ACCOUNTING Flashcards
The sum of a
company’s net income
and other____.
STATEMENT OF
COMPREHENSIVE
INCOME
Includes net
income and unrealized
income and losses, it
provides the big picture of a
company’s value.
STATEMENT OF
COMPREHENSIVE
INCOME
Useful for investors because the
information can help their
decision-making where the
company’s feasibility as a
potential investment is
concerned.
STATEMENT OF COMPREHENSIVE INCOME
Arrived at by
subtracting cost of goods sold,
general expenses, taxes, and
interest from total revenue.
NET INCOME
Is a business’ financial
statement that measures the
changes in owners’ equity
throughout a specific
accounting period.
STATEMENT OF CHANGES IN EQUITY
Define as the residual interest in
the assets of an entity after
deducting all the liabilities.
STATEMENT OF CHANGES IN EQUITY
Formula of Equity
EQUITY=ASSETS-LIABILITIES
Factors affecting retained earnings
LEGAL REQUIREMENT,
CONTRACTUAL REQUIREMENT,
ENTITY POLICY
Other term for investments
FUNDS, CONTRIBUTIONS
Requirement for the whole country (law)
LEGAL REQUIREMENT
Agreement between partners (Owners & Shareholders)
CONTRACTUAL REQUIREMENT
Policy of the corporation
ENTITY REQUIREMENT
Formula of SCE
ENDCAPITAL = BEG.CAPITAL + INVESTMENT + PROFIT/NET INCOME - WITHDRAWAL - L (NET LOSS)
- Tracks the inflow and outflow of cash
- Summarizes the amount of cash
- Tells whether a company is on solid financial ground
CASHFLOW STATEMENT
Determine how much cash is available for the company to fund its
operating expenses and pay down its
debts.
LIQUIDITY
Two methods of calculating cash flow
DIRECT METHOD AND INDIRECT METHODS
Method of CFS that actual cash
inflows and outflows are known
amounts.
- Listing
all cash receipts and payments during the
reporting period.
DIRECT METHOD
Method of CFS that actual cash
inflows and outflows do not have to be
known.
- starts with
net income and adjusts for changes in non-cash
transactions.
INDIRECT METHOD
Three main components of CFS
OPERATING ACTIVITIES, FINANCING ACTIVITIES, AND INVESTING ACTIVITIES
Receipts from sales of goods and services
OPERATING ACTIVITIES
Interest payments (Any other payments)
OPERATING ACTIVITIES
It reflects how
much cash is generated from a
company’s products or
services.
OPERATING ACTIVIES
Revenue, Expenses, A/R, A/P
OPERATING ACTIVITIES
Include any sources and uses of
cash from a company’s
investments.
INVESTING ACTIVITIES
Non-Current Assets
INVESTING ACTIVITIES
Loans made to vendors or
received from customers
INVESTING ACTIVITIES
Includes the sources of cash
from investors and banks, as
well as the way cash is paid to
shareholders.
FINANCING ACTIVITIES
Dividends payments
FINANCING ACTIVITIES
The two
expense that need to
record but no effect in
cash
DEPRECIATION AND AMMORTIZATION EXPENSES
Steps on preparing CFS
1 . Gather Financial Statements
2. Determine the Reporting Period
3. Choose the Method
4. Prepare the Statement
5. Combine All Sections
6. Reconcile with Beginning Cash
