BA 101 1st Edition Lecture 6Outline of Last Lecture1. Announcements + admin 2. Lecture: Buyer’s and seller’s markets3. Sales forecasting methods, insights, and techniquesOutline of Current Lecture I. Rehearsal tutorial II. Lecture: AccountingCurrent LectureI. Rehearsal Tutorial: Foundation process- Introductory lesson- Rehearsal tutorial – due tonight @ 11:59pm- Practice Rounds (2)- Official Rounds (8)You need to correctly process your decisions after you make them in all stages of foundation. The way to do this is; after you input your decisions in the various spreadsheets, click File, selectUpdate Official Decisions, and click save, then Process, then File, and then Exit. That will correctly record and process your decisions for your company. Get technical help if you’re having technical problems (the helpline for foundation is lecture notes for week 2). Some Due Dates: Tonight: Rehearsal Tutorial and Rehearsal Tutorial Quiz @ 11:59pmTuesday 27th: Practice Round 1Thursday 29th Practice round 2, Online Quiz 2II. Lecture: AccountingAccounting is concepts represented by numbers. - The goal of business is to create wealth for its owners (or stakeholders)- Businesses compete for transaction is the marketThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- How can you measure how well you’re doing? Measure individual transactionsPut them together and measure how much wealth you have and where did it come from?- Assets = liabilities + owner’s equity- Revenue – expense = profitAccounting DocumentsBalance Sheet: A financial statement that summarizes a company’s assets, liabilities, and shareholder’s equity at a specific point in time. - Assets: An asset is a resource controlled by a company as a result of past events and from which future economic benefits are expected to flow to the company- Liabilities: Obligations of a company or organization; amounts owed to lenders, suppliers, and employees. - Owner’s Equity: The difference between assets and liabilities.Assets that are easy to convert o cash come first, “fixed” assets are last (on a balance sheet)Current liabilities are ones that are supposed to be paid off in a one year time frame, long term liabilities are any that are paid off over a time period longer than a yearSome of your assets will depreciate over time, you are allowed to deduct some oftheir value each year. - Common Stock: is whatever amount of money was paid in by the owners, not from loans. Income Statement: The story of transactions over a specific time period. Revenue and Sales Transactions: Business and its customersExpense transactions: Business and its suppliers, such as resources, people, and capitalNet income is also Profit: The difference between revenue and expenseExpenses:Variable costs (costs of goods sold = COGS)- Labor used to make a product or service- Material to make product or service- Cost of keeping inventory Period or Fixed Costs (operating expense)- Selling/promotion expenses - Administrative expenses- R&D expenses- Depreciation expenseIncome Statement:- Revenue – funds from the sale of the product- Variable costs – more products you make, the greater the variable costs- Material costs – cost of the materials in the products- Labor costs – cost of the labor for products sold- Contribution margin – the difference between revenue and COGS- Period costs – fixed over a period of time; doesn’t vary based on amount of product made or sold- Depreciation – lessening of value of equipment or land over a period of use/time- R&D – cost of developing new products/improving existing productsEarnings Before Interest and Taxes: (EBIT). The formula for calculating EBIT from an income statement is: Revenue – Variable costs (contribution margin) – period costs = EBIT Then you subtract interest expenses and taxes from your EBIT and you get your Net Income (also knowns as; net profit/earnings/bottom line/return). If the company re-invests its known asretained earnings, if it is paid out to shareholders it is known as