01 Flashcards
1
Q
What is accounting?
A
The process of
- recording
- summarizing
- analysing financial transactions.
The goal is to help people make economic decisions.
2
Q
Why is accounting important?
A
- Helps in making informed decisions.
- Investors use financial reports to make investment decisions, monitor management performance, and allocate resources efficiently.
3
Q
Who are stakeholders in accounting?
A
- Preparers: Managers
- Users: Shareholders, creditors, employees
- Auditors: Check reported information
- Regulators: Set reporting rules.
4
Q
Who needs to learn accounting?
A
- Finance & accounting professionals
- Managers
- Entrepreneurs
- Financial analysts
5
Q
Major areas of accounting
A
- Financial accounting
- Managerial accounting
- Auditing
- Tax
- Business analytics
6
Q
What are financial statements?
A
Main reports used in accounting:
- Income statement
- Balance sheet
- Statement of stockholders’ equity
- Statement of cash flow
7
Q
What is an income statement?
A
- Reports a company’s performance over a period by listing revenues and expenses.
- Net income = Revenues - Expenses.
8
Q
Balance sheet definition
+ equation
A
- Reports a company’s financial position at a point in time, detailing assets, liabilities, and equity.
- Assets = Liabilities + Stockholders’ Equity
9
Q
What are assets?
A
Resources expected to provide future economic benefits.
- Must be owned or controlled by the company
- Must possess measurable future benefits.
10
Q
Categories of assets
A
- Current Assets: Expected to be used within one year
- Noncurrent Assets: Used beyond one year, listed after current assets.
11
Q
Common current assets
A
- Cash
- Marketable securities
- Accounts receivable
- Inventory
- Prepaid expenses
12
Q
Common noncurrent assets
A
- Long-term financial investments
- Property, plant, and equipment
- Intangible assets (patents, goodwill)
13
Q
What are liabilities?
A
- Obligations the company owes.
- These can be current (due within a year) or noncurrent (due after a year).
14
Q
Categories of liabilities
A
- Current liabilities: Due within one year
- Noncurrent liabilities: Due after one year.
15
Q
Common current liabilities
A
- Accounts payable
- Accrued liabilities
- Short-term borrowings
- Deferred revenue
