Chaper 1-Framework for financial accounting Flashcards
What are the two functions of financial accounting
- Measure business activities
Communicate those measurements to external parties
What is a corporation
A company legally seperated from its owner
What is the advantages of a corporation
Stockholders have limited liability
What is the accounting formula
Assets= Liabilities + stockholder equity Or Stockholder equity = liability -assets
Income statement
Shows a companies revenue and expenses over time and net porfit or loss
Statement of stockholders equity
Shows common stock and retained earnings for stockholders
What is a Balance Sheet?
A financial statement that provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time.
What are the five primary financial statements?
Income Statement
Statement of Stockholders’ Equity
Balance Sheet
Statement of Cash Flows
Statement of Comprehensive Income
What is retained earnings?
The portion of net income that is not distributed as dividends and is retained within the company.
What are the three categories of cash flows in the statement of cash flows?
Operating cash flows
Investing cash flows
Financing cash flows
Q: Who created GAAP and what does it stand for?
A: The Financial Accounting Standards Board (FASB) created GAAP, which stands for Generally Accepted Accounting Principles.
Q: What does SEC stand for and what role does it play in financial accounting?
A: The Securities and Exchange Commission (SEC) enforces accounting and disclosure requirements for companies with public securities.
Q: What are the three broad categories of sustainability disclosures?
Environmental issues
Social issues
Governance issues
Q: What two qualities must accounting information have to be useful for decision-making?
A: Relevance and faithful representation.
What is operating cash flow
Cash receipts and payments regarding revenue and expense activities that take place during operations
