Chap. 1 Flashcards
Field that focuses on providing info for external decision makers
Financial Accounting
Field that focuses on providing info for internal decision makers
Managerial Accounting
Any person or business to whom businesses owe money to
Creditors
What is the accounting equation?
Assets = Liabilities + Equity
Economic resources that are expected to benefit the business in the future
Something the business owns / controls
Asset
Debts owed to creditors
Liabilities
The owner’s claim to the assets of the business
Equity / Stockholders’s Equity
Owners contributions to a corporation
Contributed Capital
Amounts earned from delivering goods/services to customers
Revenues
Cost of selling goods / services
Expenses
Define Dividends
A distribution of a corporation’s earnings to stockholders
Capital earned by profitable operations of a corporation that is not distributed to stockholders
Retained Earnings
Define Net Income
Result of operations that occurs when total revenues are greater than total expenses
Result of operations when total expenses are
Greater than
total revenues
Net Loss
Transaction is any even that affects the financial position of the business and can be measure reliably in dollar amounts.
Each transaction must have at least 2 Types of Accounts which are:
Cash (Asset) Common Stock (Equity)
*For each transaction the amount on the left sides of the equation must equal the amount on the right side.
True
A short term liability that will be paid in the future
Accounts Payable
The right to receive cash in the future from customers for goods sold for services performed
Accounts Receivable
Define the 4 Types of financial statements
1) Answers the question of whether the business is profitable.
Summarizes the entity’s revenues and expenses,
reports the net income and net loss for a specified period
2) Answers the question of how the business uses its earnings.
Reports retained earnings balance changed from the beginning to
end
3) Answers the questions of the amount of assets a business has and
who can claim those assets.
Reports of the assets, liabilities, and stockholders equity on a
specific date
4) Answers whether the business generate enough cash to pay bills.
Reports on the business’s cash receipts and cash payments for a
specific period
- Income Statement
- Statement of Retained Earnings
- Balance Sheet
- Statement of Cash Flows
Information system that measures business activities,
Processes the information reports,
And communicates the results to the decision makers
Accounting
Stockholders’ claims to the assets through contributed capital and retained earnings
(Common stock, dividends, revenues, expenses)
Equity
Items the business owes
Accounts, notes, and salaries payable
Liabilities
Statement of Retained Earnings Formula: Beginning Retained Earnings \+ N\_\_ I \_\_\_\_\_ - Dividends - N\_\_\_ L\_\_\_ = Ending Retained Earnings
Beginning Retained Earnings \+ Net Income - Dividends - Net Loss = Statement of Retained Earnings
How do you prepare a Balance Sheet?
Assets = Liabilities + Stockholders ‘ Equity
What are the 3 sections that make up a
Statement of Cash Flow
Cash flow from: Operating Investing Financing ---Activities
Formula for ROA (Return on Assets)
Net Income
/ Average Total of Assets
Items the business owns/controls
Assets
Formula for an Income Statement:
R____
- E____
=Net Income/Loss
Revenues - Expenses =
Net Income or Net Loss
- Income Statement
Debits on the
Credits on the
Debits = Left Credits = Right
Asset or Liability:
Unearned Revenue - Is when a company receives cash from a customer but hasn’t provided the product or service which are delivered in the future
Liability
Asset or Liability:
Prepaid Expense - A payment of an expense in advance,
includes prepaid rent, insurance, and office supplies
Asset
Asset or Liability:
Cash - A business’s money
Asset
Asset or Liability:
Land - Cost of land a business uses in operations
Asset
Asset or Liability:
Building - Cost of building, warehouse, or store
Asset
Asset or Liability:
Accounts Payable - Promise made by the business to pay a debt in the future
Liability
Asset or Liability:
Accrued Liability - Amount owed but not paid,
includes Taxes, Rent, and Salaries payable
Liability
Asset or Liability:
Notes Payable - A written promise made by the business to pay a debts, usually involving interest in the future
Liability
Asset or Liability:
Notes Receivable -
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