Chapter 1 Financial Accounting Flashcards
What are 5 examples of long term assets that go on a balance sheet?
Property Plant (example nuclear plant) Equipment Intangible assets Investments
What does GAAP stand for
Generally Accepted Accounting Principles
What are 4 examples of current liabilities that go on a balance sheet?
Accounts Payable
Salaries Payable
Taxes Payable
Short-Term Borrowings
Statement of Retained Earnings
Shows increases and decreases to retained earnings
Name the 4 types of users of accounting?
Individuals
Investors and Creditors
Taxing Authorities
Nonprofit Organizations
Who formulated the U.S. GAAP?
Financial Accounting Standards Board
Shareholders’ Equity includes what 2 things?
Paid-in Capital
Retained Earnings
Cost
Assets are recorded at cost (not fair value or appraised value)
Income Statement
Measures operating performance for the period
Stockholders Equity on a balance sheet include what 3 major things?
Paid-in capital
Common Stock
Retained Earnings
Reliability
Accounting is based on objective evidence
Partnership
Two or more owners
What decreases retained earnings?
Expenses
What are two examples of intangible assets
Patent
Trademark
Statement of Cash Flow
shows how cash flows in and out of the company
Balance Sheet
Measures financial position
What 2 things is accounting used for?
- An information system
- Accounting is used to make decisions
(Ask Matt) What does 2 major things does the statement of retained earnings show?
Increase in net income
Decrease in dividends
Limited Liability Companies
Owners are called members
What is a positive of a corporation
business is legally distinct from the owners
- someone can only sue the corporation not go after someone’s personal assets like a car
Assets
An economic resource that provides a future benieft
Dividends are not —-
Expenses
Retained Earnings
Amount earned and kept for use in the company
By the Ethics of Accounting what are US companies required to do? (2 things)
Report Relevant information
Report Reliable Information
What are two names for Owners Equity?
Stockholders Equity
Shareholders Equity
What is an example of notes payable?
Bank loan
Net income Equation
Revenues - Expenses
List 1 example of people who receive information by managerial accounting
Managers of a company
What is a positive of a limited liability company?
Members are not personally liable for business debts
What are three categories on a statement of cash flow?
Operating Activities
Investing Activities
Financing Activities
What are 4 examples of assets that go on a balance sheet?
Cash
Short Term Investments
Accounts Receivable
Inventory
What is a proprietorship?
Business who has a single owner
What is the more complex accounting equation?
Assets = Liabilities + Common Stock + Revenues - Expenses - Dividends
What Equation should be included on an income statement?
Revenue - Expenses = Net Income
What increases Retained Earnings
Revenue
Accounts Payable
Liability for goods or services purchased on credit
Owners’ Equity
It is the owners’ claim on a business
FASB conceptual framework states that accounting should be: (what 4 things)
Relevant
Reliable
Comparable
Consistent
What is the general accounting equation?
Assets = Liabilities + Owners’ Equity
What are the 5 categories on a balance sheet?
Current Liabilities Long-Term Liabilities Current assets Long term assets Stockholders Equity
Entity
A business is separate from its owners
What is the difference between financial and managerial accounting
Financial accounting provides information to users outside the company
- Managerial accounting provides information for people inside the company
List 3 examples of people who get information by financial accounting
Investors
Bankers
Government Agencies
Paid-in capital
Amounts invested by stockholders
What determines owners’ equity?
Assets - Liabilities
What are 2 examples of liabilities
Accounts Payable
Notes Payable
What 3 major things does a balance Sheet include?
Assets
Liabilities
Shareholders’ Equity
Expenses
Represents me using up an asset
What is the language of business
Accounting
What are 5 examples of owners equity?
Revenue Expenses Retained Earnings Common Stock Dividends
Monetary Unit
Transactions are recorded in a stable currency
Dividends
Distribution of assets to shareholders
What are 5 examples of assets?
Cash Inventory Accounts Receivable Notes Receivable Land
Corporation
Owners are stockholders
What is a negative of a proprietorship?
The owner is personally liable for business debts such as someone can sue for the business owners house
Name the 4 financial statements in order
Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
How is accounting used as an information system? (3 things)
- Measures business activities
- Processes data into reports
- Communicates results to people and organizations
What Equation should be included on the statement of retained earnings?
Retained Earnings Beginning + Net Income - Dividends = Retained Earnings End
What is negative of a partnership?
Each partner is personally liable for business debts
What do dividends not impact?
Net income
What do dividends decrease?
Retained earnings
Notes Payable
Written promise to pay on a certain date
Intangible Assets
Non physical assets
Kathy Jones owns a coffee shop. Her personal expenses are included in accounting records. What concept is violated?
Entity
What does FASB stand for?
Financial Accounting Standards Board
What is another name for a balance sheet?
Consolidated statement of financial position
What are 2 examples of long term liabilities that go on a balance sheet?
Long-term notes payable
Mortgage payable
How does a net loss occur?
If expenses are greater then revenues
Going-Concern
Business will continue indefinitely
Stockholders equity
Corporation’s equity
What are the 5 major things an income statement include?
Revenue Expenses Resulting net income or net loss Gains Losses
Liabilities
Future economic sacrifices
What are 2 positive things about a Limited Liability Company?
Offer limited liability to members in LLC
-LLCs are not taxed
