chapter 1: financial segments, assets, and liabilities Flashcards
what are the four basic financial statements
- statement of financial position
- statement of earnings
- statement of changes in equity
- statement of cash flows
- statement of financial position
reports the following:
assets
liabilities
shareholders equity
resources opened and sources of financing for them
at a SPECIFIC DATE (POINT)
assets
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
liabilities
amount owed right now, or beginning or certain period
probable (expected) debts or obligations of the entity as a result of past transaction
shareholders equity
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
- statement of earnings
Reports for the accounting period:
Revenues: money earned
Expenses: money spent
reports ability to make profits
- statement of changes in equity
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
- statement of cash flows
reports ability to generate CASH and how its used
Reports how much cash went in or out for a specific period
quarterly reports
financial stamens made at each quarter
CASH
amount of cash in company’s bank accounts
short term investments
investments I. highly liquid assets
12 months or less
accounts receivable
When you’re dealing strictly with customer
customers owe you cash from prior sales
Always verbal
notes receivable
Could be from customers or from anyone else
Account receivable that’s signed and written
prepaid expenses
something you prepaid for but you expect to receive the service later
equipment
worth more than $1,000
sale equipment
land
land you have for operations
supplies
stuff you use that are worth less than $1,000
buildingz
building you have for operations
intangibles
not physical
ex: knowledge, experience, customer loyalty
How to value intangibles
when you buy a company with certain amount and subtract everything physical, which will then give you the value of intangibles
inventory
products stored but not sold
what are part if assets in the Balance sheet
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
what are part of liabilities
Accounts Payables
Accrued Liabilities
Notes Payable
Taxes Payable
Deferred Revenue
Bonds Payable
accrued liabilities
You received service but haven’t paid for it yet
what are the four items of a heading of a statement
- name of accounting entity
- title of statement
- specific date of statement+
- unit of measure
accounts payable
products or services bought on credit that must be paid in a short period of time
does not require a formal contract
taxes payable
If profitable, companies must also pay for taxes
notes payable
the written promise for giving a specific sum of money at a specified future date
deferred revenue
it reflects revenue that has not been earned
You received revenue but haven’t provided service or product
bonds payable
long term debt
formal promise/agreement to pay interest
what are the elements of shareholder’s equity
Contributed Capital
Retained Earnings
contributed capital
Investments by investors into the company to get ownership of company
retained earnings
money company keeps for reinvestment
what is an asset that is not easily liquid
an asset that is not easily converted into cash
Dividends payable are liabilities or part of shareholders’ equity in the financial position statement?
liabilities
what are dividends payable??
Dividends payable represents the amount of dividends that has not been paid yet to the company’s shareholders
what are retained earnings?
retained earnings represent the amount of earnings that has accumulated over time but has not been distributed to shareholders.
used for reinvestment
