Ch.1

Question 1

Financial Accounting

Answer 1

System for measuring an enterprise’s financial performance

Language of business

Question 2

4 Basic Financial Statements

Answer 2

1. Balance Sheet
2. Income Statement
3. Owner’s Equity Statement
4. Cash Flow Statement

Question 3

Stakeholders (not too important)

Answer 3

Creditors (FOCUS)
Prospective Investors (FOCUS)

Managers
Owners
Government and Regulators
Unions
General Public

Question 4

stakeholder

Answer 4

is a party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers, and suppliers.

Question 5

Balance Sheet Equation

Answer 5

assets = liabilities + owner’s equity

Question 6

What’s an ASSET?

Answer 6

A resource with economic value with expectation it will bring future benefit

Question 7

What is a LIABILITY

Answer 7

A debt a party owes

Question 8

What’s OWNER’S EQUITY

Answer 8

the owners investment in an asset after they deduct liabilities

Question 9

2 types of organizations

Answer 9

1. profit (private sector)
2. non-profit (public sector)

Question 10

Goals of Private Company

Answer 10

1. survival (liquidity)
2. growth
3. profitability

Question 11

Profitability

Answer 11

ability to generate net income

Question 12

Synonyms of Net Income

Answer 12

Net Profit
Profit and Loss Statement

Question 13

Net Income Formula

Answer 13

NI = Revenues - Expenses

Question 14

Cash Basis

Answer 14

What you have been doing with personal finances

Cash flows in = revenues
Cash flows out = expenses

Question 15

Accrual Basis

Answer 15

accounting method which payments are credited or debited when earned or incurred

Question 16

Accrual Accounting Revenue

Answer 16

recognizes revenue when goods or services are delivered

(not when cash received)

Question 17

Accrual Accounting Expenses

Answer 17

recognizes expenses when incurred

(not when cash is disbursed)