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ACC 200 In-Class Day 4

by: Dallin Childs

ACC 200 In-Class Day 4 ACC 200

Marketplace > Brigham Young University > Accounting > ACC 200 > ACC 200 In Class Day 4
Dallin Childs
GPA 3.89

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About this Document

These notes cover what we went over in class this week, mostly centered on accounts and liabilities found on the balance sheet. Should help with the post-class quiz :)
Principles of Accounting
Melissa Larson
Class Notes
Accounting, Math, business
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This 2 page Class Notes was uploaded by Dallin Childs on Thursday January 14, 2016. The Class Notes belongs to ACC 200 at Brigham Young University taught by Melissa Larson in Summer 2015. Since its upload, it has received 147 views. For similar materials see Principles of Accounting in Accounting at Brigham Young University.


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Date Created: 01/14/16
In-Class Day 4 ASSETS Receivables - money owed to a company because someone purchased a good or service and is contracted to pay later. i.e. Zion's Bank's entire business model is to hold and lend money, making all of their money on interest.  Accounts Receivable and Notes Receivable are two types of receivables. Accounts Receivable are generally more short term (30 - 60 days) and Notes Receivable are longer term. Prepaid Expense - Very Important! This is not an expense, and does not go on the income statement. It is an asset on the balance sheet.  This is something that you pay in advance, for example, 6 months of business insurance. It is listed as an asset because you have paid for it, but haven't received the benefits yet.  Assets are something that provides future benefit. This moves to an expanse as you receive the insurance for each given month. Property, Plant, and Equipment (PP&E) - pretty self-explanatory. Anything a company owns such as land, buildings, etc. LIABILITIES Accounts Payable - Money a company owes, usually because it has purchased inventory and agreed to pay upon purchase of the items Unearned Revenue - Also important! This is a liability, not anything else, even though it includes the word revenue.  A company has an obligation to perform services which people have already paid for but have not been provided.  A good example of this is airline companies. People purchase plane tickets in anticipation of traveling with the company in the future. Cash comes in and the company must earn that at a later date. Accrued Liability - "accrue" means to build up over time.  A good example of this is utilities. Utilities are only paid once a month, but lights, heat, ac, etc. are used throughout the month. Until a company pays the utilities, this is a liability which they have accrued.  Another good example is taxes. A company accrues taxes on every sale they make throughout the year, but taxes are only paid once a year during tax season. RETAINED EARNINGS - a cumulative count of all the earnings generated by the business which are then retained or kept in the business to finance future operations.  For example, Wal-Mart uses a portion of the profit they receive from sales of their inventory to purchase more inventory, thus avoiding future liabilities.  This count starts the day the business is created and never resets. Measuring Assets -  When reporting assets, there are options. Historical Cost or Fair Value, meaning the price you paid, or the market price for that asset. Right now, GAAP requires historical cost to be reported. Entity Concept - Where does the business end?  Defining who is the business entity. This is difficult in small businesses where owners use assets for both business and personal things. Personal assets should not be included.  Also an issue in a large company such as Berkshire Hathaway, which owns many different companies. o There is a difference between subsidiaries and investments. If a company owns 50% or more of another company, it is a subsidiary. If this is the case, all of the subsidiary's assets and liabilities are included with yours when you prepare your balance sheet. Consolidated financial statement. o If a company owns less than 50% of another company, it is listed as an investment.


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