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ACCT 1001 Understanding and Using Financial Accounting > Chapter 1 - Overview of Corporate Financial Reporting > Flashcards

Chapter 1 - Overview of Corporate Financial Reporting Flashcards

1
Q

What is Financial Accounting

A

Financial accounting is the process by which information on the transactions of an organization are Captured, Analyzed and Used to Report to decision makers outside of the organization’s management team.

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2
Q

What are financial statement users

A

External decision makers that use financial statements to make decisions about the organization

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3
Q

What is a Shareholder

A

Someone who has some level of ownership in an organization

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4
Q

What are creditors

A

Persons who have lent money to the organization

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5
Q

Who is a part of management

A

Users inside the organization

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6
Q

What is managerial accounting

A

An organization’s financial information that is never shared with those outside of the organization

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7
Q

What are the two broad types of accounting reports prepared by management

A

Reports for internal use only (for use by management), known as managerial accounting

Reports for external use (for use by others outside the organization), financial accounting

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8
Q

What is a Financial Statement

A

Management’s reports to the company’s owners that are produced at the end of each accounting period, such as every quarter or every year

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9
Q

What does MD&A stand for?

A

Management discussion and analysis (MD&A)

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10
Q

List all the users of Financial Statement Information

A

Internal: Management
External:
Stakeholders, the board of directors and potential investors
Creditors (financial institutions and suppliers)
Regulators (stock exchange)
Taxing Authorities (CRA)
Other corporations, including competitors
Securities (stock) analysts
Credit-rating agencies
Labour unions
Journalists

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11
Q

When is a Board of Directors elected

A

In a situation where there are numerous shareholders in an organization

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12
Q

What is the responsibility of the Board of Directors

A

To manage the management team

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13
Q

Who can be considered a creditor

A

Financial institutions and other lenders, suppliers, employees, various levels of government

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14
Q

What information about a company would a creditor be interested in?

A

Cash flow, Company’s assets, other factors that can influence their ability to repay their credit

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15
Q

Are employees technically considered a creditor

A

Yes as they do not immediately get paid upon completion of work but instead are paid at a later agreed upon date

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16
Q

What are common shares?

A

Shares given to shareholders in exchange for cash or other assets

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17
Q

If a corporation fails are the shareholders liable

A

Limited to their investment in the corporation and therefore are not personally liable

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18
Q

What are the two main types of corporations?

A

Publicly traded companies and privately held companies

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19
Q

How often are financial statements usually prepared for shareholders

A

On a quarterly basis (every three months)

TheOntario Securities Commission (OSC) which regulates the Toronto Stock Exchange (TSX) requires Canadian public companies listed on the TSX to submit annual financial statements within 90 days after the company’s fiscal year end.

The OSC also requires companies listed on the TSX to prepare quarterly financial statemetns and submit them within 45 days of the end of each quarter.

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20
Q

List the features of a Corporation in:
Number of owners:
Separate legal entity:
Owner’s responsible for debts of the business:
Taxes:
Costs to establish and maintain:
Do they have to make their financial information available

A

Single or multiple
Yes
Only up to the investment amount
Seperate from personal
High cost
Yes

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21
Q

List the features of a Proprietorship in:
Number of owners:
Separate legal entity:
Owner’s responsible for debts of the business:
Taxes:
Costs to establish and maintain:
Do they have to make their financial information available

A

Single
No
Yes
Filed as income
Low
No

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22
Q

List the features of a Partnership in:
Number of owners:
Separate legal entity:
Owner’s responsible for debts of the business:
Taxes:
Costs to establish and maintain:
Do they have to make their financial information available

A

Multiple
No
Yes
Filed as income
Medium
No

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23
Q

What are the three categories of business activities?

A

Investing activities > Operating activities > Financing Activities >

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24
Q

What are the two primary sources companies obtain funding from

A

Investors and Creditors

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25
Q

Shareholders purchase shares seeking to generate a return in two ways

A

Through dividends and capital appreciation

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26
Q

What do creditors seek when lending money

A

Interest and return of capital

27
Q

What are profits that are kept or retained by the company known as

A

Retained earnings

28
Q

List the inflows and outflows of financing activities

A

Inflows: Taking out a loan
Issuing shares
Outflows: Repaying loan principal
Paying dividends

29
Q

What are the two types of investments

A

Short-term and long-term

30
Q

What are short-term investments

A

Investments related to the day-to-day operations of the business and are therefore considered operating activities

31
Q

What are long-term investments

A

Purchase of property, plant, and equipment that can be used to produce goods and services for sale
Companies also invest into the shares of other companies

32
Q

List the inflows and outflows of investing activities

A

Inflows:
Proceeds from the sale of property, plant and equipment
Proceeds from the sale of shares of other companies
Outflows:
Purchase of property, plant and equipment
Purchase of shares of other companies

33
Q

List the inflows and outflows of operating activities

A

Inflows:
Sales to customers
Collections of amounts owed by customers
Outflows:
Purchase of inventory
Payments of amounts owed to suppliers
Payments of expenses such as wages, rent and interest
Payments of taxes owed to the government

34
Q

Out of the three categories of business activates which is considered the most crucial

A

Operating activities

35
Q

List the 5 components of the Financial Statements

A

Statement of Income, Statement of changes in equity, Statement of financial position, Statement of cash flows, Notes to the financial statement

36
Q

What is the objective of the statement of income and what is the sum called

A

Present the results of the company’s operating activities, for a month, quarter or year
The sum of these activities is the company’s profit

37
Q

What are other terms for profit

A

net income, net earnings, earnings

38
Q

What are other names for the Statement of Income

A

Statement of operations, Statement of net earnings, Statement of earnings, Statement of profit or loss

39
Q

What does income include and what is its definition

A

Both revenues and gains

Increase in economic resources other than those contributed by shareholders

40
Q

What are Gains

A

Resources that flow into the company from activities that are outside its normal course of operations

41
Q

What are expenses defined as

A

Decreases in economic resources, other than distributions to shareholders

42
Q

What are losses

A

Resources that flow out of the company from activities that are outside its normal course of operations

43
Q

What is a consolidated financial statement?

A

A financial statement that consolidates the financial information for the main or parent company plus the financial information of all the other companies that it controls known as subsidiary companies

44
Q

What is comparative information

A

Results of both the current and preceding period

45
Q

Earnings per share

A

Net income divided by the average number of common shares that are outstanding

46
Q

What is the statement of changes in equity

A

Provides details on how each component of shareholder’s equity changed during the period

47
Q

What are retained earnings

A

earnings or income that have been retained by the company and reinvested into the business

48
Q

What is share capital

A

The funds received when the shares were initially issued by the company to the investors

49
Q

What is the statement of financial position

A

Known as the balance sheet.

Presents the company’s financial status at a particular point in time

50
Q

What is a classified statement of financial position

A

A statement of financial position in which the assets and liabilities are listed in liquidity order (how long it would take to turn them into cash) and are categorized into current (short-term) and non-current (long-term) sections

51
Q

What items are considered current in terms of liquidity

A

Items that will be received, realized or consumed or else settled or paid within 12 months from the year end

52
Q

What items are considered non-current in terms of liquidity

A

Items that will not be received, realized or consumer or else settled or paid within 12 months from the year end

53
Q

What is working capital

A

One of the most common measures or liquidity, quantified as the difference between a company’s current assets and current liabilities

Working Capital = Current Assets - Current Liabilities

54
Q

What is the accounting equation

A

Assets = Liabilities + Shareholder’s Equity

55
Q

Characteristics of an asset

A

It is an economic resource controlled by an entity
The company expects future economic benefits from the use or sale of the resource
The event that gave the company control of the economic resource has already happened

56
Q

What are intangible assets

A

Assets that lack physical form

57
Q

What are the characteristics of a liability

A

It is present obligation of the entity
The company expects to settle it through an outflow of economic resources
The obligation results from an event that has already happened

58
Q

List of common liabilities found on a statement of financial position

A

Current:
Bank indebtedness
Accounts payable
Deferred revenue
Dividends payable
Accrued liabilities
Income taxes payable

Non current liabilities:
Notes payable
Lease liabilities
Long-term debt
Deferred Income taxes

59
Q

The accounting equation for shareholder’s equity

A

Assets - Liabilities = Shareholder’ Equity (Net Assets)

60
Q

What does the statement of cash flow present

A

It presents the flows of cash related to the three categories of business activities

61
Q

What are notes to the financial statements used for

A

Management uses there notes to give more detail about specific items on the financial statement

62
Q

What are the IFRS

A

International Financials Reporting Standards (IFRS)

63
Q
A

ACCT 1001 Understanding and Using Financial Accounting (1 decks)

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