Acct 2121 CHPT 1 Flashcards
Uses of Accounting
Accounting identifies and records the economic events of an organization and communicates to interested users
Users of Accounting
Internal and External
Who are Internal Users ?
Inside or work for company
Such as: company officers, mangers in finance, and marketing
Who are External Users ?
So not work for company
Such as: Investors, customers, Regulators
3 Forms of Business Organization?
Proprietorship,Partnership, Corporations
what is a Proprietorship?
Owned by one person, easy to set up, unlimited liability
what is a Partnership?
owned by multiple people, formalized in a written agreement, unlimited liability
what is a Corporation?
Separate legal entity owned by shareholders, limited liability, indefinite life
what is Generally Accepted Accounting Principles (GAAP)?
Rules and practices for the preparation of financial statements
publicly-traded corporations use ?
International Financial Reporting Standards (IFRS)
Private corporations use?
Accounting Standards for private Enterprise (ASPE)
Three types of Business Activities?
Financing, Investing, Operating
What are Financing Activities?
Obtaining funds to finance the operations of the business
Such As: Selling or repurchasing shares (equity financing) Borrowing money or repaying loans (debt financing)
What are Investing Activities?
Purchase or sale of long-lived assets needed to operate the company
Such As: Purchase or sale of long lived assets, purchase or sale of investments
What are Operating Activities?
The main day-to-day activities of the business
Such As: sources of income, expenses
Order of Financial Statements
Statement of income, statement of changes in equity, Statement of financial position, Statement of cash flows
Net Income = ?
Revenues- Expenses
What is Statement of income?
Reports revenues and expenses for a specific period of time
What are Revenues?
Arise from the sale of products or services, Result in an inflow of assets.
Such As: sales, service Revenue, rent revenue
What are Expenses?
Costs of assets consumed or services used to generate revenues
Such as: Salaries, Depreciation, Insurance, Etc
What is a Statement of Change in Equity?
Shows the change in each component of Shareholders’ equity for the period
What is Share Ownership?
Amounts contributed by shareholders, may include common and preferred Share classes
What is Retained earnings/ deficit
Net income retained in the corporation less any dividends paid to shareholders
What is a Statement of financial position?
shows the assets, liabilities and shareholders’ equity at a specific point in time
