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Lecture 2

BU127 Lecture 2 Continuation on Financial Statements

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David Scallen

BU127-SECTIONA6-ACCOUNTING David Scallen Office - P2072 Ext - 2880 [email protected] Office hours - Monday/Wednesday 11-1 -------------------------------------------------------------------------------------------------------------------- - DAY 2 - WEDNESDAY SEPT 11 Revenue - do not have to necessarily have cash to record, although you must have reasonable expectations to get money Same for expenses - do not necessarily have to have paid in order to record -------------------------------------------------------------------------------------------------------------------- - Example: Sales have 60 day terms Purchases have 30 day terms Sales are reported when everything has been done up to the collection of cash Sales: Jan-500 Feb-1000 Mar-1500 Total-3000 Expenses: Jan-300 Feb-600 Mar-900 Total-1800 Net Income: Jan-200 Feb-400 Mar-600 Total-1200 Cash flow Received: Jan-0 Feb-0 Mar-500 Total-500 Paid: Jan-0 Feb-(300) Mar-(600) Total-(900) Balance: Jan-0 Feb-(300) Mar-(100) Total-(400) So, at the end of the quarter, the company is $400 short in cash flow *Companies need cash flow to reinvest in the business -------------------------------------------------------------------------------------------------------------------- - Statement Headings: Name of Company Type of Statement Period of time (measurement, ex. in thousands of CHF) Statement of Financial Position: Period of time in heading - Snapshot at a given point in time (At December 31, 2009) - Assets- earned by past business events, provide future economic benefits - in order of liquidity, cash at top - Cash, short-term investments, trade receivables, inventory, supplies inventory, pre- paid expenses are all current assets - Long-term investments, equipment, buildings, equipment, buildings, land, intangibles(patents) are all maturing greater th
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