EXAM I Flashcards
1
Q
FASB
A
Financial accounting standards board, non governmental, responsible for creating accounting standards
2
Q
Accounting equation
A
Assets = liability + owners equity
3
Q
Two components of Owners Equity
A
Retained Earnings and Common Stock
4
Q
What makes up Retained earnings
A
Net income - dividends
5
Q
What makes up net income
A
Revenue - expenses
6
Q
Contra asset
A
Accumulated depreciation (+ -) buddy accounts with depreciation expense
7
Q
A = L + OE account balances
A
(+ -) = (- +) + ( - +)
8
Q
Types of business entities
A
- Sole proprietorship (work for yourself, accumulation of capital is difficult)
- Partnership (less workload, 50% 50% representation)
- Corporation (Limited liability, giving up equity)
9
Q
Dividend
A
Return on investors investment
10
Q
Market Cap
A
(# of shares) x (worth of shares)
11
Q
IPO
A
initial public offering, going public
12
Q
How to acquire cash
A
- selling product of service
- borrowing from lenders
- selling stock
13
Q
1930 Congress created what?
A
SEC to regulate and enforce rules
14
Q
GAAP
A
Generally accepted accounting principles
15
Q
IASB
A
international accounting standards board
16
Q
Four types of financial statements
A
- Balance Sheet (Assets and liabilities and owners equity)
- Income statement (Revenue and expenses)
- Statement of changes in retained earnings
- Statement of cash flow
17
Q
Account receivable is what kind of account
A
Asset
18
Q
Account payable is what kind of account
A
liability
19
Q
Prepaid expense (prepaid rent, prepaid insurance) is what kind of account
A
Asset
20
Q
Unearned revenue is what kind of account
A
Liability
21
Q
Net Book Value
A
Historical cost - accumulated depreciation
22
Q
Direct method for cash flow always starts with what account
A
CASH ACCOUNT
23
Q
Dividends do what to retained earnings?
A
Decrease
24
Q
A normal balance for retained earnings is on which side?
A
Credit
25
Accrual Accounting
When the cash is recieved after the service (service first, cash after) *assume this is what most companies use*
26
Deferral Accounting
When the cash is recieved before a service. You are deferring the service, thus cannot book the revnue as recieved becuase you have not compelted the service or earned the revenue
27
Using up of an asset is a ____
espense
28
Must complete the _____ before posting the adjustments for _____
```
income statement (revenue - expenses)
Income Taxes
```
29
Indirect method of cash flow starts with what account
Net Income
30
Current ratio
current assets/current liabilties
31
Working capital
Current assets - current liabilites
32
Debt ration
total liabilties/total assets
33
COGS
Expense, getting matieral that being sold
34
Turn over ratio
(Income statement amount)/((beginning balance + ending balance)/2)
SALES/INVENTORY
35
Revenue Concept
When & how much to record
36
Matching Concept
expenses shoudl match with the revenue they create
37
Depreciation is what kind of account
Expense, OE
38
Expense and _____
Debit
39
Trial Balance must ____ on ____
equal, both sides
40
Trial Balance
After posting to the general ledger, the ledger accounts get posted to trial balance,
41
Accounting Process Steps
1. Source documents
2. Transaction analysis
3. Journal
4. Posting
5. Trial Balance
42
What is closed the income summary?
Temporary expenses and revenue (OE accounts)
43
Cash Basis Accounting
Only record when you see and have the exchange of cash
44
Revenue Recognition Principle
Revenue is recorded when the company has met its performance obligations.
45
When you decrease a payable you ____
Decrease Cash
46
When you decrease a recieveable you ____
increase Cash
47
Balance Sheet accounts
First two columns (Assets and Liabilities)
48
Income Statement Accounts
Third colum (OE, revenue and expenses)
49
What gives the board of directors the right ot change a companys CEO
Stock holders elect the board and the board have ability to elect and fire
50
Purpose for adjusting entries is to
accurately reflect the books
51
Double taxation
Occurs in a corporation, net income is taxed, then the dividends are paid out to share holds that that is taxed
52
Reversing entries
simply flip the debit and credit from adjusting entries. Only do when there is and expense and a payable
53
Papa John WSJ
Chairman, John Schnatter, resigners after using a racial slur in a conference call.
Also resigned from the University of Louisville board for racial slurs
KEY POINT: BOD are chosen by the shareholders, and the board has the right to hire and fire people
54
Lyft WSJ
Lyft raised new capital to increase rival with Uber
New capital doubled evaluation to 15.1 billion
Uber and lyft are battling for future transportation
Lyft expanded into the international market
IPO = initial public offering
55
Bank of America WSJ
Merrill Lynch must pay a settlement of SEC charges for electronic trading charges
Lawsuit for misleading clients by routing orders to high-speed trading firms without telling customers
Avoid access fees, typically charged by exchanges and receives a commission from customers
Masking lasted 5 years
Key Point = MASKING (depriving customer of ability to make informed decisions regarding their orders)
56
Hartland Payment Systems WSJ
Insider trading against Robert Carr (former CEO) brought by the SEC
Gave romantic partner details about his company's planned sale to a larger rival before it became public
Partner bought stocked based on confidential information - Carr lend girlfriend money
punishment to get rid of profits and pay civil monetary fee
57
S&P
Illegally profiting from insider trading
Pinto-Thomas, financial analysis, leaked a deal's information to two friends before the deal was announced
Valspar and Sherwin-Williams merged and he told friends what stock to buy
Two friends bought shares and made about 200,000
Pinto-Thomas charged with securities fraud and conspiracy
58
Tesla WSJ
Some workers worried about getting paid
Model 3 drained cash
Tesla now believed to be a financial risk to their companies
Tesla's argument was "we were arguing if our parts supplied to buyers were correct"
Tesla wants to go private (taken off the markets)
59
AT&T WSJ
CEO Randall Stephenson addressed topics involving Trump, taxes and Moonves (CEO of CBS)
At&T buying somehing from time warner and Stephenson suspected Trump as interfering with department of justice in the deal
Stephen offered 1,000 bonus for workers to go against Trump
Trump calls Stephensen, thanking him for the support
Les Moonves was charged with sexual assault
60
Microsoft WSJ
Bought Nokia for many millions more than it was actually worth
Had to make adjusting entries to reflect the actual worth of Nokia (1 b)
Sold Nokia and took the loss in profit
61
In statement of cash flows, sales revenue most likely goes with what account?
Account recievable (other information)
62
When paying off prepaid rent as an adjusting entry, the two accounts effected and ____ & ____
prepaid rent and rent expense
