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Accouting > Accounting Chapter One > Flashcards

Accounting Chapter One Flashcards

1
Q

What do investors do

A

Decide whether to invest in stock

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2
Q

What do creditors do

A

Decide whether to lend money

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3
Q

What do customers do

A

Decide whether to purchase products

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4
Q

Supplier

A

Decide the customers ability to pay for supplies

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5
Q

Managers

A

Decide production and expansion

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6
Q

Employees

A

Decide employment opportunities

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7
Q

Competitors

A

Decide market share and profitability

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8
Q

Regulations

A

Decide on social welfare

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9
Q

Tax authorities

A

Decide on taxation policies

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10
Q

Local communities

A

Decide on environmental issues

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11
Q

The two functions of financial accounting are

A

-To measure Buisness activities of a company

-to communicate those measurements to external parties for decision making purposes

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12
Q

Financing activities=

A

Transactions the company has with investors and creditors

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13
Q

Investing activities

A

Transaction involving the purchase and sale of resources that are expected to benefit the company for several years.

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14
Q

Operating activities

A

Transactions that relate to the primary operations of the company. Revenues and expenses operating a Buisness

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15
Q

Types of Buisness entities
Corporation-
Sole proprietorship -
Partnership-

A

Corporation- separate entity from the owners. Limited liability. Double taxation. Corporate earning then in divided payment

Sole proprietorship- Buisness owned by a single individual NOT separate

Partnership- Buisness owned by 2 or more individuals. NOT separate

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16
Q

Assets

A

Resources of a company cash , equipment, inventory, buildings, land

17
Q

Liabilities

A

Amounts owned by a company. Accounts payable, note payable

18
Q

Shareholder equity

A

Claims against company resources by the owners. Last in line. Stock account retained earnings
Assets - liabilities
- earnings go to share holders

19
Q

Income statement
Revenues-
Expenses-
Net income -
Dividends-

A

Revenues- sales of a product or service

Expenses- cost of generating the company revenues

Net income- the difference between revenues and expenses

Dividends- cash payments to shareholders from the earnings of a company NOT AN EXPENSE

20
Q

Financial statements

A

Communicate to those outside the company what is going on inside the company

21
Q

Income statement accounting equation

A

Income statement - revenues - expenses = net income

22
Q

Statement of stockholders equity accounting equation

A

-Summarizes changes in stockholder equity
-Stockholders equity= stock + retained earnings
-retained earnings + net income - dividends = ending retained earnings
- dividends are not an expense

23
Q

Balance sheet accounting equation

A
  • financial position of a company at a point in time

:Assets - liability’s = shareholders equity

24
Q

Statement of cash flows equation and definition

A

Look at cash payments and receipts over a period (year) CASH IS KING
*operating - revenue and expenses
*investing - long term assets
*financing- stock and dividends

25
Q

Free market does what

A

Transfer of resources
- unsuccessful companies cannot obtain investors and creditor resources

26
Q

GAAP

A

Generally accepted accounting principles- rules we follow

27
Q

GAAP

A

Generally accepted accounting principles- rules we follow

28
Q

FASB

A

Financial accounting standards board
Establishes GAAP rules
Independent private sector body

29
Q

IFRS

A

International financial reporting standards

30
Q

Financial statements provide information that ….

A
  1. It’s useful to investors and creditors in making decisions
  2. Help to predict cash flows
  3. Tells us about economic resources and change in resources and claims
31
Q

Ethics

A

Especially important in accounting
Moral system for evaluating right and wrong behavior

32
Q

Public accounting

A

Professional service firms. Auditing tax and consulting

Accouting (2 decks)

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