FI 320 Lecture Notes - Lecture 1: Financial Statement, Income Statement, Accrual
Document Summary
Financial statements provide information for investors, lenders, and creditors. They are prepared using accrual basis of accounting which involves recognizing revenues when earned and expenses when incurred. Not when cash is received or paid, like the focus of finance. Accounts receivable is a holding account for sales on credit before cash is collected b. iv. Property, plant, and equipment (pp&e) are depreciated annually since their value decreases with use. b. iv. 1. Accumulated depreciation is the account used to decrease the value of ppe on the balance sheet (contra asset account) c. Liabilities are future obligations of the firm, listed in order repayment and have a normal credit balance c. i. Current/ short term liabilities- under 1 year c. ii. Accounts payable is used to account for purchases paid with credit until cash is paid: equity represents the total value of the firm (what is remaining after liabilities are paid with assets) d. i.
