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Basic Accounting Documents

Basic Accounting Documents

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Basic Accounting Documents

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  1. Basic Accounting Documents

  2. Accounting System Purpose • An accurate picture of firm’s current profitability • An estimate of firm’s current and future financial position • Input to firm’s management information system • An accurate record of past financial performance

  3. Accounting & Agribusiness Manager • Agribusiness managers must understand • Balance sheet and profit and loss statement • Evaluate financial business performance

  4. Accounting & Agribusiness Manager • The balance sheet and the profit and loss statement are starting points of most financial analysis

  5. Balance Sheet • Statement of financial conditions of business on specific date • Assets = Liabilities + Owners’ Equity • Assets: something of value firm owns or uses • Current assets: either cash now or will turn into cash within accounting period • Fixed assets: something firm owns or uses that will not turn into cash within accounting period

  6. Balance Sheet • Liabilities: obligation to pay debt • Current liabilities: debt must be paid within next accounting period • Long-term liabilities: debt where payment or repayment of obligation will be made after next accounting period • Owners’ Equity (Net worth) • Accounting equation: Assets = Liabilities + Owners’ Equity

  7. Balance Sheet AgBiz CorporationDecember 31, 20__ • Assets • Current Assets • Cash-Accounts Receivable-Inventories • Fixed Assets-Land-Bldgs & Equipment • Investments-Accounts Receivable • Liabilites • Current Liabilities • Notes Payable-Accounts Payable-$ Due this YR on LT Debt • Long Term Liabilities • Owners’ Equity-Stock-Retained Earnings Total Assets Total Liabilities & OE

  8. Profit and Loss Statement • Summarizes revenue and expenses of business over given period • Revenue: refers to amount of money firm earned from sale of its goods and service this period • Cost of goods sold: represents direct costs to business of just goods that are sold this period

  9. Profit & Loss Statement AgBiz CorporationFor the Year Ending December 31, 20__ Revenues from SalesLess: Cost of Goods Sold Beginning Inventory + Purchases Goods Available - Ending Inventory Cost of Goods Sold Gross MarginLess: Operating Expenses Income Before Taxes Less: Allowance for Income Taxes Net Income (to Retained Earnings)