Investment and Finance

Fixed assets are: Land, buildings, equipment, machinery, fixtures, furniture, office equipment and tools - less accumulated depreciation.

Depreciation is the systematic charging of a portion of the costs of fixed assets against annual revenues over a period of time.

Liabilities are everything that a business owes its creditors. Examples include: accounts payable and notes payable.

Common stock is money paid by investors in order to own a piece of the company.

Retained Earnings are the cumulative total of all earnings, net of dividends, that have been retained and reinvested in the business since its inception.

The Statement of Retained Earnings reconciles the net income earned during a given period and any cash dividends paid with the change in retained earnings between the start and end of that period. The basic accounting equation is Beginning Balance, plus Net Income or Loss for the period, minus Dividends declared = Ending balance. The statement of Retained Earnings is frequently combined with the income statement.

The cash flow statement provides a summary of the firm's operating, investment, and financing cash flows and reconciles them with changes in its cash and marketable securities during the period of concern. The cash flow statement is sometimes called a source and use statement.

Par value is a per-share value arbitrarily assigned to an issue of common stock for accounting and financial statement purposes. Par Value is the face or nominal value of a security. A dollar amount is assigned to a share of common stock by the corporation's charter. Many corporations do not assign a par value to new issues. For preferred shares or bonds, par value has importance because it signifies the dollar value on which the dividend/interest is figured and the amount to be repaid upon redemption. Preferred dividends are usually expressed as a percentage of the stock's par value. The interest on bonds is expressed as a percentage of the bond's par value.

Paid-in capital in excess of par as it relates to financial statements is the amount of proceeds in excess of par value received from the original sale of common stock.