Summary: Accounting

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• 1 Accounting

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• Every Accountant Really Enjoys Love

  (Debits) Expense, Asset / (Credits) Revenue, Equity, Liabilities

• Statement of Changes in Cash Position

   Difference between two balance sheets expressed in cash

•  Book value of an asset versus market value of an asset

   Book value of an asset: original cost-accumulated depreciation. 
  Market value of an asset: value paid by a willing buyer and willing seller 

•  Book value of a company versus market value of a company

   Book value of a company: common stockholders' equity. 
  Market value of a company: value paid by a willing buyer and willing seller 

•  Depreciation, amortization, and Depletion

   A method of cost allocation of long-term assets over the estimated useful life under the matching principle (does not represent wear and tear or loss of value)

•  Formulas for depreciation, amortization, and depletion

   Depreciation: allocation of original costs over the estimated useful life of a tangible asset. 
  
  Amortization: allocation of original cost over estimated useful life of an intangible asset. 
  
  Depletion: allocation of original cost over the estimated useful life of a natural resource asset. 
  
   Depreciation, amortization or depletion versus accumulated depreciation, and amortization or depletion: expense for the period (I/S) versus sum of the expense across all periods Since the asset was placed in service (contra asset account on the B/S) 

• What is the purpose of a for-profit and a not for profit entity? Non-governmental entity?

  to satisfy a customer demand

• How can a company "make" money and not have any cash?

   The company keeps its books on the accrual basis which follows transactions but the real world operates on the cash basis of cash in/ cash out

• Does a not for profit entity need to make a "profit"?

   Yes, the cash donations to a not for profit must exceed the cash paid out for the entity in order to build reserves and to fund future activities

• Who pays the corporation or business entity income taxes?

   The customer pays the taxes. Revenue must cover all expenses which include taxes. An increase in taxes is an increase in expenses which requires an increase in revenue for the company to make a profit