COMM 211 Lecture Notes - Lecture 2: Retained Earnings, Fixed Cost, Income Statement
2 Dec 2017
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Are employees of professional sports team an asset on the balance sheet? : employees are not assets. The player can decide not to show up or ask to be traded: you can purchase a horse (fixed cost) and determine the depreciation cost, employees are a period resource. Recorded on the income statement: for it to be an asset the resource has to be controlled by the company to control future economic benefit. Accounts are used to record changes in assets, liabilities, equity, revenues and expenses. Assets: cash, accounts receivable, investments, inventory, land, buildings, etc. Equity: retained earnings, common shares, preferred shares, etc. Revenue: sales revenue, dividend revenue, interest revenue, etc. Expenses: salary, rent, utilities, advertising, cost of goods sold, etc. Balance in accounts is closed annually to retained earnings: the closing process sets the balance of these accounts back to zero. These are not closed: they report a balance at a point in time.
