FINA 3770 1st Edition Lecture 1Outline of Current Lecture I. Accounting basicsa. Balance Sheetsb. Income StatementsII. Depreciation issuesCurrent LectureAccounting BasicsBalance Sheets:- Assets = Liabilities (Debt) and Equity- Classification of assetso Current assets: Cash, marketable securities, accounts receivable, etc.o Fixed assets: Machinery, equipment, land, etc.o Other assets: Investments, patents- Classification of liabilities:o Current debt: Accounts payable, accrued expenses, short-term notes, etc.o Long-term debt: Long-term notes, mortgages, total long-term debt- Equity: Preferred stock, common stock, par value, paid in capital, retained earningsIncome Statements:- Operating activitiesSalesLess: Cost of goods soldGross profitLess: Operating expenses Operating income- Financing activitiesOperating incomeLess: Interest expenseEarnings before taxesLess: Corporate taxesEarnings after taxesThese 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.Less: DividendsRetained EarningsDepreciation: Depreciation is the process of allocating cost of plant assets to expense over the periods that benefit from their use. - Depreciation is tax deductible and a non-cash expense- It is usually calculated by the straight-line method, which is the cost of the asset divided by the useful life of the asset. - There is another way of calculating depreciation by allocating more depreciation to the earlier years of the assets life than to later years. This method is calledaccelerated depreciation.- Land is not
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