accounting: language of business where you record, classify, Summarize, interpret systems
accounting cycle: 6 steps for preparation & analysis of the financial statements.
Bookkeeping: record all transactions.
1) analyze documents.
2) make journal
3) make ledger
4) trail balance
5) Financial statement (es., B.S., Soc)
6) analyze financial statements.
trail balance: journal=ledger
Financial statement: all transactions occurred in a specific time.
Balance sheet eq.: Asset = liabilities + Owner equity.
asset: things you own, ex: furniture, land
↳ fixed: more than 1 yr ex.: land, equipment
↳ current: less than 1yr, ex.: cash
↳ Intangible assets: copyright, something that isn't physical (can't be touched)
liquidity: how fast current assets can be converted into cash
liability: what you owe
↳ current liability: less than 1yr ex. ____ payable
↳ Long-term liability: more than 1 yr ex: mortgage, loan
Owner equity: the amount of something that belongs to you before it becomes fully asset.
↳ retained earnings: Profit that you reinvest in a company
Depreciation: a fixed asset that's value increases or decreases
gross profit=rev-cogs
operating income= gross profit-expense
net income= operating-tax
(net income): Rev-expense
Cost of goods sold: how much you spend on the stuff you sold (w/out profit)
expense: is many you spent (rent, wages, salaries, Paid)
revenue: something($) you earn ( ____ earned / recieved / Sold)
gross profit: profit from COGS ex: bottle you buy for 2 (COGS) and sell for 5 Profit is 3 (gross profit)
cash flow: money in and out
↳ Operation: salary taxes interest dividend
↳ investment sale of long term asset
↳ financing: dept