Accounting Chapter 4

Income statement – reports results of operations for a given period of time
-reports revenues( company's resources from providing goods or services)
-expenses (decreases in resources)
-can get net income
Advertising Expense – 1. Expense
2. Income Statement
3. Debit
4. Temporary
Neutrality – The absence of bias.
Contingent Liabilities – future "estimated" liabilities from lawsuits and other types of events
1.) If "Remote" – no accrual or disclosure in the footnotes is required
2.) If "Reasonably Possible" – no accrual; must disclose in footnotes
3.) If "Probable" but cannot be estimated – no accrual; must disclose in footnotes
4.) If "Probable" and can be estimated – must record/book accrual and disclose in footnotes
entrepreneur – a person who transform ideas for products or services into real world businesses
Sole Proprietor – One owner/Sole trader fully liable for the business's debts (unlimited liability: personal assets can be sold to pay for the business's debts)
Debit – The left side of an account
Return on OE – Net Income / Avg. OE

Return on each $ of OE

The profit margin on sales ratio indicates how well the firm is – controlling it costs
uniform chart of accounts – tek düzen hesap planı
If Income Summary has a net credit balance, it signifies:
Opportunity Cost – Benefit lost to pursue a particular course of action
Restrictive endorsement – An endorsement restricting further transfer of a checks ownership
Paid salaries to employees for work done this year. Does this affect net income – Decreases net Income
If Incоme Summаry hаs а net credit balance, it signifies:
COMPARABILITY – describes information that is measured and reported in a similar manner for different companies.
"Fixed Charge Coverage" Classify, Calculate, and Interpret – Solvency Rato

Fixed Charge Coverage = [ (EBIT + Lease PMT) / (Interest Payments + Lease PMT) ]

Meaningful to companies that lease large portions of their assets – airline companies

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