Ch 1.4 Flashcards
Statement of Income
reports revenues and expenses, how did the company’s operation perform during period?
Statement of changes in equity
changing in each part of shareholders equity (common shares and retained earning), and also TOTAL EQUITY during period
Statement of financial position
report of assets and liabilites and differece (shareholders equity) AT ONE MOMENT OF TIME
A - L = S
Statement of Cash Flows
shows where a company got cash durong a period of time + how cash was used
other: notes to the financial statments
contains aditional info that is cross referenced to main 4
other: statment of comprehensive income
must be prepared when a public compreports comprhensive income earned form certain iterms
other: statment of retained earning
private comps make this instead of a statement ofchanges in equity
quarterly synonynm
interim
when do many companies choose to end their acct year
whenever inventory and operations are slow, there fore it is less effort
typical acct year end
jan 31
statment of income
-List revenues first
-lists expenses
- revenues-expenses= net income/loss before tax
- net income b4 tax -income tax
-net income/loss
when are cents used
round transactions for official records, but for internal records you should use cents
why do ppl care about net income
-investors use past income to predict future income (buying/selling shareS)
-creditors use this to predit risk of lending money
statment of changes in equity
Shareholders equity= share capital +retained earnings
Share capital
money recieved by shareholders whne shares are initalily issues
share capital =common +preffered
Statement of changes in equity format
- beginning balance of share capital
- any new shares being issues (or deduct any amount paid to re-buy shares)
Common shares beginning of period + common shares sold - common shares rebought = common shares end of period
Retained earning
cumulative amounts of net income retained; if negative= deficit
How do you calculate changes in retained earnings
revenue-expenses= net income/loss
retained earning at beginning of period + net income/lloss - dividends declared = retained earnings, end of period
Why are dividends declared not part of the expenses in the statemetn of changes in equity
?? they are <3
is dividends declared= divdends paid
NOT ALWAYS, can be different
What is the statement of changes in equity used for
1) looking at divdiend declaration practices (high % of net income given to shareholds or is it reinvesting the net income to grow)
2) seeing if company is issuing or rebuying shares
What does it mean if a company is issuing shares
raising capitalwh
what dos it mean if a compapny is rebuying shares
surplus of cash they want to increase ownership
Do private companyes create a staement of changes in equity!
NO they do a statement of retained earnings
what is a statement of ffinancial position
a balance sheet, reports assets and who has CLAIM TO THOSE ASSETS
Assets claimed by creditors= liabilities
Assets claimed by shareholders= shareholders equity
Assets claimed by creditors= liabilities
Assets claimed by shareholders= shareholders equity
Assets claimed by creditors= liabilities
Assets claimed by shareholders= shareholders equity
Acct equation
assets= liabilities +shareholders equity
why does acct equation work
because assets are broken up to the assets owned by creditors (liabilities) and those owned by shareholders (shareholders equity)
*** 3 : what does right hand side of acct equation show
how the assets have been financed (debt from creditors or LIability) OR (investement from shareholders share capital) or (net income retained in company shareholders equity)
Statement of Cash flows
focuses on cash recipets and cash payments of a business for a specific period of time
-FOCUSES ON FINANCIANG ACTIVIIITSE, INVESTIN GACITVIIES, AND OEPRATING ACTIVITIES
Order of statement of cash flows
operating activities
investing activities
financing activities
questions statement of cahs flows answers
where did cash come form? where was it used during the period? what is the change in cash balance?
The statement of changes in equity depends, in part, on the results of the
statement of income!!!
because in SOI you find net income which is used in SCIE
the statement of financial position and — are interrelated
statement of changes in equity
ending balances of each component reported on the statement of changes in equity
The statement of cash flows and the – are also interrelated.
statement of financial position
The statement of cash flows shows how the cash account changed during the period.
The ending amount of cash must agree with the amount of cash shown in the assets section of the statement of financial position.
ORDER OF PREPARING FINANCIAL STATEMTN
1) STATEMENT OF INCOME
2) STATEMENT OF CHANGES IN EQUITY
3) STATEMENT OF FINANCIAL POSITION
4) STATEMENT OF CASH FLOWS
IF NET INCOME IS LISTED TWICE
YES ITS THE SAME NUMBER
CONSOLIDATED STATEMENT
statement of a company and alll its usbsidiaris
comparative statements
public corps have to present thtier statments for at least 2 fiscal years so people can companre
unit of measure
thousands or whatever! read
where does the accumulated other comprehensive income acct go
shareholders equity
annual report includes:
Public corporations must produce an annual report each year.
includes:
-the financial statements
-management discussion and analysis, an independent auditor’s report,
-the notes to the financial statements,
- summary of key financial ratios
what is mda
must accompany the financial statements released by public companies.
provides management’s perspective on the financial performance during the period covered by the financial statementsand provides important context for interpreting them.
he MD&A often includes a discussion about the company’s initiatives in relation to corporate social responsibility and sustainable development.
auditors report
independent auditor who is appointed by the shareholders on the recommendation by the board of directors.
Reading the auditor’s report before reviewing a company’s financial statements will provide users with important additional context.
Notes to the Financial Statements
Explanatory notes and supporting schedules
ex:Descriptions of the significant accounting policies and methods used in preparing the statements.E
do 1.4c activity
Which financial statements should you review before you invest?
ALL OF THEM + NOTES TO FINANCIAL STATEMENTS
Which is the most important financial statement for investors?
Statement of Income= shows past performance and can be used to predict future performance
The net income of a proprietorship is taxed on the owner’s personal income tax return.
yes it is
paying dividends is what type of activity?
FINANCIAL- OUTFLOW OF CASH
If a company is Selling equipment that the company has finished using, what type of activity is it
INVESTING ACTIVITY-OUTFLOE
Where is deferred revenue noted?
SFP
A company’s cash balance at the end of an accounting period is found on both the
STATEMENT OF FP
STATEMETN OF CF
dividends declared influences
retained earnings
common shares influecnes
dividends declared influences
shareholders equity
retained earnings
