ACCOUNTING EQUATION ( E X P A N D E D )

A - L = O E 

*

(NCA + CA) -(NCL + CL) = O E  

**

(NCA + CA) -(NCL + CL) = (CAPITAL +PROFIT -DRAWINGS)

***
*Owners' Equity 

(NCA + CA) -(NCL + CL) = (CAPITAL +(INCOME-EXPENSE) -DRAWINGS)

*Shareholders' Equity
(NCA + CA) -(NCL + CL) = (ISSUED CAPITAL +(INCOME-EXPENSE) -DIVIDENDS)

INVENTORY - CURRENT ASSET

 

Inventory types: raw materials , work-in-progress and finished goods  Inventory must be recorded at lower of cost or net realisable value (NPV) Difference recorded as Dr Impairment loss on inventory (expense) Cr Inventory (current asset) Prudence Concept FIFO - goods bought first, sold first (Best valuation method) Weighted average - $average cost of goods bought /per unit LIFO (removed from International Financial Reporting Standards IFRS due to its profit manipulation potential)
Sales & Purchases               Calculating Gross Profit :   Inventory Account: Decrease in value of inventory           Impairment loss on Inventory account:

 

COMMON SLANG TERMS OF ACCOUNTING AND FINANCE‏

1) TAKING A BATH - Intentionally incurring all losses in  current period, rather than spreading it to other periods


2) TAKE A FLIER - Intentionally investing in high risk investments, leading to huge losses for current period

3) FLIGHT TO QUALITY- Moving to a low risk investment

4) BUBBLE - Rapid growth of an economic accompanied by a downturn in assets/securities prices

5) SPECULATION - Gambling based on individual calculations

6) MARKET CRASH - Unexpected downturn of investments value


7) HEDGE - Entering into futures contract to prevent adverse price changes

8) MASTER FEEDER FUND - Combination several funds of  into one portfolio, which reduces cost and increases service level

9) LONG POSITIONS - Purchase of a security, anticipating that its will rise in value subsequently

 

10) QUOTE STUFFING - Forcing weaker market competitors to lose out on opportunities by flooding market with quotes and removing them at high speed

11) BLEEDING EDGE - Unknown risk future of an upcoming technology

12) WHITE ELEPHANT - A Burden

13) SIX STIGMA - Quality control guide for defect goods

14) OBSOLESCENCE - Technology that are no longer attractive to consumers

15) BUILT IN OBSOLESCENCE - Product produced is made known to be outdated after a short period, in order to keep customers spending frequently

16) FREE CASH FLOW/ FCF - Cash available to increase assets

17) FREE CASH FLOW TO EQUITY/ FCFE - Amount of cash available to equity shareholders after expenses , debt payments and reinvestment


FORMULA TO FCFE

FCFE = Earning / Per Share - (Capital Expenditure - Depreciation) (1-Debt ratio**)- (Change in Net Working Capital* ) (1- Debt ratio**)


OR
 
FCFE = Net Income - Capital Expenditure - Change in Net Working Capital*+ New debt - Debt payment

*WC= CA-CL
**Debt Ratio= Total Liabilities/ Total Assets
(1:1 means Liabilities = Assets)