Exam 1, Chapter 1 - Concepts Flashcards
Equation:
Assets
Assets = Liabilities + Equites
Define:
Assets
Resources to benefit a company that a company controls
Something that you have right now that you will benefit from in the future
Define:
Liabilities
Debts owed to creditors, creditors claim to a business
Define:
Equity
Owner’s claim to assets
Answer:
Equity increases with ___(a)___ and ___(b)___.
a. Capital contribution
b. Revenue
Answer:
Equity decreases with ___(a)___ and ___(b)___.
a. Expenses
b. Distributions to owners
Equation:
Income Statement
Net Income/Loss = Revenues - Expenses
Answer:
The net income/loss used on the ___(a)___ is obtained from the ___(b)___
a. Statement of retained earnings
b. Income Statement
Equation:
Statement of Retained Earnings
Retained Earnings = Net Income/Loss - Dividends
Equation:
Balance Sheet
Assets = Liabilities + Equity (shareholder equity)
Equation:
Statement of Cash Flows
Cash Receipts + Cash Payments
List:
4 Financial statements required by SEC
- Balance Sheet
- Income Statement
- Statement of Shareholder Equity
- Statement of Cash Flows
List:
3 Elements of a Balance Sheet
- Assets
- Liability
- Shareholders’ Equity
Answer:
Regarding the balance sheet, every year the total ___(a)___ must be equal to ___(b)___
a. Assets
b. Total Liabilities plus Shareholders’ Equity
Answer:
In the income statement, the company tells you ___(a)___, ___(b)___, and ___(c)___
a. How much revenue they earned last year
b. How much expense occurred last year
c. What was the net income (positive or negative)
Answer:
In the statement of shareholders’ equity, the company tells you ______
about any changes in shareholders’ interest
Answer:
The balance sheet is a ___(a)___ of the company’s ___(b)___ at a given ___(c)___
a. snapshot
b. financial position
c. point in time
Answer:
On the balance sheet, all of the assets and liabilities have to be listed in order of ______
liquidity
Define:
Liquidity
How quickly a certain item can be converted into cash
Answer:
What is the most liquid asset?
cash
List:
Subsections of assets on the balance sheet
- current assets
2. Non current assets
List:
Subsections of liabilities on the balance sheet
- current liabilities
2. Non current liabilities
Answer:
On the balance sheet, ___(a)___ have to be listed in front of ___(b)___, and ___(c)___ have to be listed ahead of ___(d)___
a. current liabilities
b. concurrent liabilities
c. current assets
d. concurrent assets
Answer:
On the balance sheet, the left side of the equation, the ___(a)___ represent all the ___(b)___
a. assets
b. economic resources the company has right now
Answer:
The right hand side of the balance sheet tells you ________
the source of the company’s assets
Answer:
Shareholder equity is also called ___(a)___ or ___(b)___
a. net asset
b. residual interest
Define:
Residual Interest
The remainder of assets after liquidation (ex - bankruptcy). Shareholders can claim the residual interest
Define:
Accounts Receivable
Claims held against customers and others for money for goods or services
Asset
Asset/Liability/Expense:
Accounts receivable
Asset because it is a claim to cash in the future
Define:
Prepaid Expense
Payment made for goods or services prior to receiving the goods or services
Asset/Liability/Expense:
Prepaid Expense
Asset because it gives you the title to enjoy the goods or services in the future
List:
Examples of Non-Current Assets
- Long Term Investments
- Property
- Plant
- Equipment
- Intangible Asset
Define:
Non-Current Asset
Asset that will give you a benefit for longer than one (1) year, for example, you use equipment for longer than a year
List:
Types of Liabilities
- Current Liabilities
2. Long Term Liabilities (non current)
Define:
Current Liabilities
Liabilities that must be paid off within the current year or within one (1) year
Define:
Long Term Liabilities
Liabilities you expect to pay off over a period of time, beyond the current year
Asset/Liability/Expense:
Deferred Revenue
Liabilities because the goods or services are unearned
Ex - deposit for catering services prior to catering event, the deposit is deferred revenue and is a liability until the service is performed and the revenue is earned. It is a service owed
Define:
Deferred Revenue
Revenue that has not yet been earned, such as a deposit for a service before the service has been earned
Also known as unearned revenue
It is a liability
Answer:
What is another term for deferred revenue?
Unearned revenue
Answer:
The statement of shareholders’ equity records ______
any changes in shareholders equity
Answer:
Issuing stock is an example of ___(a)___ because you are ___(b)___ which will ___(c)___
a. a change in shareholders’ equity
b. actually inviting new shareholders to the company
c. increase the total shareholders interest in the company
Answer:
If you earn net income, which is ___(a)___ you ___(b)___ shareholder interest
a. positive
b. increase
Answer:
If you pay dividends, ___(a)___ are happy, however it will ___(b)___ their interest in the company, so we prepare the financial statement from the perspective of the ___(c)____
a. individual shareholders
b. decrease
c. company
Answer:
Dividends only appear on which type of financial statement?
Statement of Shareholders’ Equity
Answer:
Income statement shows the company’s ___(a)___ over a ___(b)___
a. performance
b. period (quarter, year, etc.)
List:
Four Title Elements of Income Statement
- Revenue
- Expenses (from major operations)
- Gains and Losses (from miscellaneous)
- Accidental Transactions
Answer:
On the income statement, expenses are from ______
the major operations
Answer:
On the income statement, gains and losses are from ______
the miscellaneous
Answer:
The income shown on the income statement could be ___(a)___ or ___(b)___
a. positive
b. negative
Answer:
The statement of cash flows provides information about ___(a)___ and all of the information on the statement is about ___(b)___
a. cash
b. cash
Asset/Liability/Equity:
Cash
Asset
Answer:
The statement of cash flows explains the differences in ___(a)___ between ___(b)___ and ___(c)___
a. cash
b. last year
c. this year
Answer:
Because cash is a/an ___(a)___, it is part of the ___(b)___, so the ___(c)___ and the ___(d)___ are connect to on another
a. asset
b. balance sheet
c. balance sheet
d. statement of cash flows
Answer:
The statement of shareholders’ equity contains a ___(a)___, which is directly borrowed from the ___(b)___
a. net income number
b. income statement
Answer:
The statement of shareholders’ equity explains any changes in ___(a)___, and that information is also reflected in the ___(b)___ of the ___(c)___
a. shareholder interest
b. equity section
c. balance sheet
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