Chapter 1 Flashcards
What are the basic financial statements?
-Income Statment (statement of net earnings)
-Statement of retained earnings
-Balance sheet (statement of financial position)
-Cash flow statement (statement of cashflow)
-Statement of other comprehensive income
Financial Accounting
Provides info for managers and for decision makers outside, like investors, creditors, government and the public
Management Accounting
Generates inside infor for managers of the organization, like budgets and projections
Proprietorship
-1 owner
-Limited by owner’s choice or death
-Proprietor is personally liable
-The accounting entity is separate from the proprietor
Partnership
-2 or more owners
-Limited by owner’s choice or death
-Partners are personally liable
-Accounting entity is separate from partners
Corporation
-Shareholders
-Limited by owner’s choice, but not death
-Shareholders are not personally liable
-Accounting entity is separate from shareholders
Statement for: How much income did the company earn this year?
Income statement
Statement for: Why did the company’s retained earnings change during the year?
Statement of retained earnings
Statement for: What is the company’s financial position at the end of the year?
Balance sheet
Statement for: How much cash did the company generate and spend during the year?
Statement of cash flows
Income Statement Elements
Total income (revenue + gains)
- Total expenses (expense + losses)
————————
Net Income (or Net loss)
Statement of retained Earnings Elements
Beginning retained earnings
+ Net Income
+ Other comprehensive income (IFRS only)
-Dividends
———————-
Ending retained earnings
Balance sheet Elements
Liabilities + Owners equity = Assets
Statement of cash flows Elements
Operating cash flows
+- Investing cash flows
+- Financing cash flows
———————–
Increase (decrease) in cash
Going-concern assumption
We expect it to continue operating normally for the foreseeable future
Separate-entity
The business activities of the reporting entity are separate from the activities of its owners, so we do not mix the assets, liabilities, income or expenses of the entity with those of its owners reporting the entity’s operating performance and financial position.
Historical-cost
Assets should be recorded at their actual cost, measured on the date of purchase as the amount of cash paid plus the dollar value of all non-cash consideration also given in exchange.
Stable-monetary-unit assumptions
Most Canadian entities report their financial info in Canadian dollars, although some choose to report in US dollars instead.
CPA Code of Professional Conduct
-Professional behaviour principle
-Integrity and Due Care Principle
-Objectivity Principle
-Professional Competence Principle
-Confidentiality Principle
