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Financial Accounting and Reporting 1201 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Stockholder meaning

A

Shareholder; an owner of shares in a company

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2
Q

Creditor meaning

A

A person or company to whom money is owed

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3
Q

Interest meaning

A

Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt

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4
Q

Dividends meaning

A

A sum of money paid regularly by a company to its shareholders out of its profits/reserves

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5
Q

Forms of internal decision makers

A

Managers

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6
Q

Forms of external decision makers

A

Stockholders and creditors

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7
Q

What are the 4 basic financial statments?

A

Balance sheet, income statement, statement of stockholder’s equity and statement of cash flows

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8
Q

What does the balance sheet show?

A

Assets = liabilities + stockholders’ equity

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9
Q

What are the assets in a balance sheet?

A

Cash, accounts/notes receivable, inventories and property, plant, equipment, short/long-term investments, supplies, prepaid expenses, intangibles, building and land

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10
Q

What are the liabilities in a balance sheet?

A

Accounts payable, tax payable, bonds payable, unearned revenue and notes payable to banks

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11
Q

What are the stockholders’ equity in a balance sheet?

A

Common stock and retained earnings

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12
Q

What is the income statement equation?

A

Net income = revenues - expenses

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13
Q

What are the 3 business activities?

A

Financial activities, investing activities and operating activities

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14
Q

Where does the financing for a business come from?

A

Stockholders and creditors

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15
Q

What are advantages of a corporation?

A

Limited liability, continuity of life, ease of transferring ownership, opportunity to raise large amounts of money

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16
Q

What are disadvantages of a corporation?

A

Double taxation

17
Q

What are different types of business entities?

A

Sole proprietorship, partnership, corporation

18
Q

What is the current ratio?

A

Current assets/current liabilities

19
Q

What are the revenues in an income statement?

A

Sales revenue, service revenue, rental revenue, etc.

20
Q

What are the expenses in an income statement?

A

Cost of goods sold, wages expenses, rent, depreciation, income tax, etc.

21
Q

What is the income statement equation?

A

Revenues - expenses = net income

22
Q

Which statement is completed first?

A

Income statement is prepared first, then it rolls into the balance sheet

23
Q

How is the income statement relate to the statement of stakeholders’ equity ?

A

Net income from the income statement results in an increase in ending retained earnings on the statement of stockholders’ equity

24
Q

What does the income statement show?

A

Statement of operations that reports revenues, expenses, and net income for a stated period of time

25
Q

What does the statement of stockholder’s equity show?

A

Explains changes in stockholders’ equity accounts that occurred during a specific period of time

26
Q

What does the statement of cash flows show?

A

Reports inflows and outflows of cash for a stated period of time

27
Q

Why is GAAP necessary?

A

Necessary for accurate interpretation of the numbers in financial statements.

28
Q

What is the equation for the statement of stockholder’s equity?

A

Beginning balance + increases - decreases = ending balance

29
Q

What is the equation for the statement of cash flows?

A

+/− Cash Flow from operating activities
+/− cash Flow from investing activities
+/− cash Flow from financing activities = net change in cash

30
Q

How is the statement of stockholder’s equity related to the balance sheet?

A

Ending retained earnings from the statement of stockholders’ equity is one of the two components of stockholders’ equity on the balance sheet

31
Q

How is the statement of cash flows related to the balance sheet?

A

The change in cash on the cash flow statement added to the beginning-of-the-year balance in cash equals the end- of-year balance in cash on the balance sheet

32
Q

What is the CPA?

A

A professional designation is granted only on completion of requirements specified by the state that issues the license

33
Q

What are the different employment opportunities in the accounting profession?

A

Professional designations - CPA, CMA,
CIA
Practice of public accounting
Employment by organizations
Employment in the Public and Not-for-Profit Sector

34
Q

What are the operating activities?

A

Cash flows directly related to earning income, such as cash paid to suppliers and employees

35
Q

What are the financing activities?

A

Cash flows directly related to the financing of the enterprise, such as the payment of money to investors and creditors

36
Q

What are the investing activities?

A

Cash flows related to acquisition/sale of the company’s plant, equipment and investments

Financial Accounting and Reporting 1201 (6 decks)

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