Chapter 1 Flashcards
What is a financial statement?
A document that companies create to communicate their financial earnings.
What does the Income Statement report?
Revenues, Expenses, and Net Income or (Net Loss)
What are revenues?
Amounts earned for selling products or services to customers. Service and sales revenue.
What are Expenses?
The costs of operating the company.
What is COGS?
Cost of goods sold
What are examples of expenses?
Selling, marketing, administrative, interest, income tax, losses
What is the calculation for Net Income (N/I)?
Revenues - Expenses = Net Income or (Net Loss)
What question does the income statement answer?
How well did a company perform during the period?
What does the Balance Sheet report?
Assets, Liabilities, and Stockholders’ Equity (S/E)
What is an asset?
Resources of a business, the business will derive a future benefit from this resource.
Examples of assets
Cash, Accounts Receivable, Inventory, Supplies, Land, Buildings, Equipment
Is land a current or long-term asset?
Long-term asset
Is cash a current or long-term asset?
Current asset
Is accounts receivable a current or long-term asset
Current asset
What is PP&E?
Property, Plant, and Equipment
What is a liability?
Amounts owed to third parties; debts, obligations
Examples of liabilities
Accounts payable, interest payable, notes payable, salaries payable, income taxes payable
Is accounts payable a current or long-term liablility?
Current liability
When are current liabilities typically due?
Within one year
Is bonds payable a current or long-term liability?
Long-term liability
What is the accounting equation?
Assets = Liabilities + Stockholders’ Equity
True or False: The accounting equation only sometimes holds true
False. The accounting equation ALWAYS holds true. There is never an exception to this rule.
What are the two components of stockholders’ equity?
Common Stock and Retained Earnings
What question does the balance sheet answer?
What is the company’s financial position?
