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Balance Sheet
Terms on the Balance sheet
32
Accounting
Undergraduate 2
02/03/2014

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Term
Balance Sheet
Definition
tates what your business owns (assets) and owes (liabilities) on a specific date. Also shows the amount owned – assets less liabilities
Term
Income Statement
Definition
Shows how much the business earned during a period of time. This is what you have earned from providing goods and services less what it costs you to provide goods and services
Term
Stockholders Equity
Definition
Shows the earnings of the business that go to the shareholders (Some companie’s present a “statement of retained earnings” showing earnings and dividends paid only)
Term
Cash Flow
Definition
Shows the source of cash and what the cash was used for during a period of time
Term
Retained Earnings
Definition
the amount of cumulative profits and losses kept by the company since the first day of operations.

Retained earnings changes with net income (profits and losses) and dividends paid to shareholders (owners)

Beginning Retained Earnings
+ Net Income or - Net Loss
- Dividends Paid
= Ending Retained Earnings
Term
Operating Activities
Definition
directly related earnings from day to day business operations
Term
Investing Activities
Definition
directly related to buying and selling assets used long term in the business
Term
Financing Activities
Definition
directly related to borrowing and repaying debt and receipts and payments from/to owners
Term
The Accounting Equation
Definition
Assets = Liabilities + Stockholder’s Equity
Have = Owe + Own (Includes net profits)

Revenues
- Expenses =
Net profit or loss
Term
Accounts Receivable
Definition
Amounts customers owe the company for goods or services
provided; normally collected in 30 to 90 days
Term
Inventory
Definition
Items held only for sale to the customer
Term
Prepaid Expenses
Definition
Paid in advance before the service is provided; gives future benefit (rent, insurance)
Term
Supplies
Definition
Items that are used up in day to day operations
Term
Notes Receivable
Definition
Amounts owed to the company; normally interest is charged and the note is repaid in longer than 3 months
Term
Investments
Definition
The company takes their excess cash and invests it in stocks or bonds to earn a return. Investments can be short term or long term
Term
Property/Plant/Equipment (PP&E)
Definition
Assets used long-term to generate revenues; they have physical substance (Buildings, Equipment, Autos, Land, Computers)
Term
Accumulated Depreciation
Definition
The total amount for all prior years (cumulative) of depreciation expense for all prior periods. This is a contra account subtracted from plant, and equipment
Term
Intangible Asset
Definition
No physical substance - used long-term to generate revenues The company has the exclusive right to do something;Includes trademarks, copyrights, patents, franchises, goodwill
Term
Accounts Payable
Definition
Amounts owed to suppliers, normally paid in 30-60 days
Suppliers are those who provide inventory or goods and
services over and over again
Term
Accrued Expenses
Definition
Both of these are expenses that have not yet been paid
Term
Accrued Liabilities
Definition
that the company owes – examples are: employee taxes,
legal, advertising, bonuses, retirement plans
Term
_________ Payable
Definition
Expenses incurred that have not yet been paid (Salaries, Rent, Interest, Taxes) If an amount is large enough, it gets its own line. If it is not large enough it will be included in accrued expenses.
Term
Unearned Revenues
Definition
Cash received from customers before the good or service is
provided. The company owes the customer a good/service
Term
Current Maturities of Long Term Debt
Definition
The portion of long –term debt that will be repaid within 1 year
Term
Notes Payable and Long Term Debt
Definition
Amounts owed to banks and other financing companies
that will be paid later than one year from now Amounts due within a year are reported as current maturities of long term debt
Term
Bonds Payable
Definition
Amounts borrowed from investors; normally long-term
Term
Common Stock or Contributed Capital
Definition
Funds received from investors in exchange for ownership – common stock is reported at par value
Term
Additional Paid in Capital
Definition
Amounts over and above par raised from investors from the sale of stock (ownership)
Term
Retained Earnings
Definition
Total of all (cumulative) profits and losses less dividends
paid to owners
Term
Treasury Stock
Definition
The company buys and holds its own stock
Term
Operating cycle
Definition
the time it takes a company to spend cash to do business and get the cash back again (buy inventory, pay expenses, sell to the customer and collect from the customer). Usually less than one year.
Term
How is the Balance Sheet Organized?
Definition
The balance sheet is listed in the order of liquidity – how soon it will impact cash
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