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Introduction to business: accounting
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Ted Major
February 18, 2016
Education
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1.2k
Introduction to business: accounting
CC-BY-SA
Ted Major
February 18, 2016
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Transcript
Accounting: decision making by the numbers
Quiz • Closed book/closed notes • You may collaborate with
your team • You are responsible for the answers on your quiz • You do not have to choose the same answers as your team • Put phones away
What is accounting?
organizing, analyzing, and reporting financial information
information?
data?
None
SO?!?
what context do we need to make data meaningful?
price − cost price = margin price x sales =
revenue cost x sales = CGS revenue − CGS = gross profit
Managerial Accounting (insider information) cost accounting planning
controlling tax accounting
Financial Accounting (outsider information) annual report private accountant
(in-house) public accountant (clients on a fee basis) Financial Accounting Standards Board (FASB) Generally Accepted Accounting Practices (GAAP)
None
Auditing: reviewing and evaluating records independent audit: accuracy of
company’s financials internal audit
Tax Accounting trained in tax law prepares tax
returns prepares tax strategies
Balance Sheet: shows profits & losses as of specific date
Fundamental Accounting Equation Assets = Liabilities + Owners’ Equity
Tangible Assets fixed assets (property, plant & equipment PPE)
land buildings & improvements equipment vehicles furniture & fixtures
Tangible Assets current assets (can be converted to cash
w/in one year) raw materials work in progress finished inventory accounts receivable
Intangible Assets goodwill intellectual property trademarks
copyrights patents
Liabilities current liabilities (due in less than one year)
accounts payable long-term liabilities (due in one year or more) notes payable bonds payable
Income Statement shows profit (loss) over a certain period
revenue – CGS = gross margin gross margin – operating expenses = net income before taxes net income before taxes – taxes = net income (loss)
Statement of cash flows • changes to cash balance •
operating • inventory, accounts receivable/payable, taxes • investing • equipment, investments • financing • debt, dividends
Valuation issues depreciation valuation method: cost (book), market,
replacement cost of goods sold FIFO, LIFO
Liquidity Ratios current ratio: current assets current liabilities
acid-test (quick) ratio: cash + marketable securities + receivables current liabilities
Debt (Leverage) debt to OE: total liabilities owners’ equity
Profitability EPS: net income after taxes number of shares outstanding
return on sales: net income net sales return on equity: net income after tax owners’ equity