Understanding Financial Statements: Assets, Liabilities, and Equity
T.12 The Balance Sheet
The balance sheet reflects the assets and rights that constitute the assets of the company and the funding sources that comprise the net patrimony and liabilities. It is a static document that refers to the situation of the company at the date of financial close. This document is made from the balance sheet accounts, the first five groups of the General Accounting Plan (PGC). Systematized information is included in the closing entry accounting made in the journal.
Companies
Read MoreKey Economic Indicators and Market Forces Explained
Shifters of Aggregate Supply
The aggregate supply is a model that shows what determines the total supply for the economy and how total demand and total supply interact at the macroeconomic level.
Factors that shift aggregate supply include:
- Capacity and number of producers
- Economic expectations for producers
- Cost of factors of production
- Technology and R&D
Shifters of Aggregate Demand
The aggregate demand is a model that shows what determines total supply or total demand for the economy and how total
Read MoreKey Accounting Principles and Financial Reporting
Fundamental Accounting Principles and Financial Reporting
Types of Businesses
- Service Businesses: Provide services to customers, relying on human knowledge or talent. They do not sell tangible goods.
- Merchandising Businesses: Buy finished goods and sell them to customers (e.g., Walmart, Target).
- Manufacturing Businesses: Make the products they sell (e.g., Ford, Microsoft, Apple).
Financial Resources
Businesses need capital to establish and operate. This capital comes from:
- Investors: Provide capital in
Key Accounting Principles and Financial Statement Analysis
★ The Public Reform…furnish to clients. (True)
★ Balance sheet…always changing. (False)
★ Some companies prefer…the prepayment. (True)
★ The single-step…continuing operations. (True)
★ Revenues and expenses…operating activity. (True)
★ One meaning…future earnings. (True)
★ When interest…rate of interest. (False)
★ If you put $200 // 8% per year // two years later // earn interest of $32. (False)
★ Other things being…ordinary annuity. (True)
★ Sellers should…is cancelled.
Key Financial Statements: Income, Balance Sheet, Cash Flow
Key Financial Statements
The Income Statement
Also known as the profit and loss account, the profit statement, the income and expenditure statement, or the receipts and payments account.
The Balance Sheet
Also known as the statement of financial position.
The Cash Flow Statement
Shows what cash came in and what cash went out over a period of time.
- Two accounting elements which appear in the income statement:
- Expenses
- Income
- Three accounting elements which appear in the balance sheet:
- Assets
- Liabilities
- Equity
The
Read MoreAccounting Entries: Merchandise, VAT, Bills of Exchange, and More
Closing Balance of Merchandise and Changes in Inventories
- 300 Merchandise A | 880 | A, Value of merchandise at the end of this year
- 610 Changes in inventories of merchandise | 800 | E
- 300 Merchandise A | 80 | A, Value of merchandise at the end of last year
Company Buys Merchandise for €40,000 (Plus 21% VAT), on Credit
- 600 Merchandise purchased | 40,000.00 | A, Value of merchandise
- 472 Input VAT | 8,400.00 | A
- 400 Suppliers | 48,400.00 | L, Amount owed to suppliers