Understanding Income Statements and Balance Sheets: A

School: North Carolina State University - Course: MIE 201 - Subject: Accounting

Income Statement Balance Sheet monetary. or intangible goods that have some dollar valu interest income). cash or are expected to be turned into cash within the next 12 months. Less: Cost of goods The cost of producing the goods a Marketable securities in securities that can be converted to cash quickly (liquid assets). expenses associate Accounts receivable ass profit Inventory Cash due from customers in payment for goods received. These arise from sales made on credit. The income available after paying all expenses of production. Finished goods ready for sale, goods in the process of being finished, of raw materials used in the production Less: Selling and The cost of promoting, advertising, and selling products as well as the overhead costs of managing the company. administrative his includes the cost of management and corporate staff. One noncash expense included in this category is Prepaid expense A future expense item that has already been the weavers which rottweilmatches the decline in the value of plans and equipment assets due to use over time. In slums or rent. expense Total current assets most accounting statements, depreciation is not separated from selling and administrative expenses. However, The sum of the above accounts. Assets that are long term in nature and have a minimum life expectancy that exceeds one year. financial analysts usually create statements that include this expense. Investments if as investments rather than assets owned for the production process. Most often, the assets include ome before interest and This line represents all income left over after operating expenses have been deducted. This is sometimes referred to Gross property, plant, and Land, buildings, and other fixed assets listed at original cost. as operating income because it represents all in Occasionally, this is referred to as EBIT, or on herewe expenses of operations have been accounted for. T. or earnings before interest and taxes. Less: Accumulated depreciation Interest expense arises as a cost of borrowing m expense owing money. This is a financial expense rather than an operating eclated. The total amount represents, in general the decline in value as equipment gets older and wear and is listed separately. As the amount ant that can be deducted of debt and the cost of debt increase. so wil the interest expense. This covers cted is set by the U.S. Federal Tax Code and varies by type of the cost of both short-term and long-term borrowing Not property, plant, and come before taxes The firm will pay a tax on this amount. This is what is left o of the fixed assets and not they yours mount reflects the book value earnings before taxes- depreciation costs, and int tracting all operating costs, equipment Any other asset that is long term and does not fit into the preceding it could be patents or Less : Taxes The tax rate is specified in the federal tax code. Total fixed assets The sum of the above accounts, t income This is the amount of income left after taxes. The firm may decide to retain all of a portion of the income for The sum of all the asset values. reinvestment in new assets. Whatever it decides not to keep will usually be paid out in dividends to its stockho equity nature seamster category. Liabilities refer to all indebtedness and loans of both a long-term and short term Less: Preferred If the company has preferred stockholders, they are first in line for dividends. That is one reason their stock is called firm by the owners. preferred:" come to common This is the income left for the common stockholders. If the company has a good year ALLOUTIS payable Money owed to suppliers for goods ordered F us we n 30 and 90 days to pay this accoun stockholders available for dividends. If the company has a bad year, income could be nega sers are the ultimate owners and risk takers. They have the potential for very high or very poor returns because the Wages payable Earnings per share ed should be no more than two weeks" now Earnings per share is found by taking the income available to the common stockholders and dividing by the number Taxes payable Firms are required to pay corporate taxes quarterly of shares of common stock outstanding. This is income generated by the company for each share of common stock. Notes payable Other current liabilities art-term loans from banks of other lenders. Total current liabilities The other short-term debts that do not fit into the preceding categories. no-term liabitties so of the preceding accounts. Long-term debt Loans of more than for will not be paid off in the next 12 months. take the form of bands , which are securelessonsinsurance companies, or other lenders. These loans Deferred income taxes curisies that may be bought and sold in bond markets. This is a liability owed to the government but not que within one your Other long-term kabilite Any other long-term debt that does not fit the preceding two cat Total long-term liabilities The sum of the preceding accounts. Total liabilities The sum of all kability values. ekholders' equity Common stock The following three categories are the owners' investment in the company. not indicate the companysummership is a security called common stock. The par value is stated val Capital in excess of par lake . contributed when shares of stock were sold to the owners, they were recorded at the price at the time of the times $9 per shares weber share. the extra $9 per share would show up in this acco account at 100,000 shares retained earnings The total amount of earnings the company has made during its life and not paid out to its stockholders as payments of cash alvida or mums the owners' reinvestment of earnings into company assets rather than Total stockholders' equity ccounts represent and benn farm chaht of the company rive the guners' ingan wivestment in the con Total liabilities and The total short-term and long-term debt of the company plus the owners' total investment. This combined stockholders' equity amount must equal total assets.

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