revenue to determine net income.

Land

A long-term asset that is not consumed within $1\,year$, classified under assets on the balance sheet.

Notes Payable

A liability account representing an obligation or amount owed to a bank, lender, or creditor.

Ending Retained Earnings Formula

The equation used on the statement of stockholders' equity where $\text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends}$.

Balance Sheet Equation

The foundational accounting equation showing that $\text{Total Assets} = \text{Total Liabilities} + \text{Stockholders' Equity}$ at a specific point in time.