Summerfuel finance 2016 class 3 7 11
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Transcript of Summerfuel finance 2016 class 3 7 11
Summerfuel Finance
Class 3: 7-11-2016
Class RulesOne More Time !
Respect Everyone !
Me
Your Classmates
Some people here are actually trying to learn this stuff
Yourself – you should too
Stay Focused on Class while in Class
No Social Media – pc etc’s for the right reasons
Act with some Decorum
Appropriate, Maturity
Balance Sheet
P 3
3
Income Statement
P 3 4
The Accounting Equation
Land
Equipment
Buildings
Cash
Notes
Receivable
Supplies
Prepaid
Accounts
Accounts
Receivable
Asset
Accounts
Asset Accounts
C 2 6
Accrued
Liabilities
Unearned
Revenue
Notes
Payable
Accounts
Payable
Liability
Accounts
Liability Accounts
C 2 7
Equity
Accounts
Revenues
Owner’s
CapitalOwner’s
Withdrawals
Expenses
Equity Accounts
C 2 8
A Business Transaction
Any event that has a monetary impact on the
business
Gets into the company's accounting system and on
the company’s financial statements
Debits ALWAYS equal Credits
Debits and CreditsA T-account represents a ledger account and is a tool used
to understand the effects of one or more transactions.
C 4 10
Liabilities EquityAssets = +
Double-Entry Accounting
C 4 11
Double-Entry Accounting
C 4
Here is the expanded accounting equation
showing the equity section.
12
Increases to Asset Accounts
Are Posted as Debits !
13
And That’s Normal ? The balance
expected on Fin
statements
If it’s abnormal
something is wrong
Credit cash balance
. Bank overdrawn
14
Lets Try Some
Bea’s Best Bubblegum Company
Bea’s Bubble Gum Chart of Accounts
Balance Sheet Income Statement
Normal Debit Normal Credit Normal Debit Normal Credit
Assets Liabilities
Cash Accounts Payable
Accounts
Receivable Notes Payable
Supplies
Bubble Gum
Machine
Equity
O/E Bea
O/E - Pablo Expense Sales
Retained
Earnings
Miscellaneous
Expense Sales
Interest Expense
Tax Expense
Cost of Goods Sold
What’s the Accounting Entry
Bea invested $25,000 that her grandma gave her into
her new business: “
Bea’s Best Bubblegum”
17
Bea invested $25,000 that her
grandma gave her into her new
business
Debit Credit
7/7 Cash $25,000
7/7 Owners Equity Bea $25,000
What’s the Accounting Entry
Bea took a 10 year loan from the 1st Bank of Aboud for
$10,000 at 2% to purchase the world’s best
bubblegum making machine.
Bea took a 10 year loan from the 1st Bank
of Aboud for $10,000 at 2% to purchase
the world’s best bubblegum making
machine.
Debit Credit
7/7 Bubble Gum Machine $10,000
7/7 Notes Payable BG Machine $10,000
Do an Accounting Entry Bea made her 1st Sale !
She sold $6,000 of her gum to “ the Dentist’s Pleasure
Candy Store ( DPCS) . DPCS was invoiced but has not
yet paid cash
21
She sold $6,000 of her gum to “ the Dentist’s
Pleasure Candy Store ( DPCS) . DPCS was
invoiced but has not yet paid cash
Debit Credit
7/7 Accounts Receivable $6,000
7/7 Sales $6,000
Do a Accounting Entry Bea bought the supplies to create her best Bubblegum
: $5,000 on credit from her supplier
23
Bea bought the supplies to create her best
Bubblegum : $5,000 on credit from her
supplier
Debit Credit
7/7 Supplies $5,000
Accounts Payable $5,000
Accounts Receivable / Accounts Payable
An asset account .Accounts receivable (AR) refers to
money owed by customers for goods or services that
have been delivered or used, but not yet paid for.
A liability account will show the amount a company
owes for items or services purchased on credit .
One company’s accounts receivable is another
company's account payable.
Do an Accounting Entry
Bea paid all of her Miscellaneous Expenses for the
period of $100 with Cash
26
Bea paid all of her Miscellaneous Expenses for
the period of $100 with Cash
Debit Credit
7/7 Miscellaneous Expenses $100
7/7 Cash $100
Do an Accounting Entry
Pablo bought in on Bea’s company with $5,000 in
cash
Pablo bought in on Bea’s company with
$5,000 in cash
Debit Credit
7/11 Interest Expense $200
Cash $200
$10,000*.02 = $200
Do a Accounting Entry
Bea paid 1 year's interest to the Bank of Aboud
Bea paid 1 year's interest to the Bank
of Aboud
Debit Credit
7/7 Cash $25,000
Owners Equity Bea $25,000
Now Use the Entries to Build:
1. Income Statement
Bea’s tax rate is 20%
2. Balance Sheet
32
Cost of Goods Sold
How much of Bea’s supplies were used
for the gum that she sold
Debit Credit
7/11 Cost of Goods Sold $3,000
Supplies $3,000
We checked the store room and she used $3,000
Tax Debit Credit
7/7 Tax Expense $540
Cash $540
$2,700 * .20 = $540
Bea’s Income StatementSales 6000
less Cost of Goods Sold- Supplies -3000
Profit Margin 3000
less Miscellaneous Expense -100
Earnings Before Interest & Taxes 2900
Interest Expense -200
Earnings Before Taxes 2700
Taxes -540
Net Income 2160
Bea’s Ending Balance Sheet
Assets $ Liabilities $
Cash 29,160
Accounts
Payable 5,000
Accounts
Receivable 6,000Notes Payable 10,000
Supplies 2,000 Equity
Bubble Gum
Machine 10,000O/E Bea 25,000
O/E - Pablo 5,000
Retained
Earnings 2,160
Toatl Assets 47,160Total L + OE 47,160
The Capitalists
One company’s right side of the balance sheet
liabilities and equity
Is another's company's left side of the balance
sheet
assets
Assets ( stuff you have to run the business)
= Liabilities + Equity (how its paid for)
Wow !
Debt
A loan in a number of different ways to a
company
The loaned amount will repaid at some
defined time
An interest rate will be assessed as the cost
for the use of the money
No ownership stake
But senior to equity stake
Equity
Ownership (equity) in a corporation
Dividends paid or not
Residual claim
Riskier than debt from investors’perspective
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use.
Risk
The greater the risk, the
greater the potential reward.
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use.
Sources of Risk
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for classroom use.
A Look at Google Finance https://www.google.com/finance
Sign up for Stock Report Day
Mon – Thurs
3 reports over the length course
We will all do it together tomorrow.
Shark Tank http://abc.go.com/shows/shark-tank/episode-guide/season-07/10-week-10-leaux-
racing-trikes-glow-recipe-sarah-oliver-handbags-trunkster