COMM 111 Equations

Accounting equation

Assets = Liabilities + Owners’ equity

Owners Equity Expanded

Contributed capital + Retained earnings

• Retained earnings

• : Beginning RE + Net income (− net loss) − Dividends declared = Ending RE

• Cash

• CFO + CFI + CFF = Total change in cash

Pre-tax income

1. Operating income ± Other income/expense (interest, dividend revenue) =

net income

Pre-tax income − Income tax

Gross profit

Sales revenue − COGS

Operating income (EBIT)

Gross profit − Operating expenses

• Dividends declared

• : Beg RE + NI − Dividends = End RE

• Unearned revenue

Beg + New cash received − Transferred to revenue = End

• Inventory

Beg inventory + Purchases − COGS = End inventory

Allowance for uncollectibles

Beg + Bad debt expense − Write-offs + Recoveries = End