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Reference Guide

Accounting II - Reference Guides

4 Pages
1100 Views
Fall 2015
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Department
Accounting
Course Code
ACTG 2010
Professor
all
Chapter
Permachart

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Accounting II
Accounting II
WHAT IS A BALANCE SHEET?
• A Balance Sheet is a financial statement which
provides representation of the business for a particular
day in its fiscal year with respect to assets, liabilities,
and equity
Balance Sheet Equation: Assets = Liabilities + Equity
• This equation must hold true for the concept of the
balance sheet to be correct
• Many transactions affect the balance
sheet and its various parts
These accounts will increase and
decrease in value depending on what
has occurred
• These changes are classified as debits
and credits
EQUITY
Owner’s (For proprietorships and partnerships) consists of the
Equity owners’ capital accounts (contributed capital and
owners’ share) of the entity’s income, losses, and the
individuals’ withdrawals for all periods of the entitys life
Shareholder’s An investment into a company of which the
Equity investor receives stock certificates identifying their
percentage of ownership; divided between
contributed capital and retained earnings
Proprietorship Owners have unlimited liability for claims against the
or Partnership business; earnings are taxed as personal income and
the life of the business is limited to the owners’ life
Corporation Required to file letters (patent/articles/charter) that
define the business, bylaws, directors, and so on with
a government regulatory body; it may be public or
private, it has an indefinite life, and pays taxes on firm
net income
PREFERRED STOCK
• Shareholders must receive dividends before
common shareholders
• Form of ownership; holders are next in line after
creditors to receive proceeds from sale of assets
if the firm dissolves
• May be convertible into common stock
• May be redeemable by the issuing firm and
bought back at a premium
• Dividends may
be cumulative
or not
• Deemed to be
participating
RETAINED EARNINGS
• The residual earnings that are retained in a company for
future economic purposes (such as fixed asset
investment, debt)
Appropriated retained earnings have been segregated
for a specific purpose; they are not available for dividends
• Ownership interests from the paid-in capital of
shareholders who have residual claims on the
assets after all other claims have been satisfied
Earnings per share (EPS) is an index of a
corporation’s profitability; EPS = (Net Income -
Preferred Dividend) ÷ (Weighted Average Common
Outstanding + Common Stock Equivalent)
• Distinction between shares authorized, issued,
and outstanding
• Distribution of assets in the form of cash (or kind),
notes payable or additional stock; important dates
are declaration, record, and payment
Dividends per share (DPS) represents basic cash
flows passed from the entity to shareholders
ASSETS
Increase Decrease
Assets Debit Credit
Liabilities Credit Debit
Equity Credit Debit
Sample Transaction
Debits Net loss
Credits Net income
Sample Transaction
Debits Buy back of issued
stock
Credits Sale of stock
Sample Transaction
Debits Payment of
outstanding dividends
Credits Dividends declared
(outstanding)
Sample Transaction
Debits Buy back of
issued stock
Credits Sale of stock
COMMON STOCK
DIVIDENDS
Assets Economic resources owned by a company from which a future economic benefit is to be derived
Cost Historical cost
Current Assets which will be consumed within the current year of business; usually listed in order of liquidity
Assets (that is, how quickly they can be converted into cash)
The Lower Valuation of assets (such as the highest value of the asset that can be entered is the lowest of
of Cost or either cost or market)
Market Rule
Market Replacement cost
1
YES
NO
NO
IS IT
STOCK?
YES
IS IT
COMMON?
NO
YES
IS IT A CURRENT
ASSET?
ACCOUNTING II • A-787-01
w w w . p e r m a c h a r t s . c o m
l e a r n r e f e r e n c e r e v i e w
TM
permacharts
© 1997-2011 Mindsource Technologies Inc.

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Description
Advance your knowledge with our advanced Accounting II! This companion Guide to Accounting I develops the reader’s understanding of balance sheets before moving into an effective summary of how assets are treated for accounting purposes. Types of assets are defined with accompanying definitions, with various forms of asset treatment show in a schematic format.
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