Chapter 2 Notes.docx

5 Pages
Unlock Document

Marketing and Consumer Studies
MCS 2600
Karen A.Gough

ACCOUNTING CHAPTER 2 The classified Statement of Financial Position (Balance Sheet)  Statement of financial position presents a snapshot of a company's financial position  Companies tend to grow similar types of assets and similar types of liabilities together  Assets include o Current assets o Investments o Property, plant, and equipment o Intangible assets o Goodwill  Liabilities and Shareholders o Current liabilities o Non-current liabilities o Shareholders equity  Share capital  Retained earnings ASSETS  Assets are the resources that a company owns or controls that provide future economic benefits  Current Assets o Current assets are assets expected to be converted into cash or sold within one year of statement date o OPerating Cycle: average time it takes to go from cash to cash in producing revenue o Common types of current assets include:  Cash  Short term investments  Investments in debt securities or equity securities  Accounts Receivable  Amounts owed to the company by customers who purchased products or services on credit  Accrued receivables  Amounts owed to the company for interest, sales tac, rent, and like items  Notes receivable  Amounts owed to the company by customers or others that are supported by a written promise to repay  Loans receivable  Type of note receivable  Merchandise inventory  Goods held for sale to customers  Supplies  Consumable items like supplies and cleaning stuff  Prepaid expenses  Cost of things like rent and insurance paid in advance of use.  Non-Current Assets o Non current assets are not expected to be converted into cash, sold, or used up by the wbusiness within one year of the financial statement date o Common kinds of non-current assets include  Investments  Include multi year investment that management intends to hold to earn interest, equity securities  Property, plant, and equipment  Tangible assets with relatively long useful lives that are currently being used in operating the business  Intangible assets and goodwill  Non curent assets that don't have physical substance and that represent a priviledge or a right granted to , or held by, a company  Goodwill has no physical substance  Other assets LIABILITIES  Liabilities are obligations that result from past transactions - also classified as current and non- current  Current Liabilities o Obligations that are to be paid or settled within one year of the company's statement date o Common examples include:  Bank indebtedness  Short term loans from the bank typically occurring when a company uses an operating line of credit to cover cash shortfalls  Accounts payable  Represents amounts owed by the company to suppliers for purchases made on credit  Accrued liabilities  Amounts owed by the company for salaries, interest, sales tax, rent, income tax, and like items  Notes payable  Amounts owed, often to banks but also to suppliers or others, that are supported by a written promise to repay  Current maturities of long-term debt  Portion of the payment due to be made within the current year is classified as current maturities of longer term debt  Non-Current Liabilities o Obligations that are expected to be paid or settled after one year are non-current liabilities o Examples include  Notes payable including bank loans payable, mortgages payable, and bonds payable  Mortgage payable are similar to long term notes but have property pledged as security for the loan  Bonds payable are used by large corporations and governments to borrow large sums  Lease obligations  Include amounts to be paid int he future on long term rental contracts used for equipment or property  Pension and benefit obligations\  Amounts companies owe past and current workers for retirement benefits  Deferred income tax liabilities  Income tax that is expected to be payable in a later year or years when a company prepares its future corporate income return SHARE HOLDERS EQUITY  Share Capital o Shareholders purchase shares in a company by investing cash o Investments are recorded as either common or preferred shares - if preferred shares are issued in addition to common shares there totals are classified as share capital  Retained Earnings o Cumulative profits that have been retained for use in a company USING THE FINANCIAL STATEMENTS  Ratio analysis expresses the relationships between selected items of financial statement data  Ratios can give clues about underlying conditions that may not be easy to see when the items of a particular ratio are examined separately  Three comparisons o Intracompany comparisons: covering 2 years for the same company o Intercompany comparisons: based on comparisons with a competit
More Less

Related notes for MCS 2600

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.