Chapter_4-5 basic financial statement

Liabilities and Stockholder’s Equity Cash $ 20,000 Liabilities Accounts receivable 2,000 Accounts payable $ 200 Assets
Supplies Land Total assets
500 Stockholder’s equity 11,000 Capital stock $ 33,500 Retained earnings Total liabilities and owner’s equity
account form: the balance sheet
presents assets on the left column and liabilities and owner’s equity on the right column.
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An Example of Balance Sheet (account form)
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20,000 13,300 $33,500
Income Statement
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• Revenue – increases in net assets resulting from an entity’s operation over a period of time.
$8,500
(18,000)
$1,200 1,100 400 2,700 $5,800
47,900 $ 33,300 0 $ 33,300
AIR & SEA TRAVEL, INC. Statement of Retained Earnings Month Ended April 30, 2001
AIR & SEA TRAVEL, INC. Balance Sheet April 30, 2001 Assets Cash $33,300 Accounts receivable 2,000 Office supplies 500 Land 18,000 Liabilities Accounts payable $ 100
2. It reports past cash flows as an aid to :
• (1) predicting future cash flows; • (2) evaluating management’s generation and use of cash; • (3) determining a company’s ability to pay interest and dividends and to pay debts when they are due.
Who cares about?
• • • • •
Executives----expansion strategy Stockholders----pay dividends Suppliers----pay for offered credit Investors----future growth potential Employees----viability（可行性、生存能力） of their employers
Net Profit
Gross Profit
Net Sales
Gross Profit
Net Sales
—
Operating Expenses
Gross Sales
—
Cost of Goods Sold
—
Sales Returns
销货退回
—
Sales Discount
销售折扣
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BASIC FINANCIAL STATEMENTS
Financial statements, provide information about profitability(收益性 ) and financial position(财务状况)of a business to the management and the interested outsider.
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Balance Sheet
The balance sheet reports a company’s financial position as of (at) a point in time.
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BALANCE SHEET
• The balance sheet (statement of financial position) reports the company’s assets, liabilities, and owners’ equity
A statement of cash flows is important for the following purposes:
• 1. It shows the relationships of net income to changes in cash balances. Cash balances can decline despite positive net income and vice versa.
• Financing activities
– Companies finБайду номын сангаасnce themselves by issuing stock and borrowing money.
Structure
Operating cash flow
Investing cash flow
Financing cash flow
Accounting English
report form: the balance sheet
displays(显示 ) the assets on the top, and below it are liabilities and owner’s equity in that order.
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• Expenses - decreases in net assets resulting from an entity’s operation over a period of time.
Components of Income Statement
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Income Statement
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Balance sheet’s three major categories
• Assets the economic resources of the firm • Liabilities the debts of the firm • Owners’ equity the owners’ interest in the firm
What is Cash Flow?
• Cash flow simply refers to the flow of cash into and out of a business over a period of time. • the outflow（流出）: salaries, suppliers and creditors. • the inflow（流入）: receive from customers, lenders and investors.
AIR & SEA TRAVEL, INC. Income Statement Month Ended April 30, 2001
$ 6,500 (3,100) 3,400
Revenue: Service revenue Expenses: Salary expense Rent expense Utilities Total expenses Net Income
Income Statement
销货总额 Sales
Sales Returns & Discount
销货净额 Net Sales
-
=
Accounting English
What is Cash?
• Cash and Cash equivalents
• only instruments with original maturities of three months or less are cash equivalents
CASH FLOW STATEMENT
• Operating activities
– Companies operate by buying goods and services, which are sold to customers.
• Investing activities
– Companies invest in long-term assets that are used to run the business.
3. It provides explanations of changes in cash and cash equivalents (money market funds货币 市场基金, treasury bills国库券, etc.).
It covers the period of time between two balance sheet dates and explains why the balance sheet items have changed.
CASH FLOW STATEMENT
• The statement of cash flows reports the company’s cash inflows and outflows from operating（经营）, investing（投资）, and financing （筹资）activities. It explains the causes for the changes in cash by providing information about operating, financing and investing activities.