chapter 12.2 financial records and financial statements Flashcards
the value of the owner’s investment in the business
owner’s equity
contains info on all employees of the company, their compensation and benefits
payroll records
used to record and analyze the financial performance of a business
financial records
the value of the buildings and equipment owned by a business can be determined in the
- inventory records
- asset records
- records of accounts
- tax records
asset records
what are the two common divisions of assets?
current assets
long term assets (aka fixed assets)
how do business managers use the balance sheet and income statement?
to determine how the business is performing
debts that continue for more than one year
long term liabilities
lists all cash received and spent by the business
cash records
budgets reflect the financial ____ of businesses. to determine if those ____ have resulted in success, financial records are needed.
budgets reflect the financial plans of businesses. to determine if those plans have resulted in success, financial records are needed.
before computers, preparation and maintenance of financial records were done using ____ documents that had to be done by hand then saved and protected
before computers, preparation and maintenance of financial records were done using paper documents that had to be done by hand then saved and protected
shows all purchases and sales made using credit
records of accounts
what are some sources of income?
- the sale of products and services
- interest earned from investments
what is reported on a balance sheet?
assets, liabilities and owner’s equity
identifies customers that made purchases using credit and the status of each account
accounts receivable record
when does a business have a net loss?
when expenses are greater than income
what are some expenses?
- rent
- supplies
- inventory
- payroll
- utilities (electric, gas)
reports that sum up the financial performance of a business
financial statements
how often is an income statement (IS) prepared?
every 6 months or 1 year
What are the 3 most important elements of a company’s financial strength?
assets, liabilities and owner’s equity
report that shows the revenue, expenses and net income or loss from operations for a specific period - normally covers 6 months or a year
income statement
true or false
the two most common and important financial records for businesses are the income statement and the balance sheet
true
examples of long term liabilites
loans for land, buildings or expensive equipment
current liablities are amounts owed that will be paid in less than
- one month
- six months
- one year
- five years
one year
what is an I.S.?
- the income statement
- reports the revenue, expenses and net income or loss from operation for a specific period
the assets with a life span of more than one year
long term assets/fixed assets
what does owner’s equity show us on the balance sheet?
shows how much the business is worth on the date the balance sheet is prepared
shows the type of quantity of resources and products on hand along with the current value of each
inventory records
shows all taxes collected, owed and paid
tax records
when does a business have a net income?
when revenue is greater than expenses
_____ is changing the way financial info is collected. Most info is mow collected using point of production and point of sale technolody like scanners, touch screens and pda’s
technology
include cash and those items that can be easily converted to cash like inventory and accounts receivable
current assets
What are some types of records maintained other than the income statement and balance sheet?
- asset records
- depreciation records
- inventory records
- records of accounts (accounts payable/accounts receivable)
- cash records
- payroll records
- tax records
business managers ____ financial statements carefully to determine how their businesses are performing
business managers review financial statements carefully to determine how their businesses are performing
what are the two records of accounts reports?
accounts payable
accounts receivable
the current value of investments made by the owners of a business can be found in the
- income statement
- balance sheet
- tax records
- record of accounts
balance sheet
identifies the companies from which credit purchases were made and the amounts purchased, paid and owed
accounts payable record
as a part of payroll, employers must _____ a percentage of employees’ salaries and wages for income taxes, social security and medicare taxes and sometimes unemployment compensation insurance
as part of payroll, employers must withhold a percentage of employees’ salaries or wages for income taxes, social security and medicare taxes and sometimes unemployment compensation insurance
what a company owes
liabilities
what the company owns
assets
what are the two types of liabilites
current liabilities
long term liabilities
liabilities that will be paid within a year
current liabilities
lists the assets, liabilites, and owner’s equity for a specific date
balance sheet
identifies the buildings and equipment owned by the business, their original and current value and the amount owed if money was borrowed to purchase the assets
asset records
how often is a balance sheet prepared?
every 6 months or 1 time per year
in addition to the taxes withheld from employees, _____ must pay the employer’s share of social security and medicare taxes and other taxes that are calculated as a percentage of payroll
businesses
business now use ______ financial systems that have templates for each financial record. The software completes the necessary mathematical calculations needed.
computerized
examples of current liabilities
- payments owed to banks for short term loans
- payments due to supplies for inventory purchases, supplies and inexpensive equipment
shows the amount assets have decreased in value due to their age and use
depreciation records
business records have to be _____ and should be kept up to date
business records have to be accurate and should be kept up to date
