Financial element and accounting equation

1. Assets elements

1. Cash and cash equivalents::

1. Liquid securities with 90 days or cash

2. Account receivable::

1. Allowance for bad debt (is a contra ccount, will be minused by)

3. Inventory::

1. Goods in the storages

4. Financial assets::

1. Marketable securities

5. Prepaid expense::

1. You paid for a service, but the service is yet to come. (it’s a plus, not a minus, even though it’s called ‘expense’)

6. PP&E (Prpoerty, Plant, and equipment)::

1. Include a contra account(备抵) for accumulated depreciation

7. Intangible assets::

1. Patent, trademarks, licenses, and goodwill
2. Except goodwills, other will be reduced by accumulative amortization
3. Amortization(摊销) = Depreciation, but for intangible only

8. Deferred tax asset::

1. The excedding tax you paid, will be returned in the future

2. Liability elements

1. Account payable::

2.Unearned revenue::

1. Liquid securities with 90 days or cash

3. Deferred tax liability::

1. The tax you owe

4. Income tax payable::

1. The tax you owe

5. Long-term debt::

1. Such as bonds payable

3. Equty

1. Capital::

• Par value(or face value, initial value) of stock

2.Additional paid-in capital(资本公积)::

• The increase of stock value after the IPO

3.Retained earnings::

• Net income minus by the dividends given to the shareholders
• The residual and actual earned money.

4. OCI (Other comprehensive income)::

1. Changes resulting from foreign currency translation (NOT transcation!!!)
2. Minimum pension liabiliy adjustment
3. Unrealized gain and loss(浮盈浮亏) from cash flow hedging derivatives(举例：一个人股票赚了20%，但是没有抛出套现，没多久亏了)
4. Unrealized gain and loss from available for sale security

4. Expense

1. Cost of goods sold::

• the cost for producing the goods

2. SG&A(Selling, general, and administrative expenses)::

• advertising, management salaries, rent, and utilities

3. Depreciation and armotization: 4. Tax expense: 5. Interest expense: 6. Losses:

5. Gains

1. Sales revenue:: 2. Gains::

6. Important accounting equation

Asset = Liability + Equity

Equity = Capital + Revenue - Expense

Asset + Expense = Capital + Revenue + Liability(借贷平衡)

Asset = Revenue + Liability + Contributed captital + Beginning retained earnings + Net Income - Dividend(扩展公式，6项)