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Introduction to business: accounting

1247d0fbb1983f2e8070809bb7acd6ef?s=47 Ted Major
February 18, 2016

Introduction to business: accounting

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1247d0fbb1983f2e8070809bb7acd6ef?s=128

Ted Major

February 18, 2016
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  1. Accounting: decision making by the numbers

  2. Quiz • Closed book/closed notes • You may collaborate with

    your team • You are responsible for the answers on your quiz • You do not have to choose the same answers as your team • Put phones away
  3. What is accounting?

  4. organizing, analyzing, and reporting financial information

  5. information?

  6. data?

  7. None
  8. SO?!?

  9. what context do we need to make data meaningful?

  10. price − cost price = margin price x sales =

    revenue cost x sales = CGS revenue − CGS = gross profit
  11. Managerial Accounting (insider information)  cost accounting  planning 

    controlling  tax accounting
  12. Financial Accounting (outsider information)  annual report  private accountant

    (in-house)  public accountant (clients on a fee basis)  Financial Accounting Standards Board (FASB)  Generally Accepted Accounting Practices (GAAP)
  13. None
  14. Auditing: reviewing and evaluating records  independent audit: accuracy of

    company’s financials  internal audit
  15. Tax Accounting  trained in tax law  prepares tax

    returns  prepares tax strategies
  16. Balance Sheet: shows profits & losses as of specific date

    Fundamental Accounting Equation Assets = Liabilities + Owners’ Equity
  17. Tangible Assets  fixed assets (property, plant & equipment PPE)

     land  buildings & improvements  equipment  vehicles  furniture & fixtures
  18. Tangible Assets  current assets (can be converted to cash

    w/in one year)  raw materials  work in progress  finished inventory  accounts receivable
  19. Intangible Assets  goodwill  intellectual property  trademarks 

    copyrights  patents
  20. Liabilities  current liabilities (due in less than one year)

     accounts payable  long-term liabilities (due in one year or more)  notes payable  bonds payable
  21. Income Statement  shows profit (loss) over a certain period

     revenue – CGS = gross margin  gross margin – operating expenses = net income before taxes  net income before taxes – taxes = net income (loss)
  22. Statement of cash flows • changes to cash balance •

    operating • inventory, accounts receivable/payable, taxes • investing • equipment, investments • financing • debt, dividends
  23. Valuation issues  depreciation  valuation method: cost (book), market,

    replacement  cost of goods sold  FIFO, LIFO
  24. Liquidity Ratios  current ratio: current assets current liabilities 

    acid-test (quick) ratio: cash + marketable securities + receivables current liabilities
  25. Debt (Leverage) debt to OE: total liabilities owners’ equity

  26. Profitability EPS: net income after taxes number of shares outstanding

    return on sales: net income net sales return on equity: net income after tax owners’ equity