Chapter 3 Flashcards
_____ Activities: Acquire capital from investors and creditors
Financial
______ Activities: Invest in productive resources (ie. equipment)
Investing
_____ Activities: generate wealth (manufacturing and selling tv sets)
Operating
Assets=
Liability + Equity
“Probable future economic benefits obtained or controlled by a business”
Asset
Probable future sacrifice of future economic benefits
Liability
Residual interest in the assets of a business that remains after deducting liabilities (Net assets, net worth)
Owners Equity
Net Income =
Revenue - Expenses + Gains - Losses
Revenue -Expenses + Gains - Losses=
Net Income
increase in owner’s equity resulting from central operating activities
revenue
decrease in owner’s equity resulting from central operating activities
expense
increase in owners’ equity resulting from peripheral activities
gain
decrease in owners’ equity resulting from peripheral activities
loss
______ summarizes financial position as of a point in time:
Balance Sheet
______ summarizes financial performance for a period of time
Income Statement
______ summarizes cash inflows and outflows for a period of time
Cash Flow statement, bitch
Net Cash Flows=
Operating +/- Investing +/- Financing net cash flows
Cash Flows consumed or generated by sales of goods and services
Operating
cash flows consumed or generated by acquisition or disposition of non-current assets
Investing
Cash flows provided by or paid to capital providers
Financing
The balance sheet and income statement are linked via
RETAINED EARNINGS BICHHHH!!!!
Assets = Liabilities + CC + RE where CC= and RE=?
CC= Contributed Capital RE= Retained Earnings
Asset:
Debit or Credit?
Debit
Expense:
Debit or Credit?
Debit
Liability:
Debit or Credit?
Credit
Equity:
Debit or Credit?
Credit
Revenue:
Debit or Credit?
Credit
Accrual Accounting:
reports on effects of events that ultimately have cash effect
Cash Flow accounting:
Reports cash receipts and disbursements as they occur.
Adjusting Entries are required for: (3)
- Recognizing revenue for the period
- Matching expenses with revenues they helped generate
- Adjusting entries are required every time financial statements are prepared to comply with GAAP
