Chapter 1 Hw Flashcards
Service revenue
income statement
Equipment
balance sheet
Advertising expense
income statement
Accounts receivable
balance sheet
Common stock
balance sheet
Interest payable
balance sheet
Cost of renting property: .
Expense
Truck purchased: .
Asset
Notes payable: .
Liabilities
Issuance of ownership shares:
Common stock.
Amount earned from performing service:
Revenue
Amounts owed to suppliers:
Liabilities
The statement of cash flows would disclose the payment of a dividend
in the financing activities section.
what things are stockholders’ equity
common stock and retained earnings
How to calculate retained earnings statement?
net income - dividend
List assets in order of liquidity
cash -> accounts receivable -> supplies -> equipment
The basic accounting equation is
assets = liabilities + stockholders’ equity
[Liability or Not Liability] cash
Not Liability
[Liability or Not Liability] Accounts payable
Liability
[Liability or Not Liability] Dividends
Not Liability
[Liability or Not Liability] Accounts receivable
Not Liability
[Liability or Not Liability] Supplies
Not Liability
[Liability or Not Liability] Equipment
Not Liability
[Liability or Not Liability] Salaries and wages payable
Liability
[Liability or Not Liability] Service revenue
Not Liability
[Liability or Not Liability] Rent expense
Not Liability
[Affects and Account Title] Costs incurred for advertising.
Affects: Expense
Account Title: Advertising expense
[Affects and Account Title] Cash received for services performed.
Affects: revenue
Account Title: service revenue
[Affects and Account Title] Costs incurred for insurance.
Affects: expense
Account Title: insurance expense
[Affects and Account Title] Amounts paid to employees.
Affects: expense
Account Title: salaries and wages expense
[Affects and Account Title] Cash distributed to stockholders.
Affects: dividends
Account Title: not applicable
[Affects and Account Title] Cash received in exchange for allowing the use of the company’s building.
Affects: revenue
Account Title: rent revenue
[Affects and Account Title] Costs incurred for utilities used.
Affects: expense
Account Title: utilities expense
[Affects and Account Title] Cash purchase of equipment.
Affects: does not affect stockholders’ equity
Account Title: not applicable
[Affects and Account Title] Cash received from investors.
Affects: common stock
Account Title: not applicable
Income Statement
Reports success or failure of the company’s operations during the period of the statement.
Summarizes all revenue and expenses for period (month, quarter, or year).
If revenues exceed expenses, the result is a net income. If expenses exceed revenue, the result is a net loss.
Retained Earnings Statement
Change in ownership based on fiscal period information.
Indicates amount paid out in dividends and amount of net income or net loss for period.
Shows changes in retained earnings balance during period covered by statement.
Time period is the same as that covered by income statement.
Assets
Assets — resources owned by the business which are expected to provide a value or service to the business at some future point in time.
Liabilities
Liabilities — creditors claims (obligations or debts of the business) on total assets for resources or services provided to the business in the past.
Stockholders’ Equity
Stockholders’ Equity — ownership claim on total assets.
Balance Sheet
Balance Sheet
Shows relationship between assets, liabilities, and stockholders’ equity at a particular date.
In equation form
Assets = Liabilities + Stockholders’ Equity
Referred to as the basic accounting equation
Assets = Liabilities + Stockholders Equity is referred to what?
basic accounting equation
Statement of Cash Flows
Reports cash inflows and outflows resulting from financing, investing, and operating activities during the period.
Reports the cash effects of a company’s operations for a period of time.
Shows cash increases and decreases from investing and financing activities.
Indicates increase or decrease in cash balance as well as ending cash balance.
INTERRELATIONSHIPS OF STATEMENTS
Net income from the income statement is added to beginning retained earnings to determine ending retained earnings.
Ending retained earnings (reported on the retained earnings statement) is also reported on the balance sheet.
The ending amount of cash shown on the statement of cash flows must agree with the amount of cash on the balance sheet.
income statement
revenues - expenses = net income or net loss
retained earning statement
retained earnings, beginning add net income - dividends = retained earnings, ending
balance sheet
assets cash liabilities stockholders equity common stock retained earning
statement of cash flows
cash flows
net increase in cash
cash at the beginning of period
cash at end of period
Management Discussion and Analysis or annual reports
Covers various financial aspects of a company
Ability to pay near-term obligations
Ability to fund operations and expansion
Result of operations
Notes to Financial Statements
Clarify information presented in the financial statements.
Describe accounting policies or explain uncertainties and contingencies.
Auditor’s Report
- Auditor, a CPA, a professional accountant, who conducts an independent examination of the financial accounting data presented by a company.
- Auditor gives an “unqualified” opinion, meaning the auditor has no reservations concerning the material validity of the presented information, if the financial statements present the financial position, results of operations, and cash flows in accordance with accepted accounting standards.
income statement
Revenue during the period.
balance sheet
Supplies on hand at the end of the year.
statement of cash flows
Cash received from issuing new bonds during the period.
balance sheet
Total debts outstanding at the end of the period.
Auditor’s opinion
An expression about whether financial statements conform with generally accepted accounting principles.
Corporation
A business that raises money by issuing shares of stock.
Common stock
The portion of stockholders’ equity that results from receiving cash from investors.
Accounts payable
Obligations to suppliers of goods.
Account receivable
Amounts due from customers.
Creditor
A party to whom a business owes money.
Stockholder
A party that invests in common stock.
Partnership
A business that is owned jointly by two or more individuals but does not issue stock.
