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Financial Accounting > Financial Statements > Flashcards

Financial Statements Flashcards

1
Q

What are Financial reports used for?

A

They are used by investors, managers and other stake holders to determine how well a business is performing.

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2
Q

Statements that can be prepared from Trial Balance

A

Balance Sheet & Income Statement

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3
Q

Accounts Listed on Trial Balance - types

A

1)Permanent Accounts 2)Temporary Accounts

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4
Q

What Permanent Accounts/Real Accounts?

A

1)Reported on Balance Sheet, Continuous accounts that have a cumulative balance over time.

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5
Q

Example of Permanent Accounts

A

Cash, Accounts Receivables, Inventory. Assets, Liabilities & Owner’ s Equity

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6
Q

What are Temporary/Nominal accounts

A

Listed on Income Statement. Show activity only in a period of time and are reset to zero at the beginning of new acct period.

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7
Q

Examples of Temporary Accounts

A

General & Admin expenses, sales, tax expenses, Income Stmt accounts: Revenues, expenses, gains, losses.

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8
Q

Stock Measures Are

A

Permanent Accounts because they are measured at a certain point in time

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9
Q

Flow Measures Are

A

Temporary Accounts because they measure the flow of transactions over a period of time.

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10
Q

Retained Earnings

A

Account has balance in the beginning of the year unlike other accounts that reflect balance at the end of the year. Retained earnings are increased or decreased by revenues,expenses, losses, gains

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11
Q

Closing Process

A

1) End of Fiscal year, net effect of nominal accounts is transferred to retained earnings
2) It resets nominal accounts to zero and updates retained earnings balance

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12
Q

What is a Balance Sheet?

A

Stmt of financial position and Snapshot of a business at a certain point of time

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13
Q

Types Of Assets

A

1) Current 2)Non Current

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14
Q

What are current Assets?

A

If an asset will be used within a year or one operating cycle whichever is longer, it is called current asset

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15
Q

What is operating cycle?

A

Amount of time it takes business to produce its goods, sell the goods and receive cash from its customers. Most operating cycles are less than year

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16
Q

Examples of Current Assets

A

Cash, Inventory, Accts Receivables

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17
Q

Non-Current Assets

A

All assets that will held for more than a year are non-current assets.

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18
Q

Example of Non-Current Assets

A

Buildings, Equipment, LEasehold improvements (tenants make long-lived changes to property to enhance)

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19
Q

An asset can be split into current and non-current asset

A

Long term notes receivable. Amount it will receive in current year will go in current portion and rest in non-current

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20
Q

ORdering Of Current Asset accounts under GAAP

A

1) Most liquid accounts listed first.
Example:
Cash
Short-Term Investments
Accounts Receivable (sales already done and waiting to receive cash)
Inventory (needs to be sold and wait to receive cash)
Pre-payments(Pre-paid rent)

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21
Q

Ordering Of Non-Current Asset Accounts

A

1) Long term Stock investments
2) Fixed Assets (Equipment, Accumulated Depreciation, property)
3) Company’s Intangible Assets (goodwill)

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22
Q

Ordering Of Asset Accounts in IRFS

A

Reverse with Lease Liquid accounts listed first

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23
Q

What is Depreciation?

A

It is the decrease in the value of an asset over time

24
Q

What is accumulated Depreciation?

A

Sum of all depreciation recognized over the life of an asset

25
Q

Depreciation is Debit or Credit?

A

Credit because it decreases the asset value. Its a contra asset account because its balance is the opposite of normal asset account balances

26
Q

What is current Liability?

A

Those liabilities that are due within one year

27
Q

What are Non-Current liabilities?

A

Those liabilities that are due in more than one year

28
Q

Ordering Of Current Liabilities under US GAAP

A 
Notes/Loans Payable
Current Portion OF Long Term Debt
Accounts Payable
Wages Payable
Accrued Expenses (Accrued utilities liability)
Accrued interest liability
Accrued Income Taxes
29
Q

What are Accrued Expenses?

A

Expenses that are recognized on the income statement but are not due yet

30
Q

Examples Of Accrued Expense

A

Accrued wages, accrued interest expense, accrued income taxes

31
Q

What is a Bond?

A

A common form of long term debt - Liability

32
Q

Order of Non Current Liabilities

A

Long-term debt

Deferred Income taxes

33
Q

Order of Accounts In Equity Section (Both US GAAP and IFRS)

A 
Preferred Stock
Common Stock
Additional Paid- In Capital
Retained Earnings
Accumulated other income
Treasury Stock
34
Q

What is Preferred Stock?

A

Shares Of Stock issued to public are common stock or preferred stock

35
Q

What is Partner Capital?

A

Contributions made by owners in partnership

36
Q

What is Paid-In Capital/Contributed Capital?

A

Preffered Stock + Common Stock + Addnal Paid in capital

37
Q

Accumulated Other comprehensive income

A

Unrealized Gains, Losses that haven’t been settled

38
Q

Once Gains and losses are settled, which account they go to?

A

Retained Earnings

39
Q

What is Treasury Stock

A

Stock repurchased by the company, effectively reducing the amount of stock available on the open market

40
Q

For a Bank, loans are

A

Assets, because they lend money and receive interest on them

41
Q

What is Income Statement?

A

Stmt that shows how a business is performing and shows changes over a given period

42
Q

What does Income sTatement show?

A

Revenues, expenses, losses and gains how they change ove rtime. Story of company’s operating activities

43
Q

Balance Sheet & Incoem Statement are connected by

A

Retained Earnings

44
Q

Income Stmt reflects all changes that affected

A

Retained Earnings (Component of owner’s equity)

45
Q

Net Income (Loss)

A

Revenues & Gaines - Expenses & Losses

46
Q

Retained Earnings increase if Net income

A

increases

47
Q

Other Names for Net Income

A

Bottom Line, Net Profit and Net earnings

48
Q

Gross Profit/Gross Income

A

Sales/Revenue - COGS

49
Q

Examples of COGS

A 
Raw material costs
Cost of storing inventory before sold
Factory Depreciation
Wages for workers
Rent paid for factory space
shipping costs of products sold
50
Q

Example of operating expenses

A 
wages
pension contributions
rent
depreciation
utilities
selling expenses
advertising expenses
combines all into Selling, General and Administrative expenses (SG&A)
R&D
51
Q

Operating Profit/Operating Income/Earnings Before Interest and Taxes (EBIT)

A

=Gross Profit - Operating Expenses

52
Q

Income Before Taxes

A

Operating Income + Other Income - Other Expenses

53
Q

Examples Of Other income

A

Gains or Loss on sale of asset

54
Q

Net Income

A

Income before taxes - taxes

55
Q

Consolidation of reporting transactions in stmts

A

If they are material or relavant they are separate, if not they are consolidated.

56
Q

Accounting Period

A

Length of time over which a business evaluates its financial performance

57
Q

Income Statement vs Balance Sheet

A

Income Statement gives info company’s performance over time

Balance sheet gives company’s financial position at a point in time

Financial Accounting (9 decks)

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