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OU Management Spring 2018 > Financial Statements > Flashcards

Financial Statements Flashcards

1
Q

accounting system of a company

A

set of procedures and controls used for identification of relevant transactions or events within the company

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2
Q

What is the purpose of financial statements?

A

provide critical company information to internal and external users

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3
Q

What is a financial statement?

A

Written reports that quantitatively describe the financial well-being of a company

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4
Q

What are the basic financial statements?

A
  • Balance sheet
  • Income statement
  • Statement of owner’s equity
  • Statement of cash flows
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5
Q

What are the principles of accounting?

A
  • Going concern
  • Objectivity
  • Conservatism
  • Consistency
  • Matching
  • Materiality
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6
Q

Going concern

A

Any given company plans to remain in existence for the foreseeable future

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7
Q

Objectivity

A

Accounting entries will be recorded on the basis of objective evidence

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8
Q

Conservatism

A

Accounting estimates, evaluations, and opinions should neither overstate nor understate the business activities of the company

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9
Q

Consistency

A

Similar measurement concepts and procedures for related items within financial statements are applied for entire accounting period

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10
Q

Matching

A

Requires that all expenses directly associated with the production of revenues be reported within the same period on the income statement (depreciation for example)

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11
Q

Materiality

A

Acknowledges the significance of various decisions and their ultimate effects on the financial statements given the magnitude of a company’s operations

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12
Q

Accounting Equation

A
  • also called balance equation
    • Assets = Liabilities + Owner’s Equity
    • Assets - Liabilities = Owner’s Equity
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13
Q

What are the 5 basic types of accounts?

A
  • Assets
  • Liabilities
  • Owner’s Equity
  • Revenues
  • Expenses
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14
Q

Assets

A

things a business owns that can be used to generate income

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15
Q

Liabilities

A

money owed to others or claims that various groups have against the company’s value

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16
Q

Owner’s Equity

A

Owner’s own fund or worth in the company

17
Q

Revenues

A

Increases in assets and decreases in liabilities resulting from an entity’s profit-oriented activities

18
Q

Expenses

A

Decreases in assets and increases in liabilities resulting from an entity’s profit-oriented activities

19
Q

What is a balance sheet?

A

Itemized statement that lists total assets and total liabilities of a company with a specific date

20
Q

What questions does the balance sheet answer for a company?

A

tells you how much cash you have as of today

21
Q

What are the components of a balance sheet?

A
  • Cash
  • Accounts Receivables (A/R)
  • Inventory
  • Prepaid accounts
  • Property, plant, equipment
  • Intangible assets
  • Accounts Payable
  • Mortgage notes
22
Q

Balance sheet: Cash

A
  • Money
  • Currency
  • “Benjamin’s”
23
Q

Balance sheet: Accounts Receivables (A/R)

A

The rights to receive money in the future.

24
Q

Balance sheet: Inventory

A

refers to items held for resale

25
Q

Balance sheet: Prepaid accounts

A
  • accounts you pay at the beginning of the year, but haven’t used yet
  • ex. prepaid rent
26
Q

Balance sheet: Property, plant, equipment

A

Fixed assets such as your pharmacy building (assuming you own it)

27
Q

Balance sheet: Intangible assets

A

an asset that is not physical in nature (i.e. goodwill, patents, trademarks)

28
Q

Balance sheet: Accounts Payable

A

an entity’s obligation to pay a short term debt (payment for inventory, utilities, etc.)

29
Q

Balance sheet: Mortgage notes

A

balance of your mortgage loan if any is owed on property purchase

30
Q

depreciation

A

Property has a limited life span and it should be depreciated according to pre-established
guidelines

31
Q

What is an income statement?

A

Records the company’s revenues and expenses for a specific period of time

32
Q

income statement equation

A

Revenues – Expenses = Net Income

Dated “for the period ended” of a specific date

33
Q

What are the components of an income statement?

A
  • Sales (or Revenues)
  • Cost of Goods Sold (COGS)
  • Operating expenses
34
Q

Income statement: Sales (or Revenues)

A
  • Prescription sales
  • OTC
  • Compounding
  • MTM
  • Vaccinations
35
Q

Income statement: Cost of Goods Sold (COGS)

A

merchandise (inventory) for resale

36
Q

Income statement: Operating expenses

A
  • Payroll
  • Advertising
  • Rent
  • Depreciation
  • Insurance
  • Utilities
37
Q

What is a statement of owner’s equity?

A
  • Reports how a company’s retained earnings have changed over some time period
  • specifically dated
38
Q

What is a statement of cash flows?

A
  • Reports all major cash receipts (inflows) and cash payments (outflows) during a period
  • May be used as an analytical tool to assess short-term viability of a company
  • Reveals how a business generated and used cash during an accounting period

OU Management Spring 2018 (21 decks)

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