FInancial accounting cours 1 Flashcards
What’s an SFP and what does it tell?
Statement of financial position (balance sheet). It shows the assets, liabilities, and equity.
What’s an SPL and what does it tell?
Statement of profit or loss. It shows the sales minus all the expenses. This statement works for a specific period of time.
What are the 2 big categories of assets and what are in them?
In current Assets:
cash, accounts receivable, inventories, and current investments.
Non-current Assets:
fixed assets (property, plant, equipment), intangible assets, and non-current investments.
What are the 2 big categories of liabilities and what are they?
Current liabilities:
account payable, income tax payable, and current portion of long-term debt.
Non-current liabilities (long term):
Long-term debt
What is in the equity category?
Capital and retained earning
What is a short-term vs a long-term?
Short-term is something that can be either converted into cash within 12 months (current assets) or that needs to be paid in a period of 12 months (current liabilities). Long-term is everything that should be used or paid for after 12 months—for example fixed assets or long-term debt.
In general, what is an asset?
It is a good resource. This is what the firm owns.
In general, what is a liability?
They are sources of finance. This is what the firm owes.
In general, what is equity?
Equity is the internal funding source. This is what goes to shareholders.
What is income?
It’s an increase in assets or a decrease in liabilities. It will result in an increase in equity. It doesn’t take into consideration the contribution of the shareholders.
What are expenses?
They are a decrease in assets or an increase in liabilities. It will result in a decrease in equity. It doesn’t take into consideration the contribution of the shareholders.
What is the difference between revenue and income?
Revenue is a money figure acquired at a precise moment and income is a return of money over a period of time.
What is the gross profit?
It is the sales minus the cost of goods sold (material, workers, etc.)
What is in the operating expenses section?
Salaries, electricity, depreciation, and amortization.
What is direct cost vs indirect cost?
direct costs are costs related to the product like the cost of goods sold and indirect costs are the operating expenses that are not directly connected to the product such as electricity or a manager’s salary.
What is the SCE and what does it do?
It’s the statement of changes in equity. It shows the evolution of equity over a period of time
What are the 2 big sections of the SCE?
The share capital and the retained earnings.
What is the share capital?
They are the funds provided by shareholders in exchange for shares in a company. It takes into consideration the share of the capital at the beginning of the month. It also takes into consideration de capital issued during this period. The total of the share capital should be the total equity.
What are the retained earnings?
They are all the profits earned (they exclude dividends. in the SCE, it shows the net income of the prior year. It generally is a good representation of the entire lifetime of the firm.
What is the SCF?
It is the statement of cash flows. it shows the change in cash flow for a given period. It provides an understanding of where the cash is coming from and how it is being used by the company. It is linked with the balance sheet (SFP).
What is the SFP linked to and how?
The cash in the current assets is the same as the ending cash balance of the SCF. The retained earnings in the equity section are linked with the total retained earnings of the SCE.
What is the difference between an account payable and an account receivable?
The account payable is the supplier and the account receivable is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers.
What do the notes in a financial statement represent?
They give information on the general nature of the entity’s activities and other information that supplements the figures presented in the financial statements.
What is the equation of gross profits?
sales-costs of goods=gross profits
