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Business Accounting

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schoolstudycanada's version from 2017-06-25 22:17

Terms

Question Answer
Working capitalCurrent money (money they need to pay bills with)
Equation: Current assets - Current Liabilities
Current Ratio(Current assets)
------------------------ (divide) = (Current Ratio)
(current liabilities)

This value represents the ratio of capital to dept
Accountingprocess of recording, analyzing and interpreting economic activities of a business
Transactionany activity involving money
Why do businesses keep track of all transactionsAccountability, Budgeting, taxation, preparing for financial statements, annual reports
Accountabilityanyone who handles cash must be responsible for the losses and gains
How do businesses guarantee accountability?bookkeeping
Why is budgeting important to business?understand market
How do businesses predict sales figures?analyze all records of transactions in same period of previous years.
count remaining inventory at end of this and last years season
Capital gainsell stock for price higher than paid for (pay taxes... double taxation?)
memorize

Balance Sheet

Question Answer
Balance sheetFinancial statement that shows the financial position of a business on a specific date. (snapshot).
Balance sheet is divided into three sections; Assets; Liabilities; Owners Equity
Assetsanything of monetary value owned by business.
listed in order of liquidity (how fast can it be connected into cash).
Base Asset liquidity order- Cash
- Accounts receivable
- Supplies
- Inventory
- Furniture and Equipment
- Delivery Truck
- Building and land
Current AssetsAssets which are used up in under one year
Long Term Assets / Capital AssetsAssets which last longer than a year
Liabilities- debts of a business
How is dept acquired?- buy on credit
- borrowing money
Current liabilitiesdepts which are paid off quickly (less than a year)
Long term liabilitiesdebts which take longer than a year to pay
Base order of liabilities- Accounts payable
- Loans payable
- Mortage Payable
Owners Equityrepresents owners investment (net worth)
Equity in corporationsShareholders equity
"The Accounting Equation"A = L + OE. This equation MUST be written like this (teacher preference)
memorize