Financial Accounting parte 1, Dispense di Contabilità Finanziaria

Scarica Financial Accounting parte 1 e più Dispense in PDF di Contabilità Finanziaria solo su Docsity! Financrat Accounting We study the Financia STATERENTS Xu order To tnderitand the FINANCIAL SITUATION of a compeny. This va vefdl to investors or erepitors = that want = Too savest Lato the company , to OwUERS, MadaGERS Or ENtLovees © hit vast to costrol the ivaucal trend 0f the company. Ltd ponible to explain who ae the figure» dist ve ha ZuiT MuecTioned: 3) OWWERS - MANAGERS fovnders of the bssines who also furctions as samagers b) caeottoas "Bey Lend aconez for a specific periodi of time and ga by charging = dntereito 05 the umcueg tat tey © Lod e) = InvESTORS : Bey buy ownership in the company in tne form of stock The mvestods = have tuo kind of ReToRns frau the nvestuenti - DIVIOENS : portion of company ecavniags + CAPITAL GAWNS è the ammounts that ove e@arned when @ the company produt i sold Or focus la = The ACCOUNTING SYSTEM Hat collecte and process financial informations tit cam be Uded by Ue tors thit we lavo suorTiored before (investors, creditore The Acco UNTING SYSTEM 4 defined da: + FWANCIAL AccounTING SYSTEH + if produce» periodie financial reports ; TT given to ENTERUAL PEOSION MAUERI ( craditors, investors , Supplier, costume .. ) + HAMNAGERIAL AccounTING SISTEM» i prodlucea periodic conlinova performance veporta and © detaîled giu >; ct i give to ; WITERNVAL. DECISION HAMERS (sinagera) BASES 0F FINANCIAL. ACCOUNTING There are FOUR BASICO FINANCIAL STATEMENT © è © Batance sueeT It gives a pictore of the finanual © position of the company AT ONE PONT IN THE ) "can le prepared Gt tie tà Sf dhe yer ( AnuvaL REPORT) | quite or mosto. The BALANCE SHEET. reports the asuousto = of ASSETS, LIABILITIES and ST ocKMorner Ss" Eaviriv of an auoustine estity . Let's see tie definitions of em Terza: i) assETSO (A): al i teonomic ressorce» ENT ire owned ly dn company (eredità) example: : cash, invoitoy, sogglica , acconto reccivable , land, intangibile, | copprigios =.) 2) LiaBaities O 1 Source of finonciup comi; from creditore examples + acouats pay ble, mote payble , @acored expenses , Tares payabie iu) stomuoroeas' cavat 6) : source ef financing comìg from stodiholders The = STocuuoroe@s' Equity as tuo SQetions : * CONMOA STOCK (or Com RIBUTEO caoma. ) (+ coritate conferito) - RETAINEO GARNINGS eariags Ut are not distabited a» dividens, bit they are re- inverled în the bidiness (+ utîlì trattenati) (ca gaALanNcE 0F__RE = geGionina Balance ov RE + NET lNwoME ow0E05) (reddito nio) © iwWcoue sratenent It reports REVENvES ® and EXPENMdES © that ocors DURING. AN AccouNTING PERIOD MPORIANT Qowî - RevewveEs ® î dep are recognited i. the period in whid gquods aud services are sold, (ricavi) nol necemary = the period a wlieh cash lo receved ; they are CaRmIWGI Faom THE sale OF 4009S or SERIES td EX PENDES © 1 they ave vecogired = Li the period LL which gdoods and sarice» are died, (see) not hecenary = Be qeriod ino whid, cah è pid; thy ar ME souR4 AMOUNT 07 RESFORCLES LED VP_By THE Entity To CARD REVENLES O DurimG A QER10 &) IndEnTORIES. or SuPPLIES are = ALwAYS consiperen As CURRENT ASSETS ang Elia ia Independent on The True needed Too dell Thew and so To toa Ùem dito ca IT 16 IMPORTAMT TO NOTICE THAT ALL OF THE FINANCIAL sTATEMENTS ARE INTERRELATED , 29 ue can see from te fotonieg fi tre Income Statement Revenues = Expenses Net Income Statement of Cash Flows +/- Cash Flows from Operating Activities $ 875 +/= Cash Flows from Investing Activities (125.5) +/- Cash Flows from Financing Activities 470 Change in Cash 90 + Cash at Beginning of Period (ewancia STATEMENT SONMART at suse 21 of cueerer 4) Genenat Acceoieo Aceountina PRriwerrtes The = Secrity and Enchanse © Comuuîeion (SE) ho been given broad pouu to diterscine | sutarv remet roles for finaueial. staTezanet. Ito sila to the TFRS | Inscrvationar Finance Redoatina Sianongo ) and wa uil under Lue durios the course the difference between ta. The most Zupotast principles = ou which te acconti; qrecen "a Vaud are the folowta:: © HISTORICAL. COST + cash equivalent cost given up ia the baris = for initial reconiie of demuts © REVENUE RECOGNITION - record when = UEASLRABLE , REALITABLE (traracdio, Talia place and collection probabled ) aud earueo (suetantaly | accosupliatieol | tbit da neccmary = ta re estiticd to benefits) © Hatcnina + Tecorà expendeo ven incomid Ìn caming revenve Ex0ENdES recorded whe, EARNEO to generite REVENVE 7 (erpemves are recor ded © tl. same period Tit fevove are ralired ) This principle holds independent on when cash is pied or recevedì 2) E am recogriaed Shen gooee /seriteo are und => woepevoentty or $ tue 2) RO are recoguired Ven qoods/ semicca are Sold = = WOEPENDENTLY OF $ reciso crampie » 3) $ 000 saie a May 26% bo $ cieca n So 12° ® -» Tue REVENUE Wil BE qQecor0eD on Hay 26 —» when they are sold Mo 6) $ 5000 porto a Hay 45 aud service begins on June 30% —+ THE GXPEMDE Will BE RELORDED on CHE when they are used © Fu Discrosore + provide inforsation Sufficientiy ZuuporTanT do inflvence 3 decisîon TRANSACTION ANALYS51\S The evento that affect the compauy dre called TRANSACTIONS Ind they vuost le recorded o the fimancal stitemests . Bom TRAVIACTIONS | occor between partico, Like the sale of goods ; there are aloe TRANDACTI ON THAT DO NOT INVOLVED EXCHANGES BETWEEN PARIIES BT SII HAMIWG AN ECONONICAL | HEASSRABLE EFFECT o) UE coMPANY aud 40 they need to lt recorded. Erasmples of those ave: use of equpemets |, gianta or material PIE cortrait SiguaTure lo not a tramactiom ; “lar to be callectel iL the noTeS The TRANDACTION © AMALYSIS da \ased on tne T-ACCOUNTS : an organited format uxd by companier To auumulate the Douar EFFECTS of tramsactions. ; s è T-AcovuT The TRANDACTION ANALYSIS ds loased ou Some Very Rsuple prindiples —+ EACH STRANDACTÒOA) AFFECIS AT LEAST TWO ACCOUNTS - DVALITY EFFECT > de acoueting equation A = L+ SEO set o remain “n balome after coach tramaaition Soda helps o underTaud if tere are Seu culilaleo, eapeclally ‘in "ho erercioea Dans Te TrRamacti ON ANALYSIS, it la ZuportacT to remember Tuo role. lat give 3° procedure: 4) IDENTIFICATION of AUOUNTI and ClassiFy THEN By TYPE OP AUOOAT ( A, L, se) 2) Digeetioy 0 Te EFFECT (increrse or deerene) on cacm account After Bat Bere dd the BALANCING : 0 ue have To verify dit the a uontiog equstion cemgina ino balance, The T- Accounts 2 reaited ar follows: + PEGIT and <AEDIT O dre juit tuo masse) dat DEEIT CREDIT helps To distiagvia, ne left ad vige Sde 0000 0900 Leal Tr tw auovsT THIS AMDONT LS pEBITED CREDITEO The anrîi quepore of the TRIAL BALANCE Z> To quali Sure dat = DEBNTS = crREDTS for ead account before prepariuy the balance sheet. Some T-Accovnts at the ed of te aeconitiny period become CLOSED : 50 Physicaltz the accont d3 clomd, rfepor@it the Fina BALANCE = oF_ O (Since DeBITS= cREDIS). There particolar accousts ’ e 3 f are the ones Lee REVENVES, EXPENDES ), LOSSES , GANS since te amouti are Transfemed to RETAINEO —EARNINGS, —"Thede are called TEMPORARY Accounts, Anether type the PERMANENT ACCOUNTS ( balame sheet) thit are never closed. OfperATIWa —DECIZIONI = AND WCOHE STATEMENT Mou vie understand how To dal wilh REvENSE and Griemes. First of au thu are teo acovtiuy athods To record REVENVE dd EnIENIES i % 4) CASH BASISO Accountina = HATCHNG ACCOUNTING REVENvE R CASH ‘5° RECIEveD are recorded whew Ertemes E CASH \S O Paw Thia auetThod 4° not und by companiea since TTD sitio Too uderrtano lot The dseaio ' disaduarlare dd Dat A axd E cam be recognized Uiben cab il veceved or qaid , se th duethod di not detailed. 2) ACCURALO ACCOUNTING Toò tue vuostly ued ly o companies. Ito è band o We Revense ARWepLe for unta, revenver are recorded vhen ty ave tamed, veal'sablo ov sutiprable + A ave recorded ven they are EAEO idependesTiy = on vhen o cal è recwed ) > € ave recorded When they dre Incorgeo , independentiy | on when call pai a) REVENvES & 49° cose ——_——_—, Io tia case, Vhen cash i grid, the reverse can ba recorded DELIVERY $ eeceuso and so the company creilea Tuo accounta: L Revere ‘5 Reconseo cass (n) revenve (6) Kx Ax & Tu tia cane Ue company Qaîd i advance |> di 29° cose —_ | & . $ oecenco peLiverr 2) tt, € company camel reed The revinve bIT only cah 4 casn_ (a) unetturo Revenue (L) Revense 1 Aeconoco È pewo T- Aeon + ù " ‘ 2) tr + te company record the Yeveme $ Nene D DELIVERY 4 fevene (se) uscageo REvenve (L) REvENJE ld REcotoeo Xx Kr d SWwereo 50 the compa clossa tha Aol by Shieruoa TUE ANoosm from credit to delsit i the UNEARD REVEVLE ACCOUNT recogni tion lo DEFERRED This: second com È dn exaugle of |DEFERRAL |, become the revenve until the pestied Lul tn tramadion (deliver) ouors. BP case di t vewverRY $ scceveo v REVENVE LU RE LOLpED Ii tia care we uil have dw ACCRUAL |: the ca will Ve received Liter wi vespeet © ‘ ; the revence "1 recogution. (se) ACCOUNT ASmvALLE (A) 2) = teo company const record The cash REVENVE Kx Kx È) ti + the company records Cash ENT lo rewrved casa__(A) Accovt Recwate (A) x x Kr i sweTeD The REvEnNVE do dmoclaTed dm ano INCREASING OF Asset 'S Account © © conpay A received 4,300 È ar detesto iucome in cain reverve es CASH Invertnenz Incove (R) L,t00 L.t00 @ Accouni gecENvagLe Account PAYvBue SOLwTION = Salo FROM TEXT Rene Ch Riscoeratane bum comomen Veenotory cf maschansme. Egsorrart Tot Ascets intime Acconto panpatita Say papato e D- came nio ADIUSTHENTS They troîcalouov at the cud of th decovatiue gerted nd there are uo tr per cf ADIUSÌMG ENTRIES ? + ACCRUALS x revenver Cavned or expenies incummed | but no cash ha bech © charged * RAR before $ + JOTE REWGIVABLE + E before è Wo MavaBe > DEFERRALS : recciots of anets. or payaments 0f cash ‘im advance. 0/ revenve on daferie — recognition . È before A + vugarneD Accovat (1) . $ before E + PRE- Palo sxeesse (A) © AccRvaLs uo 0 ThE Accovmiina PeRL00 $ Ì î ° REVENUES. EARUCO ADIUSTNG CASH Rec ED o ENTRY on ERPENIES. Incop.ReD SASA PAD 3) REVENVES O è AD TUstina ENTRY ACCoUnTE > ur + Acounî RECEGUUAGBLE CASH Aeon gs + CASH 7 Acco RECGIVABLE b) expenses è» AD TostinG ENTRY Acouvnts + + E + Acouot BAVARLE CASH Accounts + casu 7 Acco 2avASCE Bom © eraupia includes = INTEREST CARNED durin tn period ( Accaver Revenve ) ar wages CAMEO BY ERPLOY EES Gui No YET Paven ( Accavro expenses )  a net . Exan?Le on Oxoser 15 (2045), 3° coupup duet 10,000 $ Lor 6 soho è a cotifute 7 . - - - a of deposit. Wat pays 6% of anal inTereido There iuteresto vii ba resìved o Harh dI (20%). me ADIUSIOG EOTRY sto December 81° da: 40,000 $ - 0,06 - 3 - 150 INVEN EARNING 2 A Frou October to December > 3 ut Devmber 81°. tere devene uiEResT RELA N ADIVITING ENTRY 4s0 4150 RELORDED GY COMPANY © vereraats Suo oB THE $ AccouaTING PERLOO + + + t Î ° CASH Receive ADIUNING REVENVES. eaRuCO CS ENTRY a Y Asm PAID ERPEDIES in coalED 3) REvENvESO è AD TUITING ENTRY Accounta > + - UNEARNED REVENIVES (L) CASH Accounts + casm + unearneo REvenves |L) b) expenies AD Tosti ENIRY AQOUTS +» + E - PRE -Mmo Extemses (A) CASH Accounts — CASH 1 PRE-PMD = Er2EnaEs (A) Some erasagles aciude © Renî Raceweo ww AOvance | upeagued Reverse > L) or wsorance Paro W ADVANCE ( ree- PAD Siende a) . DEsTS 2) Sao 3) idcone TAKES How To AccoulT FOR NET SALES REVENVES IL, tre income STATEMENT We will see record the that are defined @. BALES RevenNvEds - DAWES OVCOUNTS 7 SALES Retoty / Auowances > CREOIT CARD MICOVUTS NET sales 2) CREDITO CARD DId COUNT Thi appli to relailes 4uosTIy Companies that sell amerchandizize ad they allow the credit card payament. crepit corps © dupne a FEE to the company to Pay fr tn sone Bait they are provi dine, erano i for ne month, credito cord Gale = 3,000 È 00° Samarg 41° vita 3% fee (tana) 3% of 3,00 $ - to $ REVEDVEI Acco ont RELEWAIE CREDITO CORP PIdCONT da mM oRDER TO NEW Fee 3,000 2,09 do ) BALESO DISCOUNTS They ave agplieà by a certain company to encourage © Some Carly Pay anenTa + ue cuitosmer purclares = on open acsovit, they 4udy be offered a SALE Plicont Te enwrase tl fapantat. 1 2/40 where 2 în Me Discount 7 do LOENTIFI TION 10 The DiacounT PERICO Wo) "A where n andicateo Tie Fou PAYUSAT W IRE ODWNT D qemod » 30 A the MAR MM CREDIT PERIOD Let's se amo exrazple i order to understand Now record . ao) ERAMIE : On Samary 6 è company Sella 00 cacom = 4,000 È ud Shows 4 v termo 2/40, n /30 Gusto va bot PAYWG 1MNEDIAT ELY Famoxy e” Aacot accevadce (4) R=vEnvE 4,000 {000 E * 8 itomer o Pays the Company on Janary Ah (after ds) 4 PAYMENT ld» RECEIVED WiTiin me 40- DAYS TERM 3% THE comfanY HAS TO Afftv THE Finep DI OUT Fanvary 1 CASO ALOOWNI RECEIVA BLE Spuz> vw (XR) Q30 4,909 29 7 ‘ 1,090 - 20 0î sac IT urne BE NOT pdIDERED In cade o PAYMENT AFTER THE 40- 08vS TERH saLes Retorns / Auowances Thia happens fer exasupli, ve are sella; goa smercbadize. and Some of ‘them relum back To US since they ar damaged or defecive (difettosi) ENAMELE è Costumer = reTurno Soo è of suerchandîde to tn cosupany _— L PorcHa E ol Account SALES RETORI / Auovantes a AGOUT RECGIVAGLE v SOD  GeneraL FORUAT FOR ME CLA S$\F1V 60 INGWME STATENENUT The WGoUE STATEMENT can be reposted dn Movipue gieps : 4) stato wilh NEI Sates 2) add / sobre te following anovats AET SALES 7 cos of coon som (CGS) + cost of used ivetory GROSSO PROFIT - (umite Lapo ) OPERATING = EX DENMICI > dee ® the HAW CORE ACTIVITY (operating attivite ) OPERATING INCOME */- Nor ofersting R/e ano cams/ won — refemed to Te peripherical activibeo ot the osp PRE TAX INCOME - + income before tarey INQHE TAX ESPEME HIT ORTER SEEN g Nod - RELVARIA ITEMS NET Ncode @ (ceperate sutio.) ex Traordinary itews, Something tit è not 20 fiequertt dA. PIs6WTi NUED OPERATIONS 2. ER QAORDINARY ITEMS 3, WWwu_Tws EFFECT 0F O CHANGES VW ACCOVNTING METHODS CLASSIFIED NCoOUE STATEMENT GrAMRlE APPLE INC 4 connector) i stemento ed Operation ca maliiazro e ceppi menndder ed shiareo hh are de fheamernde send pers vherr ssemmenie Theve years emibeci Sepienaler 24, III ano sn EC Ne les seus sas Contof sale 341 REAL WORLD EXCERPT Cina perdi Aerial Report Opersing creme een ecs Recan and devoti qurasi 24 1 135 Seltr poneral. sod abremitranve 19 sr dan Total apennag cyeme 10008 Si (Financac RATIO) Opersing ici num tes SARNO di EARMINGI PER CoNkod SHARE Otder inconne ana iper ss 198 DI 1 Adriana e, acne debate jrrmmam fer inve Leon Ms IRso 12016 Mronan fe savane rsa uan uaar USI ] dee NET inco s mo $ 1a0mI s_ns ire AVERAGE SHAREB GUI ST ANDIVA barrare pre sumnenm share de drain PTT Manic some sisi $ "] Nera end mi coeagtone rervengi pes re | fiane aria sos noie OTTO I GMMUNSE MA Serro Sensi CAN: è siutemena dure dea simpiiri foo pocpsse dr din mento Pavona n non ne Riese ne (IT) — II sourieo of ddution are converted into shares The T- Accounta © Zuvolved ave de followiny one: ALOUANE Podi ACouI REtEVaGLE AUT ut AUOwI Te EUMNATE FROM THE =» Book Tue AMOUNT. THAT ARE xx RL NOT UE REO ANTHOLE Wim tha sccovà step, mea vl ave a 8) 4/0 EFFECT du the eue STATEMENT ») No EFFECT 0a The qmets |, diuce è J Actcousi AGCELVa BLE offset î Atwwance = DOVRRFUL Actovvi =D No CHANGE Summary of the Accounting Process Accounting for bad debts is a two step process. | Financial Step Timing Accounts Affected Statement Effects 1. Record estimated End of period in Bad Debt Epense E) A Net Income ” bad debts which sales are adjustment made Allowance for Doubtful A Assets (Accounts Accounts (XA) Receivable, Net) 2. Identify and write off Throughout Accounts Receivable (A) Y Net Income actual bad debts period as bad debts become -—Allowance for Doubtfu 4 =—Assets (Accounts [NO ®fect known Accounts (XA) Receivable, Net) REPcaATIDG AUD INTERIRETING cost of Gooo So find INVENTORY taventoRg od: > Tangilbe preperTy of the cosmupauy ; IT i cowpord by some items dit are held for being sold ( FInuA eroDvetS inventoRT ) or items tnt Still need to be proceneà ( mora 1 Mocers wvenToRi ) . Houever , we remember Hut INVENTORI di sluayi consider a CURRENT ASSET è Flow 0Ff THE WvVesToORT eis RETAILERS © MERCMANDISE » MERCHANPISE Cost of GOOD so POR CUAdE0 INVENTORY HAV FAO RERS è RAW HSTERIAL » Raw MATERIALS »>o Mora Ww pros _p Finisneo G009 > IT 0F PurWAsED INVENTORI Mwvemioni INVENTORY Goap dIL0 DIRECT capoa, FACTORY OVERRERD IN conneo wewntso The Flow DFF THE INVENTOY COSTS Z3 comporrì ef lire steps STEP A 0 porcheriag / prodeediag a ui TER 2: additiome To Guvestory on the balance sheet stee 3° + Sale - cost of 49 Sold on Tscomu statement + NATURE 0F Wventorkt Avo coò of G90D 400 BEGIVINNO INVENTORT + PuRclases Tor Tue PeRIvo I Gooos AvAILABLE FOR SALE ENOING INVENTORY Così OF @Go00D S0.0 (batame sheet.) Income Stile) BEGIUNINO INVENTORY + PORCHASES = ENDING wVENTORY = os OF 900 Soup IN VENTORY coITING METHOOS There sare 4 isvestory totiag muettolo , that are und To aleuità Une doll» T te good sold. i) RIFO ciro WEIGHTED AVERAGE Cost METHOD Ù) SPearie I0ENTIFI cationi METHOD Thera sctrods ave very INPORIANT sitie Ha pricco of good ce change; Thi priv varatio» affects tue Snangiag in Inveltory coil. The last one, SPECIFIC 10ENTIFICATION METROO , Za the leso ded sine td nt pactlaal for de fatenitog rerona i The cost of each item sold da Zduti fied and recorded da così of 294 sod —- tro cal of ti remmaiviog items è to eeding duvestory GT requista huepiuy a track recorà of the porciare cast of cad item Thia actirod ia vaed by cosmpanie» = Wat predice © very enpensive pro duel! (x. Relex ) asd s0 ey car easily Trace edch good sad. The daciptias of tu sther sneThody are The fotto vin © Firo è» FIRST - IN, FIRST - out - AUDEST costs ale recorded Under the cod 07 Goop SOLD - RECENT Cats are rewrded vuder the ENDING INVENTORY ®© Liro LAST - in FRUT - OUT - OUDEST cosTs are recorded Under the ENDING INVENTOR Y - RECENT costs dre rewrded voder the CIT 07 Goop SOLD REPORTING AnD INTERARETING PROPERTY, PLANT ANO EGUPUENT Lt % mu Zupotant for è coupary to be alble to plan wlidh, d the OPTINAL PRODUCTION caracity fe a Punt, because GF we overestimite thin need ) 0 skgito ian da hig cits thit reduce our profit | moreover, ndor citivasting uneans nét ssff, tune dewand These anits are LONG -TeRM ASsets = that can be: + TANGIBLE ASSETSO 30 physical scbitance , Lie: - lands . Souilaia: i permetti divas ad avipemest { assors dPBIELT To DEPRECIATION + fonitoe ad fiatures * aclrera) degosits and Tùuber = —> NSTUIAL REDOURLE ANETI. DATECT To DEPLATION + INTANGIBLE ASSETS. : no ghyaîcal sebflane , dle da Fieci cu + patests * o Spy îghts DEFINITE LIFE SOBSIEIT To AMORTILATI OA * fran chiesa * trademartoz } INDEPIANITE LiFE % good will + How to recorà è TANGIBLE ASSET A Gamgee ASSET ld recorded (st its Acauaition com ( hutorial cot) giu as: Acandariion cos - PORCUASE PRICE + ALL ENPEMONORE needed To prepare the anel far its we The acquisition cost doro NOT indude fismueimg charge» and cash dircost ; ST cod be defined BY COmSARUERION în Audiug è - II Mat ERVALS ded LABovR needed to the comtrudlion ; > d Terona ble amout of OVERHEND ; - CAPITALI ESO MIERESÌS * interot ou dell'a incwred during the coniTru ctio. ExAMPLES © Batim Aretineo purchase Sirplanea = Gr 4 ut d io cao and 74 suli $ a) site papobe Acauation For E QPMENT CASR AGTE PavagLe CASH Coma Es lo N) +S 4 2 9A @ Seti Airlines | purchazeo | Girplamto | Gr 1 culn shares (AS per vota, 90 $ suit vate) gua 25 «in $ cam (50 $ 1 due] - Aut Acquintioy = For NON - «sw Cau HEAT CAS CoMkon STOM PAID- MN UPNAL CINDIDE RATIO N3 1 25 4 4g —_—y—_—_—_—_—_" corato cetra = 50 sdu $ © Poriny comstro cl airplanea — papius 00, 000 $ in Libor csì, 1,3 sul $ 2 amiTestal and 400,000 $ of iterest (of unim 400,00 $ rete to conitru tion ) Acquiatioy BY EQUPHENT cASM INTEREST — EXPENIE CONITRUCIION 2 2,3 $00,000 CAPITALI AED 7 Î INTEREST 600,000 + 4,3 vl, + 100,000 «= 2 4h $ 600,000 + 4,3 wu + 400,00 = 2:3 ql $ LA8OSA MATERIAL COMIT RO CT 1a mrentsT Capaaro AND Revenve Exsenpitunes Host anets require expenditure» To amaulain or embance bbeîr productive capacity @ revenve Expeno tunes (recorded è» an Enpense) tney go Lilo tue ICONE SITEMEN Da L ner cone | Enpenditura = donc on 8° tangibile amet, iu order to montaia its produttive capacity © CROSAL EKPENDITURES (recordea ea ivcacases i TUE ASSET AccOLOT) gu, do iron Gaumes est Lo sw meme È the productive lfe , qertine Enpenditurs done on è Tangible anne , in order To Sacreare efficeneo or capacity of the asset To sos up, the influence 9 the capital gua Revenve ExpewniToRe on the financial STalezwe Ts are the fotto i Ones » Fi Effect È Hauy companies have police» Treatment Statement Income Taxos. Srfensing (all Oporditura below Capital Balance shoet Expenditure account debited | Higher Higher 9° cerlii, dauout. Revenue Income statement = TieRe ARE No SieciFic RULES — Expenditure | accountdebited | Lower Lower Derprecario Concept N ___—_— # sat value Da Derreciarion | da the proce» Df ato catine the cost of builainzs and equpaet Over their Product ve s Using a syiTemitic and rational wethod. DEPAE Gation Ene csbE AccunurateD pereecutton — (XA) + guai auoute equipment Xx Rx FQNPERENT - AccoHvuteo pEPRGA ATION 3 Book VALVE POME EMP HENT @ Acceceraten MeTHO0» DECLINING BALANCE The accelerated —deprecation suatches higher depracialion expende with higuer revenvea d> the carly asset'so well Lio when tr at da vor effizient. gesso of dn Tr i a method urd by companie» vhich expect è rapid ebsolescente Of the equiperatet Nb TECH coNnPaniES Depreciation Repair Expense Expense Early Years High Low > HiqueQ REVENVE SO do and do suore eliaat Later Years Low High + LowsA REvE NVESO i ani do less tAiuant DECCININO BALANCE 0F 2° 18 4 DovBLE - DECLLINIWG- BALANCE RATE ANNUAL DEPRE CIQUION 2 NET Book VALVE x 2 SKp Ende USEFUL LIFE IM Years î COS - ASCUMULAI SD DEPRECIATION A CCELERATING RATES . 495 - 13 - 2 EXAMPLE > Britti Airways purcimer cquipuat Le 62,500 È pering 1a cash. Tio equipune Mas a urli Ufo oh 3 yeers and a residua vol of 2,500 $ - YEAR 4 > peegeciaiton Expense + (62,500 - 0) x 2 a 41,663 $ 1 3 AU. DERMECIATIOR - YEAR 2» peegeciaiion Enpenre = (62,900 - GA,66Y) x 2: 43,883 $ 3 - YEAR 3°» peegReciaiion Greene » (62,500 - 6,696) x 2 a 4,62% $ 3 To sua ud - how to calcolite the DEPRECIATION ExPENSE RAIGHT-LINE _ Cost - Residual Value — :THOD ni Useful life UNITS Annual F Production —Cost - Residual Value OF PRODUCTION Life in Units of Production DOUBLE. 2 x Cost-Accumulated Depreciation DECLINING © Usefullife BALANCE Asset In?apuent INPAIRMENT À tre lo of a portion of the utility of an anto tough: * <©a20alty *obsolescence + Asset 'S Fmi Value < Boo VALVE ESTIMATEO FUILRE « L d & 1 È ak of deman for the auet's Services Casi FLows THAT AQe GENERATED BY We recognire = a loss when an amet suffers a PERMAMENT INPAIR MEANT THIS SQUI?EMSAT When Enis happens , the company records an IMPAIRUENT O — LOSS _ NET Book VALUE IMPAIRMENT Loss = - FAIR VALVE OF THE ANET Tio O asd mt the anet d» WRTEN-OFF EXAMPLE: Hhe net book value of the British Alruepg equipueto 2 2,320 duo $. The FAIR ve & £,000 sul $ (< book value ) INPECIMENT O Loss = 8,320 - 8,000 = 320 $ CQUPMEN INPAIRMENT Loss 329 320 DisposAL oF AN ASSET A oiseosaro ds basically = when an anet da net kept for rs eutice life. The pisposal can be of tuo types: 2) VOLUNTARY DIS POSAL ©! the company Chocsea To sellthe anet LL) INVOLUNTARYO pidposAL =! some accîdet or fire elìuztite te ano © Hoy too record a bDIiSPosaL There ave Tuo steps that have to be followed: set: Update the amout of the depreciìation to tie dite of the disposal sita Qesord the DioposAL è cASK GAW / coss EQuenenT xx xx xx xx (t013) (Gan) cASH > Soox value => Gard (creo) . CASA < Boom varve = coss (9EBIT) casÙ = Book Vawe = NO Los / can EXAUPLE | Gritish Atruay o sold fligito equipe Sir S sula dato de end of AE year OP Usage, The original cost ef tia equipuert dd 20 ala $ |, with a use) Ufe of 20 years, Zero reridual value. The company Um the STRAIGAT LWE KETHOD to comple the deprecioti om Cxpeme + DEPRE ciato EX PENE = 204 n $ sa ferro _DEPAECNMOI EkP Neo ureo 9E0R 2 + Beonio VALVE 0F eQuirnento 29 > (4-ta) = 3 del È at dre cad oh N gear ef vagge + He company sella dle anet at 5 valo $ > duula $ = look value => GA CASA GAW EA? Kent AuRuuTEO DEPR 2 20 tt INTANGIBLE ASSETS Sor chavacTeristica of Thu WTANGIBLE = AmeTa are Ayted below: — Non- cumet assets without physical subsTance + ©Often provide Cxadusive fights or privilege» > User Ul 4 often diffioe to deterzive (eitiuite) Usvally dcquired for cperatTional ie + They can ha gurctared or developed UxTernatlty Iutargible anets can have : i) DEFINITE LE : de ct o an istangible 2 alloceted on a streighit- Une basìs over ite vie Ufe ( AmoarizamoN ) - AMORTIT ATION EXPEADE dd Ancluded 2 the INCOHE STATEMENT - Trtargible amets are reporTed at così - AUUMULA TEO AMORTITATIO A) in the BALANCE SHEET Ù) INDEFINWTE LIFE i the cost of an “nTangible Za NOT AMORTIZEO + They com be subject to IMPAIRMEST ( fair valu < book vatue ) ISA\RUENT LO» INTANGIBLE AmeT xx xx INTAN GISLE ASSETSO WTtd A DCEFWITE UFE + Subjet to AMORTIRATION Eranchises Licenses and Operating purchased by a se Limited permissions RARE II sonfiio pian products or provide prtersi RO AeRI a period and purpose, Purchase price is You may be using COSIO RO ia computer software that amortized. is made available to you Patente through a campus Exclusive right granted by the fodoral govermment to sell or licensing manutacture an invention. è Cost is purchase price pius legal cost to defend. Amortize cost over the shorter of usefut life or 20 years. Research and development costs that might result in a patent ‘are normaliy expensed as incurred, . Re seAlaca ANO DEVELO PHENT EXPENSE - GAS è» ENBENIES ( Gad DU are intancagle AsETS) = FRS : RESEAROM | Cost = BaPEMDE DEVELOPMENT Cost == CAPITALIZEO * GOODWILL Googuit “5 chivacteriotica | are Lostad below: + Trey Suor vihen one company buys onother one . + It d the assouto by which te porca price exceods the fair maricit volue of het anet acquiral —_ 4 . _ 4-L Only purchased geoduili are Long: ble @ssets Gooduill è not anontize» . Its valve suit be reviewed at Lerstannoaliy for pontible Zmiprivanento; and the book © value «reduced to fair value if èumpaived. EXAMPLE è» the company A SRL. paid 4a $ to purchased the ABDETS. + QIAVFILITIEO o the compa S.P.A. The ametsS" fair markato velue Za 209,000 $ The LABILGIES8 È fair market vele di 200,920 È FAIR VALLE 0F NG ADET Acaviren = 900,000 - 200,000 = Foo, oc0 $ Potnase PRICE s 4 sula $ > 100,000 $ = FARO VAWE 07 NE ANET O PuRWasen Goopwue = Ls - £00,000 = 300,000 $ casu GOODWILL (A) Ives Kent 1 sulu 300,000 ‘00,00 Reroazi na ano lutereretine — Lia iuties The acquisition = ef the anels da financed from two sources + - Dei - FUNDS Frou cereditors + Eaviît - Funos = frow ovners Debt considered Miskier = than equity = Sìnce = WIEREST 13° A LEGAL OBLIGATIO) and CREOITORS cam Foo ce BSANNRLPT CY LIABILITIES defined ad PROGABLE DERTS gr osLGATIONI | of the entity Thit reavits Frosn = past tramsactions, which will Ve paid with amels or services They are cianì fed dependiu; ono the MRILRATY è a) CORRENT Lia BiLiTIES «è 41 or la year of sestority b) NON CURRENT LIABILITIES over 4 per of sesturity LiaBiuries Arne nREcOROED AT mNEIR CURRENT CASH EQUVALENT de amouit tt a credîtor would accept to caucel the debt, at è time Aucured Accouit pryable Liagiunies aecovato Exaupres o Note papalle Accrued L'abilties Un-eamed revenver Some Zuportart indicitore of a company's ability to 4ueet Us comes gobli galions are: + CURRENT RATIO = crerni AETS cs vile DD bilwem 1 ad 2 CURRENT MAGILITIES % TIME COHPANY HAS > WoawwG CAPITAL = CURRENT ASSETS. - CORREUT LABILITIES A G900 quot If te wet vritio i too high , GT stano Tit the cosupany do suaVing an inelficert ue of its resources) betaure the duouez covid — be invested în productive anels. If it do oo Low, ito vucamo that the company D nt da 3° fawable situation, di Terza of Lquaity.  On tn other Maud, we ca compila Thu PAEIENT VALE ftatiug fon He FutvRe ONE Fv o PVv= —— PRESENT VALVE OF A SWGLE ARQUAT (r)" ExaM?Le Vou such LO love to daveit at 40% 0 1 uud 4,000 È 2 3 year ? - 000 x pv = en £13 $ (1+ ono) Auother ZuupovTant = ComcegT % the ANNUITY A streasu of regular payamests = ET lasts for è lined vvsmber of perì ods _—_—_—+_____—___+—_—_—_—__—»n s so pv 1 2° 3 ev ARMATI AMNSITY ANNI The ANNUTY ls charazterived ly è 4) au EQUAL DOLLAR AUOUnT tach Sigle period internet perioo of — Eavar LENGHT ) dh EQUAL INTEREYÌ RATE ea single period If ue Vave to compiute Be PRErZST and Future vane of au | vito Nave Te ue These Formula: n FV e A|U) 1 pv All. 1 n r " "rlder) FUTURE VALLE OF_ANO ANIWVITY Pecsent VAWE OF ANO ANNWIY EXAMPLE : we imit 4,000 $ each per at 4% + ilat vite (compound amvally ) | 3 + tre Future vawe AFTER 3 Years & FV = 4.00 Mao) 1 - 3,20 $ aio o + t©e PREMENT VALLE BEFORE 3 VEARS da fi = 4000 4 1 - 2,49 d 7 n GT 3° dio ono (4t 0.10) Leasma (locsrario) (locstore) The LEASE da 3° Contracva agreement between the LESSOR and te LESSEE. d1t ano bhe Lusse tu vigit to ua 3° Specific propety | Tha LEM speri the duration dud the rental Payments. Theo Ovcousi RATE 4 tie intenent Rate whin tie lemor es to calculite the pay suest mot oe the alert vate the lener d norzeali charged {a Loan to pucte 3 Stamilar awet, The olblgiliona fr taxes , ivrance aud susìiteronee 4eoy le ansmued by tre linor or tu lusce. There ave Tuo types of LEASING è © CAPITAL LEASE = Vhen è Company Lernes an aneco ou a long-teru las - 3 lare TravaPerving SubaTauti ally a of the benefits and rists of owuership shodd be Capitalited , transfer 00 owuerslip can be adnumed culy Gf th Lease A non - caucellabie > © Reconpto © ASP TRE ASSET Has Been PURMMASEO (ana ded Caritity ) ®© ofeEratInG@ LEASE - when è Company lenes ano aneto on a° shot - tera lasis - lea dint do nst subiTantialiy drenifer = benefits and riaks —. No LIABILITY IS RecoROEO BUT AU RENT ERPENDE 480 7 voeò THE Assets Theo GRAPSO ddentifico = 4 polaito But delie» a leave as CAPITAL LEASE (st Lot on of tie) ta tn Lessec at im end 0 tm leese tera 4) Oumersip oh tu amet d trasferred 2) Lease vit bargaim poechare options (ta lemez ii allowed “o quosie th and at è price tt 2a lower toa it fair sarto vale) 42) leases uwith lia terius equi to 152 or suore OP te anil'i expected economic LA 2) Lea ben Une prevosto value of lens paymests 25 equal to 98 or suore of tie fi senit volue old are when the lede DD signed  How to acowmt fr capita leme ? There ore a few stees Bit have to le followed in order t auovit for CAPNAL ster 4 the cosupany records the amet ASSET LEADE LIABILITY LOS Kr ste? 2 de anel vil depreciste = over its ewnoume Lfe DEPRECIATIO N ACCOMULATEO 0evN xx xx ste d AT the end oh the PATAGEST rear CASH INTEREST ERPENE LEAsE LAGILITY XK xx Xx EKAMeLe : Powell Tracking vita lean eqipret from anotter company > LEE Dufation + © gears AT RavuesTo > at the end LP Ùe gerr — amato Paes: 13,8% d = ANWITIES INTEREST RATE va d10% > Power Treo Neep the opipuot 8T ti evd of te learin period => = equipiest expected Uunfoi Lf 6 pearo uit O residuo value PREDENT VALVE oP THE GQUIPHENT Ne 13,8% 2°. , % so0,000 $ on om (400) Segiming ol bre Luasing 4 Eu? H EN LEASE LARILITY 60.000 50,000 LEA SE è CAPITAL LEASE