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GT-OMSA-MGT-8803 > Financial Accounting Week 1 > Flashcards

Financial Accounting Week 1 Flashcards

1
Q

What is the purpose of financial accounting?

A

To provide meaning, quantitative financial information

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2
Q

Who are the two most relevant decision-makers with financial accounting information?

A

Shareholders and debt holders

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3
Q

What “decision-makers” that are using financial accounting information are typically seen as the owners?

A

Shareholders

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4
Q

What “decision-makers” using financial accounting information are typically seen as the creditors?

A

Debt holders

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5
Q

What two attributes make financial information useful?

A

The relevance and faithful representation

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6
Q

What does GAAP stand for?

A

Generally accepted accounting principles

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7
Q

What does the SEC stand for?

A

Securities and exchange commission

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8
Q

What does the AICPA stand for?

A

The American Institute of certified public accountants

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9
Q

What are the five required financial statements for financial accounting information?

A
  • Balance sheet
  • Income Statement
  • Statement of Shareholder’s Equity
  • Statement of Cash Flows
  • Statement of Comprehensive Income
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10
Q

What is a balance sheet in reference to financial accounting?

A

A sheet that describes the sources and uses of funds at a firm point in time.

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11
Q

What is an income statement in reference to financial accounting?

A

The document that shows how much money a company has earned (not cash) over a
period of time.

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12
Q

How is a balance sheet helpful within financial accounting?

A
  • evaluates capital structure
  • assesses risk and future cash flow
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13
Q

How is an income statement helpful with financial accounting?

A
  • helps evaluate past performance
  • useful and predicting a firms future performance
  • assess risk of uncertainty or risk in achieving future cash flows
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14
Q

What is an asset?

A

An economic resource that is owned or controlled

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15
Q

Within financial accounting: what does cash, accounts receivable, inventory, land, buildings, equipment, copyrights, or investments refer to?

A

Assets

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16
Q

What stipulations must an asset have to be reported on a balance sheet?

A

They must be owned or controlled by the company and they must possess expected future economic benefits

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17
Q

What two ways are assets reported to have value?

A

Historical cost or market value

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18
Q

Can you report assets within financial accounting that are not reliably measured?

A

No, you may only include assets that can be reliably measured

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19
Q

What are liabilities within financial accounting?

A

They are future obligations to pay cash, transfer assets, or provide services to another party

20
Q

What is owners equity within financial accounting?

A

Ownership interest in the net assets of an entity

21
Q

What accounts comprise a balance sheet?

A

Assets, liabilities, owners equity

22
Q

What formula do balance sheets use?

A

Assets = liabilities + owners equity

23
Q

How are assets ordered in a balance sheet?

A

assets are listed in order of the liquidity, ascending in order of how quickly they can be converted to cash

24
Q

How quickly would you have to convert an asset to cash for it to be considered a current asset?

A

Within a year

25
Q

How quickly would a liability have to mature for it to be considered a current liability?

A

Less than one year

26
Q

In what order are liabilities listed on balance sheets?

A

Liabilities are listed in order of maturity, assending in time for maturity

27
Q

What is the equation for retained earnings?

A

Beginning retained earnings + net income - dividends = ending retained earnings

28
Q

What are revenues within an income statement?

A

An increase in a companies resource from the sale of goods or services

29
Q

What are expenses with an income statement?

A

Costs incurred in the normal course of business to generate revenue

30
Q

What are gains/losses within an income statement?

A

Money made or lost outside of normal firm operations

31
Q

What is net income or loss?

A

An overall measure of the performance of a company

32
Q

What is a statement of shareholders equity in reference to financial accounting?

A

The statement of equity is a reconciliation of the beginning and ending balances of shareholders equity accounts

33
Q

What is a statement of cash flow in reference to financial accounting?

A

A statement that describes an entities cash inflows, and cash out flows during a period

34
Q

What three sections are included within a statement of cash flows?

A
  • operating activities
  • investing activities
  • financing activities
35
Q

What are operating activities within the statement of cash flows?

A

Cash transactions that enter into the determination of net income

36
Q

What are investing activities within the statement of cash flows?

A

Cash transactions involved in the purchase and sale of PPE, other long-term assets, and making/collecting loans

37
Q

What are financing activities within the statement of cash flows?

A

Cash transactions, whereby resources are obtained or repaid to owners and creditors

38
Q

What are the four steps of the accounting cycle?

A
  1. Analyze transactions
  2. Record effects of transactions
  3. Summarize effects of transactions by account
  4. Prepare reports
39
Q

What is a transaction in reference to financial accounting?

A

An event that causes a change in balance sheet values

40
Q

What is an account in reference to financial accounting?

A

An accounting record in which the results of transactions are accumulated

41
Q

What is double entry accounting in reference to financial accounting?

A

A method of accounting that includes debts and credits

42
Q

What is accrual accounting?

A

A system of accounting in which revenues and expenses are recorded as they are earned and incurred, not necessarily when cash changes hands

43
Q

What is revenue recognition?

A

Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive an exchange for those goods or services

44
Q

What is the matching principle within financial accounting?

A

All costs and expenses incurred in generating revenues must be recognized in the same period as the revenue.

45
Q

What are T-Accounts?

A

A place to accumulate the effect of journal entries on each account.

GT-OMSA-MGT-8803 (5 decks)

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