Chapter 9 Flashcards
Statement of Financial Position
Shows a company’s financial position at a specific date (usually the last day of the fiscal year)
Define Assets, Equity and Liabilities. Assets Calculation
Asset: the the company owns and what is owing to it
Equity: represents the shareholder’s interest in the company
Liability: what the company owes
Assets = Equity + Liabilities
Assets: Current Assets
Assets that are EXPECTED to be converted to cash within one year (although this conversation may be indirect)
Assets: Fixed Assets
Assets that are expected to last longer than one year. Long-term assets used in the day-to-day operations of a company to produce the goods/services the company sells. (They are not intended to be sold)
Liabilities
Classified as either current of long term, with the same one year dividing line
Long-Term Liabilities
Liabilities not likely to be paid off within one year. (Ex. Bonds, or a term loan made by a lender)
Shareholder’s Equity
The amount contributed to the financing of the company by shareholders over time by:
- buying shares from the company when they were first issued on the primary market
- retained earnings: a company’s annual profits are not distributed to shareholders and rather reinvested in the company to continue to accumulate in shareholder’s equity over time
Statement of Comprehensive Income
Presents revenues and expenses over a specific period
Statement of Changes in Eauity
Link between the Statement if Comprehensive Income (yearly earnings) and the Statement of Financial Position (retained earnings)
4 Sections of the Canadian Auditor’s Report
1: The introductory section identifies the financial statements covered by the auditor’s report
2: Outlines the financial statement responsibilities or management
3: Outlines the auditor’s responsibility and states how an audit was conducted
4: Gives the auditor’s opinion on the financial statements of the company being audited
