Lecture #4, Balance Sheet - Liabilities and Equity

Liabilities

Financial debts or obligations owed by a business to outside parties (creditors, suppliers, lenders).

Current Liabilities

Debts or obligations that must be settled/paid within one year (e.g., Accounts Payable, Short-Term Debt, Accrued Expenses).

Long-Term Liabilities

Debts or financial obligations due beyond one year (e.g., Bonds Payable, Long-Term Bank Loans, Mortgages).

Accounts Payable (AP)

Money owed by the business to its suppliers for goods or services received on credit.

Accrued Expenses

Expenses that have been incurred but not yet paid in cash (e.g., unpaid wages, taxes, utilities).

Short-Term Debt

Loans or notes payable that mature within the next 12 months.

Long-Term Debt

Bonds or loans maturing in more than one year, typically used to fund capital investments.

Stockholders' Equity (Owner's Equity)

The net worth of the company belonging to shareholders; represents the residual interest in assets after deducting liabilities.

Common Stock (Par Value)

The nominal value assigned to shares of stock as stated in the corporate charter.

Additional Paid-In Capital (APIC)

The amount paid by investors for stock above its par value during an equity issuance.

Retained Earnings

The cumulative net income earned by the business that has been reinvested rather than distributed as dividends to shareholders.

Ending Retained Earnings Equation

Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends Paid

Treasury Stock

Shares of a company's own stock that it has repurchased from investors (recorded as a negative/contra-equity account).

Working Capital Equation

Working Capital = Current Assets - Current Liabilities

Total Equity Equation

Total Stockholders' Equity = Common Stock + Additional Paid-In Capital + Retained Earnings - Treasury Stock