Accounts and Financial Statements Flashcards
Operating Activities
related to day-to-day business
Investing Activities
related to acquisition/disposal of long term assets (PPE)
Financing Activities
related to obtaining or repaying capital
Assets
economic resources of the company
Liabilities
creditors’ claims on the company’s resources
Owners’ Equity
owners’ residual claim on the company’s resources
Revenues
inflows of economic resources to company
Expenses
outflows of economic resources to company
Acccounts
individual records of +/- in specific asset, liability, owner’s equity, revenue or expense
Chart of Accounts
Table of contents of accounts
Contra Accounts
Account that is offset or deducted from another account; Ex: accumulated depreciation, sales return, allowance for bad debts
Non-Current Assets
assets expected to benefit the company over an extended period of time; Ex: goodwill, PPE, copyrights, etc.
Current Assets
assets expected to be consumed or converted into cash in the near future
Inventory
unsold units of product on hand
Trades Receivable
another term for accounts receivable
Other Receivables
amounts owed to the company from parties other than customers
Cash/Cash Equivilants
cash on hand/ liquid short term investments maturing in 90 days or less
Balance Sheet
a company’s financial position at a particular point in time
Residual Claim
owner’s remaining claim on company’s assets after the liabilities are deducted
Balance Sheet Equation
Assets = Liabilities + Owners’ Equity
Owner’s Equity Equation
Owners’ Equity = Contributed Capital + Retained Earnings
Income Statement
performance/activity of a company over a specific period
Income Statement Equation
Revenue - Expenses = Net Income (loss)
Net Income (loss)
difference between revenues and expenses; net income is when company’s revenue is greater than expenses; net loss is when the expenses are greater than the revenues
Gains/Losses vs. Revenues/Expenses
gains and losses aren’t directly related to the primary business, revenues and expenses are related to day-to-day
Ending Retained Earnings Equation
Beginning retained earnings + Net Income - Dividends
Retained Earnings
earnings retained by the company( aka not distributed as dividends)
Statement of Retained Earnings
shows link between balance sheet and income statement
Double Entry Accounting
keeps accounting equation in balance; Ex: buying office furniture- cash decreases, assets increase
(A)
Assets
(L)
Liabilities
(E)
Equity
(R)
Revenue
(X)
Expenses
Unclassified Balance Sheet
doesn’t show subtotals for current assets and current liabilities
Depriciation
spreading the cost over multiple periods
Unearned Fees
fees for services promised, but not yet provided; ex: magazine subscription is unearned until it’s delivered
Total Assets Equation
Total Assets = Total Liabilities + Equity
Costs of Goods Sold
an expense incurred when you reduce inventory by the value of the production
Accruals + Adjustments
decide if revenue/expense items are being counted in the correct accounting period; “a” - denotation
Accrual Accounting
expenses recorded when incurred and revenue recorded when earned
Direct Format
operating receipts - operating cash disbursements
Indirect Format
starts with net income and shows adjustments to infer operation cash flow
