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Finance Admin Test 1 > JC Notes > Flashcards

JC Notes Flashcards

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1
Q

What are the four basic financial statements?

A
  1. Statement of Financial Position
  2. Statement of Comprehensive Income
  3. Statement of Changes in Equity
  4. Statement of Cash Flow
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2
Q

What is the statement of financial position?

A

Reports the assets owned but the company and claims against.

Assets = Liabilities and Shareholders Equity

A= L + SE

As at date

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3
Q

What is the statement of comprehensive income?

A

Reports how well a company has performed its operation (revenue, expenses and income) over a period fo time

Two part statement that that reports changes that have occurred in stakeholders equity from all business activities excepts investment from and distribution to shareholders
Part #1 - Excess of revenues over expense. Referred to as profit or net earnings
Part #2 - Reports comprehensive income

For the period of dates

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4
Q

Statement of changes in equity

A

How much too the company’s net earnings was retained in the business, dividend distributions to owner, the dollar amount of shares issues and repurchased and other changes in equity over a period of time

For the period of time date

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5
Q

Statement of Cash Flows

A

Reports the sources and uses of a company’s cash over a period of time

For the period of time date

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6
Q

What is the order of Financial Statements?

A
  1. Statement of Financial Position (Beginning of Period)
  2. Statement of Comprehensive Income
  3. Statement of Changes in Equity
  4. Statement of Cash Flows
  5. Statement of Financial Position (End of Period)
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7
Q

Give examples of Asset headings

A

Current Assets - Cash, AR, inventories
Long Term Investments - Shares, bonds, real estate
Property, Plant and Equipment - Buildings, land, equipment
Intangible Assets - Goodwill, Patents, copyrights

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8
Q

Give examples of Liabilities headings

A

Current Liabilities - AP, salaries payable, income and sales tax
Long Term Liabilities - Loans payable, bonds payable, mortgages payable

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9
Q

Give examples of what you would find under Share Holders Equity

A

Contributed Capital - Common shares, preferred shares

Retained earnings - accumulated income

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10
Q

What is the operating cycle?

A

The average time that it takes a company to purchase good, resell the goods, and collect the cash from customers

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11
Q

Give examples of Current Assets

A

Cash
Short term investments
Accounts Receivable
Inventories

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12
Q

Give examples of Non-Current Assets

A

Long Term Investments
Property, plant and equipment
Intangible Assets

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13
Q

True or False - Depreciation is listed as a liability?

A

False - It is listed as an asset with a negative value

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14
Q

What is the formulate to calculate Working Capital?

A

Working Capital = Current assets - Current Liabilities

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15
Q

What is the formula for Current Ratio?

A

Current assets divided by current liabilities

Current Assets
———————
Current Liabilities

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16
Q

Statement of Earnings

A

Reports the results of a company’s operations - the sales of goods and services and the associated expenses of operating the company for a given period

Two major elements

Revenues - increase in the assets that results from the sale of products or services

17
Q

What is on a single step statement of Earnings?

A

Two categories - total revenues and total expenses

18
Q

What is on a multiple step statement of Earnings?

A 
Gross Margin (gross profit) = Nets sales - Cost of goods sold
Income from operations = Gross Margin - Operating Expenses
Net Income = Income from operations
19
Q

What is the calculation for Net Profit Margin

A

Net income divided by Sales Revenue

20
Q

Public Companies prepare . . .

A

A statement of change in equity

21
Q

Private companies prepare . . .

A

A statement of retained earnings

22
Q

What are the three categories of cash flow?

A
  1. Cash flow from operating activities - Cash flows related to earning income
  2. Cash flow from investing activities - related to the acquisition of sale investments and long term assets a such property, plant and equipment
  3. Cash flows from financing activities - repayment of debt, common share transactions, payment of dividends
23
Q

What Reporting Standard is mandatory in Canada

A

International Financial Reporting Standards (IFRS) - Used by private companies

24
Q

What are the two fundamental characteristic in financial information?

A
  1. Relevance - Useful to help predict future events
  2. Faithful Representation - Faithful of real world economic events it is intending to portray. Information should be complete and free from error
25
Q

What are the four Enhancing Characteristics?

A
  1. Comparability - comparable information allows external users to identify similarities and differences between two or more items
  2. verifiability - information is verifiable when independent parties can reach a consensus
  3. Timeliness - information is timely if it is available to users before it loses its ability to influence decisions
  4. Understandability - if users who have a reasonable knowledge of accounting and business can comprehend the meaning
26
Q

What are the three Accounting Principles?

A
  1. Historical Cost principle - this principle requires that the activities of a company are initially measured at their cost - the exchange price at the time the activity occurs
  2. Revenue Recognition Principle - this principle is used to determine when revenue is recorded and reported
  3. Full disclosure principle - This principle requires that financial statements include all information required for the financial statement
27
Q

Define cash basis accounting

A

Revenue is recorded when it is received, regardless of when it is earned

28
Q

Define accrual basis accounting

A

An alternative to cash basis accounting that is required by GAAP principles. Transactions are recorded when the occur.

Accrual Accounting is superior to cash base because it links income into measurements to selling

Finance Admin Test 1 (1 decks)

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