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Accounting Capstone > Financial > Flashcards

Financial Flashcards

1
Q

What is the purpose of GAAP

A

provide guidance to standard setters to develop high quality standards

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2
Q

objective of GAAP standards and regulations

A

provide financial information about companies useful to capital providers and decision making for investor who want to predict financial performance

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3
Q

Releveance

A

reporting processes must predict value and provide relevant information to decisions being made

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4
Q

Faithful Representation

A

when there is an agreement between a measure or description and the phenomenon it attempts to represent

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5
Q

Consistency

A

comparing financial statements of the same company from different reporting periods with the same methods

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6
Q

Comparability

A

ability to compare financial results from different entities

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7
Q

Verifiability

A

different, knowledgeable, and independent measures would reach census regarding whether information is a faithful representation

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8
Q

Timeliness

A

info is timely available to users early enough to be able to use in decision making

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9
Q

Qualitative characteristics of GAAP

A 
Relevance
Faithful Representation
Comparability
Consistency
Verifiability
Timeliness
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10
Q

Elements of Financial Statements

A 
Assets
Liabilities
Equity
Investments by Owners
Distribution to Owners
Comprehensive Income
Revenues
Expenses
Gains
Losses
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11
Q

Investments by Owners

A

increases in equity of a particular enterprise resulting in transfers from other entities to increase ownership

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12
Q

Distribution to Owners

A

decreases in equity of an enterprise resulting from transfers to owners

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13
Q

Comprehensive Income

A

changes in equity of an enterprise during a period from transactions and includes all changes in equity except from investments and distributions from owners

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14
Q

Revenues

A

inflows, other enhancements of assets, or settlements of liabilities during a period of delivering goods or services

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15
Q

Expenses

A

outflows or other use of assets during a specific period of delivering goods or services

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16
Q

Gains

A

increases in equity from peripheral or incidental transactions of an entity

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17
Q

Losses

A

represent decreases in equity arising from peripheral or incidental transactions

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18
Q

GAAP Assumptions

A

Economic Entity
Going concerns
Periodicity
Monetary Unit

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19
Q

Economic Entity Assumption

A

presumes all economic events can be identified with a particular economic entity

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20
Q

Going Concern Assumption

A

assumes a business will operate indefinitely

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21
Q

Periodicity Assumption

A

allows the life of a company to be divided into artificial time periods to provide timely information

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22
Q

Monetary Unit Assumption

A

states that financial statement elements should be measured in a particular monetary unit

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23
Q

What do Debits do

A

Increase Assets
Decrease Liabilities
Decrease Shareholder Equity

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24
Q

What do Credits do

A

decrease assets
increase liabilities
increase shareholder equity

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25
Q

Income Statement

A

reports the business’s revenues, expenses, and net income for a specified period of time

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26
Q

Alt names for income statement

A

P&L/statement of operations

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27
Q

Balance Sheet

A

reports the company’s assets, liabilities and owners’ equity as of a specified date

28
Q

Alt names for Balance Sheet

A

statement of financial condition/position

29
Q

2 types of assets

A

current and long term

fixed and intangible

30
Q

Basic accounting equation

A

A = L + OE

31
Q

2 main sources of OE

A

paid in capital

retained earnings

32
Q

multistep income statement

A 
revenues
(returns, discounts)
---
net sales
(COGS)
---
Gross profits
(ops expense)
---
EBIT (aka operating income)
(interest expense)
---
EBT
(taxes)
---
net income
33
Q

statement of cashflows sections

A

operating activities
investing activities
financing activities

34
Q

operating activites

A

inflows and outflows of cash related to the transactions determining net income

35
Q

cash inflow examples

A

sales to customer of goods and services

interest and dividends from investments

36
Q

cash outflow examples

A

paying for purchases of inventory, salaries, ops expenses, interest on debt and income tax

37
Q

the two methods of preparing the ops activities

A

direct and indirect

38
Q

direct ops activities prep

A

shows the effect of cash on each activity

39
Q

indirect ops activities prep

A

income from accrual basis accounting to cash basis by removing non cash items from net income

40
Q

investing cashflow examples

A

purchase and sale of long term assets like buildings, land, equip, intangibles
any investment buy or sale

41
Q

financing activities examples

A

inflow - when cash is borrowed or invested

outflow - when cash is paid back or distributed to owners

42
Q

do notes receivable or accts receivable generate interest

A

notes rec.

43
Q

Inventory

A

cost of acquiring a good that isnt sold

shown on balance sheet

44
Q

sales revenue

A

selling price of all goods sold to customers

shown on income statement

45
Q

COGS

A

total COaGS to customers

expense recorded on the income statement

46
Q

Periodic inventory system

A

inv. records are updated at the end of the period

47
Q

Revenue Recognition Steps

A

Identify Contract
Identify seller
Determine prices
allocate transaction price to performance obligation
recognize rev when performance obligation is satisfied

48
Q

Valuation Methods

A 
Periodic
Perpetual
Specific ID
FIFO
LIFO
Weighted Avg.
49
Q

Periodic valuation

A

specific sale date are unknown, use beginning inv, purchases, ending inv. to calc total COGS

50
Q

Perpetual Valuation

A

dates of sale matter, each sale date, COGS must be calculated

51
Q

Specific ID valuation

A

individually IDs and records the cost of each item sold (cars, homes, high end goods)

52
Q

FIFO

A

oldest items are sold first

:(grocery)

53
Q

LIFO

A

newest items are sold first (rock yard)

54
Q

Weighted Avg.

A

Calc weighted average cost per unit

(COGS avail for sale. # units avail for sale

55
Q

Capitalization

A

recording purchases as assets and not as expenses in the current period

56
Q

ordinary repairs and maint

A

relatively small and recurring expenditures that maintain normal ops, do not increase productivity

57
Q

extraordinary repairs and maint

A

large and infrequent expenses, overhauls, replacements, that may increase productivity and useful life

58
Q

Tangible asset

A

Physical substances, PPE, depreciate

59
Q

Intangible asset

A

no physical substance, patent, copyright, trademark, amortized

60
Q

depreciation

A

spreading historical cost of a fixed asset over the assets estimated useful life

61
Q

cash basis accounting

A

revenue is recorded when cash is received

expenses are recorded when cash is paid

62
Q

accrual basis accounting

A

revenues are recorded when earned or when services are performed REGARDLESS of when cash received
expenses are recorded when incurred or become liable for them REGARDLESS when cash paid

63
Q

amortization

A

lower the book value of a loan or an intangible asset over a set period of time

64
Q

depreciation methods

A

straight line
unit of production
declining balance

65
Q

straight line method

A

(cost - residual value) / useful life

66
Q

units of production

A

(cost - residual value) / (Actual production / estimated total production)

67
Q

declining balance

A

(cost - accumulated) x (2 / useful life)

Accounting Capstone (3 decks)

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