REFERENCES GUIDE TO Diné College
BASIC ACCOUNTING FORMULAS LEARNING CENTER
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These formulas are used to produce the Balance Sheet and Income Statement. Also known as Profit & Loss Statement.
The Accounting Equation Formula
The accounting equation is a vital formula, it is the foundation of accounting.
Assets = Liabilities + Equity
Current Assets Formula
Current assets are the sum of assets that will convert into cash in less than 12 months.
Current Assets = Cash + Account Receivable + Inventory + Prepaid Expenses
Net Fixed Assets Formula
Net fixed assets are the book value of fixed assets.
Net Fixed Assets = Fixed Assets @ Cost - Accumulated Depreciation
Total Assets Formula
The sum of all assets.
Total Assets = Current Assets + Other Assets + Net Fixed Assets
Current Liabilities Formula
Bills due within 12 months of the Balance Sheet date.
Current Liabilities = Accounts Payable + Accured Expenses + Current Portion of Debt + Income Taxes Payable
Shareholder’s Equity Formula
Shareholder’s equity is the value of the company to its owners. Also called net worth.
Shareholder’s Equity = Capital Stock + Retained Earnings
Total Liabilities & Equity Formula
This is the total obligation plus worth of the entity.
Total Liabilities & Equity = Current Liabilities + Long-Term Debt + Shareholders’Equity
The next accounting formulas are needed to produce the Income Statement. Also called the Profit & Loss Statement
Gross Margin Formula
The left over amount after cost of goods sold are taken away from net sales.
Gross Margin = Net Sales - Cost of Goods Sold
Operating Expenses Formula
The sum of expenses paid for developing and selling the product or service.
Operating Expenses = Sales and Marketing + Research and Development + General and Administrative
Income From Operations Formula
Net profit from the product or services sold.
Income From Operations = Gross Margin - Operating Expenses
Net Income Formula
Net income is all income minus total expenses and costs.
Net Income = Income From Operations + Interest Income - Income Taxes
