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Financial Acctng > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Objective of Financial Accounting (4)

A

Identifying, recording, reporting, and analyzing economic transactions to help interested parties make decisions.

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2
Q

Financial verses Managerial Accounting

A

financial: aimed at serving external users

managerial: aimed at serving internal users

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3
Q

Users of Financial vs managerial accounting

A

Financial: shareholders, lenders

Managerial: purchasing, marketing, CEOs, etc

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4
Q

Primary Users of financial information

A

Internal and External users

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5
Q

Internal Vs External Users

A

internal: directly manage business ops

External: don’t run business and have limited access to acct info (lenders and shareholders)

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6
Q

Components of the Fraud Triangle

A

opportunity, pressure, rationalization

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7
Q

Purpose of internal controls within a company

A

To help prevent fraud

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8
Q

Define Ethics

A

codes of conduct by which actions are judged as good or bad

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9
Q

Measurement/Cost Principle

A

Accounting info based on actual cost.

-cash given = cash

-Assets = the value of the asset

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10
Q

Revenue Recognition Principle

A

Record revenue in the period in which it’s earned

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11
Q

Expense recognition principle (matching principle)

A

Match expenses with revenues in the period business tries to make those revenues

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12
Q

Full Disclosure Principle

A

A company reports details behind financial statements that would impact users’ decisions.

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13
Q

Basic Accounting Equation (Balance Sheet Equation) (BALE)

A

Assets = Liabilities + Stockholders’ Equity (they balance)

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14
Q

What are the four financial Statements in the order they are prepared?

A
  1. Income Statement
  2. Statement of Retained Earnings
  3. Balance Sheet
  4. Statement of Cash Flows
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15
Q

How do you compute retained earnings? (RID)

A

Beginning Balance of Retained Earnings PLUS or minus Net income MINUS Dividends declared EQUALS Ending Balance ofa Retained Earning

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16
Q

How do you compute the net income of a company?

A

revenues(income), minus expenses

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17
Q

How do you compute a company’s Return on Assets? (ROA)

-average total assets
-net income

A

net income divided by average total assets

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18
Q

What is included in an Income Statement (RISEN)

A

Revenues

MINUS Expenses

Net Income or Loss

19
Q

When is an expense recorded?

A

After it is used

20
Q

What account does pre paid expenses fall into?

A

Asset account

21
Q

double-entry accounting

A

The recording of debit and credit parts of a transaction

22
Q

Define account balance

A

the difference between the total debits and the total credits in an account

23
Q

General Ledger

A

record containing all accounts - amounts included - for a business.

24
Q

Steps in the Accounting Cycle (9 steps)

A
  1. Analyze business transactions
  2. Journalize the transactions
  3. Post to ledger accounts
  4. trial balance
  5. Journalize and post adjusting entries
  6. adjusted trial balance
  7. Prepare financial statements
  8. Journalize and post closing entries
  9. trial balance
25
Q

What are the preliminary financial statements? (Source)

A

initial document that serves as a basis for the actual statements

26
Q

debt ratio (equation)

A

total liabilities/total assets

27
Q

par value stock

A

capital stock that has been assigned a value per share in the corporate charter

28
Q

stated value stock

A

No-par stock assigned a stated value per share

29
Q

Authorized shares

A

shares of common stock that a firm’s corporate charter allows it to sell

30
Q

issued shares

A

represent the total number of shares of stock that have been sold (includes those owned by company)

31
Q

treasury shares

A

Issued shares that have been repurchased by the corporation. Treasury shares may not be voted by the corporation. Treasury shares may be resold by the corporation.

32
Q

outstanding shares

A

shares that are owned by all stockholders (does not include company owned shares)

33
Q

Rights of Shareholders (5)

A
  1. to sell their stock
  2. vote in the general meeting
  3. know certain information about the company
  4. can sue the managers for (alleged) misconduct
  5. Certain residual rights in case of the corporation’s liquidation
34
Q

Basic Earnings Per Share (EPS)

-basic weighted shares outstanding
-net income

A

Net Income / Basic Weighted Average Shares Outstanding

35
Q

Price/Earnings (P/E) Ratio

-earnings per share
-market price per share

A

market price per share/earnings per share

36
Q

Components of Statement of Cash Flows (FOI)

A

operating activities, investing activities, financing activities

37
Q

Define operating activities

A

activities that involve buying and selling goods and expenses related to admin

38
Q

Define Investing Activities

A

activities that involve buying and selling long term assets, notes receivable and other cash investments are included

39
Q

Define Financing Activities

A

transactions with owners and creditors that include obtaining cash from issuing debt, repaying amounts borrowed, and getting and giving cash to owners.

40
Q

examples of operating activities (inflow and outflow)

A

Inflow: cash from sales, cash for interest revenue and dividend revenue

Outflow: operating and salary expenses, taxes, interest owed, paying suppliers

41
Q

examples of investing activities (inflow and outflow)

A

Inflow: selling assets, collecting principal on notes receivable, selling investments

Outflow: buying assets, buying investments, loaning money for notes rec.

42
Q

examples of financing activities (Inflow and outflow)

A

Inflow: issuing stock,. contributions by owners

Outflow: paying dividends, withdrawls from owners, paying off notes payable

43
Q

no par value stock

A

a stock not assigned an amount per share by the corporate charter

Financial Acctng (4 decks)

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