Business Administration 1220E Lecture Notes - Gross Income, Space Capsule Recovery Experiment, Retained Earnings
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Business 1220 – Financial Statements Ch. 2
1. SOE – Statement of Earnings: over period of time
2. B/S – Balance Sheet: at a specific time
3. SRE – Statement of Retained Earnings: over the lifetime
Components of a SOE 0. Gross Sales
1. Net Sales: Gross income – Sales returns & allowances – Sales
SALES 2. Cost of Goods Sold (COGS): Beg. Inv. + Purchases – Ending Inv.
- COGAFS: Beg. Inv + Purchases
Gross Income (Margin, Profit): Net Sales – COGS
3. Operating Expenses:
a. General & admin Exp.
types of OE
b. Selling Exp.
c. Amortization Exp.
Earnings from Operations: Gross income – Operating expenses
4. Other Incomes & Other Expenses
: interest earned, sale of land,
5. Net earnings before tax
EARNINGS 6. Estimated income tax expense (%)
Components of a B/S 7. Net Earnings after tax
ASSETS (@ lower cost)
1. Current Assets: Cash, Marketable Securities, A/R (– AFDA=NAR
Inventory , Prepaid
2. Investment in subsidiaries:
controlling interest (owns 50%), not
Other investments: no controlling interest, @ mkt value
Property, plant &
3. Property, plant and equipment: Land (no Dep.), Plant,
Machinery, Office equip.
Total property, plant & equipment ^
Amort. = Net ____)
4. Intangibles: Goodwill, Organization expenses, Patents, Costs,
LIABILITIES 5. Current liabilities: Notes payable, A/P, Accrued Exp. Payable
(wages, legal, interest)
Taxes payable, Current portion of long-term debt (CPLTD)
6. Long-term liabilities : First mortgage bonds, Debentures,
EQUITY 7. Shareholders’ Equity (net worth): Owns – Owes
8. Capital stock: Preferred shares (% dividend, first claim),
9. Retained earnings (deficit): earnings (losses) after paying
10.Total Shareholders’ Equity
11.Total Liabilities and Shareholders’ Equity
Components of a SRE
1. Retained earnings, previous year
Amortization / Depreciation 2. + Net earnings
SOE: Amort Exp. 3. – Preferred Dividends ($ x shares)
B/S: Accum. Amort, Cost,
4. = Retained earnings, present year
•Retailer/Merchandiser : (SOE) Freight-in, Net purchases = Delivered cost of purchases – Purchase
discounts – Returns & allowances (B/S) Inventory – present market value
•Manufacturer : (SOE) COGS = Beg. Finished goods inv. + COGM – Ending Finished goods inv.
(B/S) Inventory – Raw materials inv., work-in-process inv., finished inv.
Gross income (margin, profit): net sales cogs: operating expenses: Expenses 3 types of oe: general & admin exp, selling exp, amortization exp. money borrowed. Other investments: no controlling interest, @ mkt value: property, plant and equipment: land (no dep. Total property, plant & equipment ^ ( accum: intangibles: goodwill, organization expenses, patents, costs, current liabilities: notes payable, a/p, accrued exp. 11. total liabilities and shareholders" equity shares (vote) dividends: retained earnings, previous year, + net earnings, preferred dividends ($ x shares, = retained earnings, present year. : (soe) freight-in, net purchases = delivered cost of purchases purchase discounts returns & allowances (b/s) inventory present market value (b/s) inventory raw materials inv. , work-in-process inv. , finished inv. + cogm ending finished goods inv: manufacturer.