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    Lecture Slides Video01!02!2

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    Axce1996
    An asset is a resource that is expected to provide future economic benefits through cash inflows or reducing cash outflows. Assets are recognized when they are acquired through a past transaction and the value of future benefits can be reasonably measured. A liability is a claim on assets by non-owners (creditors) that represents an obligation to make future payments of cash, goods, or services. Liabilities are recognized when the obligation is based on current or past benefits or services received and the amount and timing of payment is reasonably certain. Stockholders' equity represents the residual claim on assets after settling claims of creditors. It is calculated as total assets minus total liabilities, and also called net worth or net assets. Sources

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    Lecture Slides Video01!02!2

    Uploaded by

    Axce1996
    31 views6 pages
    An asset is a resource that is expected to provide future economic benefits through cash inflows or reducing cash outflows. Assets are recognized when they are acquired through a past transaction and the value of future benefits can be reasonably measured. A liability is a claim on assets by non-owners (creditors) that represents an obligation to make future payments of cash, goods, or services. Liabilities are recognized when the obligation is based on current or past benefits or services received and the amount and timing of payment is reasonably certain. Stockholders' equity represents the residual claim on assets after settling claims of creditors. It is calculated as total assets minus total liabilities, and also called net worth or net assets. Sources

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    An asset is a resource that is expected to provide future economic benefits through cash inflows or reducing cash outflows. Assets are recognized when they are acquired through a past transaction and the value of future benefits can be reasonably measured. A liability is a claim on assets by non-owners (creditors) that represents an obligation to make future payments of cash, goods, or services. Liabilities are recognized when the obligation is based on current or past benefits or services received and the amount and timing of payment is reasonably certain. Stockholders' equity represents the residual claim on assets after settling claims of creditors. It is calculated as total assets minus total liabilities, and also called net worth or net assets. Sources

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views6 pages

    Lecture Slides Video01!02!2

    Uploaded by

    Axce1996
    An asset is a resource that is expected to provide future economic benefits through cash inflows or reducing cash outflows. Assets are recognized when they are acquired through a past transaction and the value of future benefits can be reasonably measured. A liability is a claim on assets by non-owners (creditors) that represents an obligation to make future payments of cash, goods, or services. Liabilities are recognized when the obligation is based on current or past benefits or services received and the amount and timing of payment is reasonably certain. Stockholders' equity represents the residual claim on assets after settling claims of creditors. It is calculated as total assets minus total liabilities, and also called net worth or net assets. Sources

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    Assets

    An asset is a resource that is expected to provide future economic


    benefits (i.e. generate future cash inflows or reduce future cash
    outflows)
    An asset is recognized when:
    It is acquired in a past transaction or exchange
    The value of its future benefits can be measured with a reasonable degree of
    precision

    KNOWLEDGE FOR ACTION

    Which of the Following are Assets?


    BOC sells $100,000 of merchandise to a customer that promises to
    pay cash within 60 days
    BOC signs a contract to deliver $100,000 of natural gas to DEF each
    month for the next year
    BOC buys $100,000 of chemicals to be used as raw materials, with
    payment made in time to secure a 2% discount on the purchase price.
    BOC pays $12 million for the annual rent on its office building. It has
    already occupied it for one month.
    BOC buys a piece of land for $100,000. Its broker says this was a
    steal because the land is probably worth $150,000.
    BOC is advised by a marketing firm that its brand name is worth $63
    million

    KNOWLEDGE FOR ACTION

    Liabilities
    A liability is a claim on assets by creditors (non-owners) that
    represents an obligation to make future payment of cash, goods, or
    services
    A liability is recognized when:
    The obligation is based on benefits or services received currently or in the past
    The amount and timing of payment is reasonably certain

    KNOWLEDGE FOR ACTION

    Which of the Following are Liabilities?


    BOC receives $300,000 of raw materials from its supplier and
    promises to pay within 60 days
    Based on this quarters operations, BOC estimates that it owes the
    IRS $3 million in taxes
    BOC signs a three-year, $120 million contract to hire Al Dokes as its
    new CEO, starting next month
    BOC has not yet paid employees who earned salaries of $1,000,000
    during the most recent pay period
    BOC borrows $500,000 from a bank on a one-year note with a 10%
    interest rate
    BOC is sued by a group of customers who claim their products were
    defective. The suit claims damages of $6 million.

    KNOWLEDGE FOR ACTION

    Stockholders Equity
    Stockholders equity is the residual claim on assets after settling
    claims of creditors (= assets liabilities)
    Also called net worth, net assets, net book value

    Sources of Stockholders equity:


    Contributed capital (arises from sale of shares)
    Common stock (par value)
    Addl paid-in-capital (excess over par value)
    Treasury Stock (stock repurchased by company)

    Retained earnings (arises from operations)


    Accumulation of net income (revenues minus expenses), less dividends, since start of
    business
    Retained EarningsEND =
    Retained EarningsBEG + Net Income Dividends

    KNOWLEDGE FOR ACTION

    Stockholders Equity Issues


    Dividends
    Distributions of retained earnings to shareholders
    Not an expense
    Recorded as a reduction of retained earnings on the declaration date (creates a liability
    until payment date)

    Statement of Stockholders Equity


    Required financial statement
    Reports changes in stockholders equity over a period of time

    KNOWLEDGE FOR ACTION

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