Financial Accounting Foundations Flashcards
Loans, owner investments and retained profits are sources of _______.
Assets
This statement is also known as a P&L (profit & loss) statement or a statement of operations.
Income Statement
The difference between revenue and expenses is called _______.
Net Income(Loss)
Type of cashflow that involves everyday transactions.
Operating Cashflows
Type of cashflow involving investments in the productive capacity of the business.
Investing Cashflows
Type of cashflow that involves getting money to repay loans and pay dividends.
Financing Cashflows
A key metric in cost analysis; this term refers to the direct costs attributable to producing a good or service. Term typically used by retailers.
Cost of Sales (Cost of Revenue)
A key metric in cost analysis; this term refers to the direct costs attributable to producing a good or service. Term typically used by manufacturers.
Cost of Goods Sold (COGS)
Cost of sales/COGS subtracted from total revenue yields ________.
Gross Profit
Summarizes accounts involved in a transaction: increases, decreases, and associated amounts.
Journal Entry
No entry can appear on both the balance sheet and the ________.
Income Statement
Formula used to determine how much it costs to sell a product/service.
COGS/Net Sales
One contract covering more than one valuable good or service.
Multiple-Element Transaction
The accountant estimate of the wear and tear on a long-term asset resulting from normal use.
Depreciation
When the value of equipment declines faster than originally estimated.
Impaired
A contract specifying the terms under which the owner of some property transfers the right to use the property to someone else, without transferring legal ownership.
Lease
Also known as “incognito leverage,” this occurs when an asset, debt or a financing activity is not shown on the company’s balance sheet. Utilizing this strategy allowed companies to maintain a lower debt-to-equity ratio to make borrowing easier. This practice has been denigrated by some since it was exposed as a key strategy of the ill-fated energy giant Enron.
Off-Balance Sheet Financing (OBS)
The amount of net income divided by the number of ownership shares in the company.
Earnings Per Share (EPS)
Profit/gain that has not yet been taken/received.
Unrealized Gain
Referred to by accountants as “available-for-sale securities,” these are special gains and losses that are listed as special items in the shareholder equity section of a company’s balance sheet.
Accumulated Other Comprehensive Income (AOCI)
Tax that is owed at some point in the future.
Deferred Tax Liability
A financial statement in which all the numbers have been divided by sales for the year.
Common-Size Financial Statement
A measure of the amount of profit earned per dollar of owner investment (= Income/Equity)
ROE (Return on Equity)
The number of dollars in profit for every 100 dollars in sales.
Profit Margin
