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Assets . . . defined
Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.
Or
Types of Assets
Current Assets: Cash, Short-Term Investments, Accounts Receivable, Inventory, and Prepaid Expenses Property, Plant & Equipment Long-Term Investments Intangible Assets Other Assets
Liabilities . . . defined
Generally . . . amounts by businesses to third parties.
TYPES
Current: Accounts Payable, Accrued Liabilities, Notes Payable Long-Term: Long-Term Notes Payable, Mortgages Payable, Long-Term Accrued Liabilities
Stockholders Equity
Common Stock Additional Paid-In Capital Retained Earnings
BALANCE SHEET
AIR & SEA TRAVEL, INC. Balance Sheet April 30, 2003 Assets Cash $33,300 Accounts receivable 2,000 Office supplies 500 Land 18,000 Liabilities Accounts payable $ 100
Total assets
$53,800
Stockholders Equity Common stock 50,000 Retained earnings 3,700 Total stockholders equity 53,700 Total liabilities and stockholders equity $53,800
INCOME STATEMENT
AIR & SEA TRAVEL, INC. Income Statement Month Ended April 30, 2003 Revenue: Service revenue Expenses: Salary expense Rent expense Utilities Total expenses Net Income $1,200 1,100 400 2,700 $5,800
$8,500
Investing Activities
Companies invest in long-term assets that are used to run the business
Financing Activities
Companies finance themselves by issuing stock and borrowing money
AI A AVEL, I . t t t f Fl w t Ended April , fl w fr per ting ti ities: Coll ctions from c stomers P ments to s liers nd employees Net c s inflow from oper ting cti ities Cash fl ws fr investing activities: c isition of l nd $(4 , S le of l nd , Net c s outflow from investing ctivities Cash fl ws fr financing activities: , Issuance (sale) of stock $ Payment of dividends ( , Net cas inflow from financing activities Net increase in cas Cas alance, pril , Cas alance, pril ,
6, ( , ,4 ) ( ) 4 ,9 $ , $ , , )
Accounting Gimmicks
Asset Issues
Inflating inventory Understating allowance for bad debts Overstating useful lives of depreciable assets Misclassifying current assets & liabilities Capitalizing expenses
Pumping Up Revenues
Channel stuffing Bill and hold sales Grossing up revenues Front loading