Chapter 2 Flashcards
Economic resources presently controlled by the company that have measurable value and are expected to benefit the company by producing cash inflows or reducing cash outflows in the future.
Assets.
Measurable amounts that the company owes to creditors.
Liabilities
Owner’s claim to the business resources.
Stockholder’s Equity
Financing and Investing Activities Continued
(1) A company always document its activities
(2) A company always receives something and gives something
(3) A dollar amount is determined for each exchange.
Exchanges involving assets, liabilities, and stockholder’s equity that you can see between the company and someone else.
External Exchanges
Events occurring within the company, for example, using some assets to create an inventory product.
Internal Events
A systematic accounting process is used to capture and report the financial effects of a company’s transactions.
Study the Accounting Methods
A _______ is a business activity that affects the basic accounting equation.
Transaction
Every transaction has at lease two effects on the basic accounting equation.
Duality of Effects
Assets must equal liabilities plus stockholder’s equity for every accounting transaction
Assets = Liabilities + Stockholder’s Equity
A name given to each item exchanged.
Account Titles
True or False: The chart of accounts is tailored to each company’s business, so although some account titles are common across all companies others may be unique to a particular company.
True
The Debit/Credit Framework
(1) Accounts increase on the same side as they appear in A= L + SE
(2) Left is debit (dr), right is credit (cr)
(3) The normal balance for an account is the side on which it increases.
Will be used up or turned into cash within the next 12 months of the balance sheet date.
Current Assets
Debts and other obligations that will be paid or fulfilled within 12 months of the balance sheet date.
Current Liabilities
