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Bus - 20N Survey of Accounting > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

name of the 4 financial statements

A

balance sheet
income statement
statement of change of stockholder´s equity
statemenet of cash flow

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2
Q

what does the balance sheet include

A

assets = liabilities + common stock + ending retained earnings

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3
Q

what does an income statement include

A

revenue - expenses = Net income (loss)

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4
Q

what does a statment of change of stockholder´s equity include

A

beginning retained earnings + net income - dividends + beginning common stock + additional contribution received from owners = total stockholder´s equity

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5
Q

what does a statement of cash flow include

A

cash inflow and outflow of operations, investments and financial actions

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6
Q

what are the two formats to prepare an income statement

A

simple income statement

multiple step income statement

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7
Q

what is the difference between balance sheets and the other 3 financial statements

A

balance sheet shows assets, liabilites and stockholder´s equity at one specific date
the other 3 finanical statements show a beginning and ending period

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8
Q

what does on account mean

A

buying or selling something on credit

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9
Q

what are account payable

A

amounts that the company owes to a vendor

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10
Q

und which category of a balance sheet do accounts payable fall

A

liabilities

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11
Q

what are credit payments called to somebody else except a vendor

A

other payables

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12
Q

what is prepaid insurance

A

an insurance the comapny paid in advance for but didn´t make use of it yet

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13
Q

what are accounts receivable

A

amounts customers owe a company for good purchased on credit

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14
Q

what does adjusting the books in relation to an finincail statement mean

A

make changes in accounting records, just before fin. statements are prepared

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15
Q

why do adjustments need to be made

A

to reflect the correct financial conditions of a company at the time

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16
Q

what part of retained earnings is not included in an income statement

A

devidends

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17
Q

what are the categoeries as which transactions are listed in a statement of cash flow

A

operating
investing
financing

18
Q

what are dividends categorized as in a statement of cash flow

A

financing cash flow

19
Q

what is part of a complete fniancial statement in addition to 4 statements

A

notes

20
Q

what are current assets

A

assets that are used and turned into cash within a year

21
Q

what is liquidity

A

measure of how quickly assets can be turned into cash

22
Q

what are noncurrent assets

A

assets that a company will not be used within a year

also called long-tern assets

23
Q

current liabilities

A

liabilities the company will pay off within the next fiscial year

24
Q

noncurrent - longturn liabilites

A

paying off of liabilities takes longer than a year

25
Q

what does a classified balance sheet show

A

subtotals for many items (e.g. current assets and liabilities)

26
Q

what are the two ways owners can create equity in a company

A

making a capital contribution - buying stock

create profit - increases equity

27
Q

what principle does accrual accounting follow

A

matching principle

28
Q

what does accrual accounting refer to

A

companies recognize revenue whne it is earned and expences when they are incurred - no matter when the cash is receiverd or disturbed

29
Q

what are the two different types of accrual basis accounting

A

accruals

deferrals

30
Q

what can be understood as accrual

A

action first - money later

revenue is earned or expense is incurred before exchange of cash

31
Q

what form of assets is often recorded related to accruals

A

accounts receivable

32
Q

what are deferrals

A

money first - action later

exchange of cash before revenue is earned or expense is incurred

33
Q

example for a deferral

A

payment of insurance

34
Q

what is another type of accounting called

A

cash basis accounting

35
Q

main idea of cash basis accounting

A

revenue only recognized when cash is collected

expenses are recognized when cash is disbursed

36
Q

problem with cash basis accounting

A

it is not accepted by GAAP and SEC

37
Q

most common ratio to measure company´s short term obligations

A

current ratio

38
Q

equation of current ratio

A

current assets/current liabilities

39
Q

internal controls

A

company´s policies to protect assets and to ensure accuracy of accounting records

40
Q

major contol types in company´s accounting system

A

preventive control - stop errors before they happen
detective control - find errors before they damage anything
corrective control - fix errors

Bus - 20N Survey of Accounting (11 decks)

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