chapter 1: financial segments, assets, and liabilities

Question 1

what are the four basic financial statements

Answer 1

1. statement of financial position
2. statement of earnings
3. statement of changes in equity
4. statement of cash flows

Question 2

1. statement of financial position

Answer 2

reports the following:

assets

liabilities

shareholders equity

resources opened and sources of financing for them

at a SPECIFIC DATE (POINT)

Question 3

assets

Answer 3

Owned by the company that give and add it value

probable (expected) future economic benefits owned by the entity as a result of past transactions

resources owned by the business at a given point in time

Ex: Cash, machinery, land, but not employees

Question 4

liabilities

Answer 4

amount owed right now, or beginning or certain period

probable (expected) debts or obligations of the entity as a result of past transaction

Question 5

shareholders equity

Answer 5

amount of cash invested by investors in the company (remaining in the company) that was never paid back out (still property of shareholders)

financing provided by owners of the business and by the net earnings generated from the operations of the business

assets minus liabilities

Question 6

2. statement of earnings

Answer 6

Reports for the accounting period:

Revenues: money earned

Expenses: money spent

reports ability to make profits

Question 7

3. statement of changes in equity

Answer 7

Reports changes for a specific period (year, month, week, etc)

reports what happened to that certain amount throughout that period

reports of additional contributions from shareholders or payments to them

reports amount reinvested for future growth

Question 8

4. statement of cash flows

Answer 8

reports ability to generate CASH and how its used

Reports how much cash went in or out for a specific period

Question 9

quarterly reports

Answer 9

financial stamens made at each quarter

Question 10

CASH

Answer 10

amount of cash in company’s bank accounts

Question 11

short term investments

Answer 11

investments I. highly liquid assets

12 months or less

Question 12

accounts receivable

Answer 12

When you’re dealing strictly with customer

customers owe you cash from prior sales

Always verbal

Question 13

notes receivable

Answer 13

Could be from customers or from anyone else

Account receivable that’s signed and written

Question 14

prepaid expenses

Answer 14

something you prepaid for but you expect to receive the service later

Question 15

equipment

Answer 15

worth more than $1,000

sale equipment

Question 16

land

Answer 16

land you have for operations

Question 17

supplies

Answer 17

stuff you use that are worth less than $1,000

Question 18

buildingz

Answer 18

building you have for operations

Question 19

intangibles

Answer 19

not physical

ex: knowledge, experience, customer loyalty

Question 20

How to value intangibles

Answer 20

when you buy a company with certain amount and subtract everything physical, which will then give you the value of intangibles

Question 21

inventory

Answer 21

products stored but not sold

Question 22

what are part if assets in the Balance sheet

Answer 22

Cash

Short-Term Investment

Accounts Receivables

Notes Receivable

Inventory (to be sold)

Supplies (less than $1,000)

Prepaid Expenses

Long-Term Investments

Land

Equipment (more than $1,000)

Buildings

Intangibles

Question 23

what are part of liabilities

Answer 23

Accounts Payables

Accrued Liabilities

Notes Payable

Taxes Payable

Deferred Revenue

Bonds Payable

Question 24

accrued liabilities

Answer 24

You received service but haven’t paid for it yet

Question 25

what are the four items of a heading of a statement

Answer 25

1. name of accounting entity 2. title of statement 3. specific date of statement+ 4. unit of measure

Question 26

accounts payable

Answer 26

products or services bought on credit that must be paid in a short period of time does not require a formal contract

Question 27

taxes payable

Answer 27

If profitable, companies must also pay for taxes

Question 28

notes payable

Answer 28

the written promise for giving a specific sum of money at a specified future date

Question 29

deferred revenue

Answer 29

it reflects revenue that has not been earned You received revenue but haven’t provided service or product

Question 30

bonds payable

Answer 30

long term debt formal promise/agreement to pay interest

Question 31

what are the elements of shareholder's equity

Answer 31

Contributed Capital Retained Earnings

Question 32

contributed capital

Answer 32

Investments by investors into the company to get ownership of company

Question 33

retained earnings

Answer 33

money company keeps for reinvestment

Question 34

what is an asset that is not easily liquid

Answer 34

an asset that is not easily converted into cash

Question 35

Dividends payable are liabilities or part of shareholders' equity in the financial position statement?

Answer 35

liabilities

Question 36

what are dividends payable??

Answer 36

Dividends payable represents the amount of dividends that has not been paid yet to the company’s shareholders

Question 37

what are retained earnings?

Answer 37

retained earnings represent the amount of earnings that has accumulated over time but has not been distributed to shareholders. used for reinvestment