financial accounting

income statement

revenue - expenses

retained earnings statement

beginning retained earnings + net income - dividends = end retained earnings

balance sheet

assets = liabilities + equity

current

within 1 year

forms of business organization

sole proprietorship, partnership, corporation

sole proprietorship

can be sued personally, tax advantages, owner controlled

partnership

shared control, tax advantages, broader skills and resources

corporation

no personal liability, easier to transfer ownership, easier to raise funds

liabilities

payable/unearned

dividends

payment to stockholders

revenue

earned, not tangible items

examples of assets

cash, inventory, accounts receivable

examples of liabilities

notes payable, accounts payable, interest payable

examples of stockholders’ equity

retained earnings, common stock

intangible assets

patents, goodwill

current cash debt coverage ratio

cash from operations / current liabilities

examples of property, plant, and equipment

land, buildings, equipment

depreciation expense

income statement

accumulated depreciation

contra asset, subtract from other PPE

profitability ratio

earnings per share = (net income - preferred stock dividends) / average common shares outstanding

liquidity ratio

current ratio = current assets / current liabilities

solvency

debt to assets ratio = total liabilities / total assets

debits & credits

dividends, expenses, assets increase with debits

liabilities, equity, revenue increase with credits