Chapter Onethe financial statements vocabulary words
vocabulary words • Words for which you need to know the definition (word for word or almost word for word) • Words which you need to understand or be able to describe
Definition • Accounting • Revenue • Expense • Assets • Liabilities • Current assets • Current liabilities word for word (or almost)
understand and be able to describe • Financial accounting • Managerial accounting • GAAP • FASB • IFRS • IASB • Sole proprietorship • Partnership • Corporation • Limited liability company
understand and be able to describe • Sole proprietorship • Partnership • Corporation • Limited liability company When discussing how a business is organized there are two questions. Does the business entity pay income tax or does the obligation to pay tax on the entity’s income flow through to the owner(s)? Can the owners’ of the business be held liable for the entity’s liabilities or, are the owners shielded from the entity’s liabilities? When the owners are shielded from the entity’s liabilities, we say the owners enjoy limited liability.
Miller Motor Co.Income Statementfor the year ending Dec. 31, 2013 Revenue - Expenses +gains -losses Net Income
Miller Motor Co.Statement of Retained Earningsfor the year ending Dec. 31, 2013 Retained earning as of Jan. 1, 2013 + Net income - Dividends (paid to owners) Retained earnings as of Dec. 31, 2013 We use the words Net Income Earnings Profit (net profit) Almost interchangeably
Miller Motor Co.Balance Sheetas of Dec. 31, 2013 Cash Short-term investments Accounts receivable Inventory Prepaid expenses Current assets Land Buildings Equipment Property, plant & equipment Assets Accounts payable Income tax payable Wages payable Current liabilities Notes payable Non current liabilities Common stock Retained earnings Stockholders’ equity Liabilities and stockholders’ equity