Professional Documents
Culture Documents
An overview
Balance Sheet
Fundamental Structure:
Resources
Sources of Capital
Assets
Liabilities
Qwners Equity
Asset: Resource
owned or controlled by the
accounting entity
expected to provide future
economic benefits to the
accounting entity
ownership or control acquired
in a past transaction
The effect of a transaction on the left hand side of the balance sheet
always equals the one on the right hand side
Examples:
Assets
... economic resources owned (or controlled) by a business as
a result of past transactions that are expected to yield future
economic benefits and eventually result in cash inflows to the
business enterprise.
Examples: property, plant, cash, copyrights, patents, investments
Liabilities
... claims of those to whom money is owed, i.e. liabilities are
existing debts and obligations
Examples: loans payable to a bank, salaries payable to employees
Owners Equity
... residual interest in the assets of a business
enterprise after deducting its liabilities; also referred to as residual
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equity or net assets
Classification of assets
Assets
current
cash and marketable securities
Receivables
Inventories
Prepayments and accrue income
fixed
property, plant and equipment
long-term financial investments
intangible assets
Liabilities
current
short-term debt and current portion of long-term debt
payables
accrued expenses and deferred income
long-term
long-term debt
provisions for contingencies and charges
other long-term liabilities
Equity
Common Stocks at par value
additional paid-in capital (= capital surplus, share premium)
Reserves
accumulated other comprehensive income / loss
retained earnings
net income for the year
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[Exchange of assets]
3.
Angie buys computer paper and office supply for 500 on credit.
Liabilities
Owner's Equity
(profits)
(losses)
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Income
(funcional basis)
Net Revenue
Cost of goods sold (by product category)
Gross margin
Operating expense
Operating Income (EBIT)
+ Financial, Investment & other revenue
Financial expenses
expenses from investments and other
Income before Taxes
Income taxes
Income after Tax
+ Extraordinary Items
Net income
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Income statement
12
+
+
=
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Revenues
gross increase in owners equity resulting from operating the business with the
objective of generating profits
usually results in an increase in an asset
Examples: sales; fees, commissions; interest; dividends; rents
Expenses
cost of assets consumed or services used resulting from business activities
and are, in general, actual or expected cash outflows
Examples: salaries, wages; interest on loans; insurance premiums; cost of
providing fringe benefits to employees; decrease in inventory
Revenues
>
Expenses
Net profit
Revenues
<
Expenses
Net loss
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This is a revenue:
Accounts affected: Bank; Revenues; Amount: 1.000
7. First rent and utility payment due, charged to bank account, 500.
This is an expense:
Accounts affected: Cost of office space; Bank
This is a withdrawal
Accounts affected: Owners equity; Bank.
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Inflows
Outflows
Closing Cash
(a)
Direct method
(b)
Indirect method
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Cash Flow
Profit
Cash Paid
Income Earned
Cash Received
Expenses
Incurred