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Lesson 1 (Intriduction & Financial Statements Flashcards

1
Q

What is this ?
a set of accounting reports that convey economic and financial information to outside users such as creditors and investors

A

financial statements

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2
Q

What are these ?
1. balance sheet
2. income statement
3. statement of owners equity
4. statement of cash flows

A

the four major financial statements

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3
Q

What is this ?
the financial statement that portrays
1. assets
2. liabilities
3. equity

A

balance sheet

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4
Q

What is this ?
the economic resources owned by a business

A

assets

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5
Q

What is this ?
the debts owed by a business

A

liabilities

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6
Q

What is this ?
the amount of the owners investment in the business

A

equity

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7
Q

What’s the fundamental accounting equation ?

A

Asset = Liabilities + Equity

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8
Q

What are the two major assets categories

A
  1. current assets
  2. long term assets
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9
Q

What is this ?
Assets that are expected to either be concerted into cash or expire within one year

A

current assets

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10
Q

Examples of Current Assets ?

A
  1. Cash
  2. Accounts receivable
  3. Inventory
  4. Supplies
  5. Deferred expenses (prepaid expenses)
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11
Q

What is this ?
represent amounts owed to the company by its customers

A

accounts receivable

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12
Q

What is this ?
this is the product the company sells to its customers

A

inventory

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13
Q

What is this ?
items used in the normal course of business

A

supplies

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14
Q

What is this ?
assets we expect to be used in business operations for longer than one year

A

long term assets

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15
Q

Examples of long term assets ?

A
  1. property-plant-equipment
  2. intangibles
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16
Q

What is this ?
long term assets that have a physical substance (you can touch, feel, and see these assets)

A

property-plant-equipment (P-P-E)

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17
Q

Examples of P-P-E ?

A
  1. land
  2. buildings
  3. equipment
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18
Q

What does accumulated depreciation do ?

A

decreases P-P-E

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19
Q

What is this ?
long term assets that lack a physical substance (you can not touch, feel, and see these assets)

A

intangible assets

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20
Q

Examples of intangibles ?

A
  1. trademark
  2. patent
  3. copyright
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21
Q

What is this ?
what is a generally accepted accounting principle (GAAP) ?

A

historical cost concept

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22
Q

What is this ?
assets are to be shown on the balance sheet at their cost (amount which the company paid to acquire them )

A

historical cost concept

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23
Q

What are the two major categories of liabilities ?

A
  1. current liabilities
  2. long term liabilities
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24
Q

What is this ?
liabilities expected to be paid within one year

A

current liabilities

25
Examples of current liabilities ?
1. accounts payable 2. short term notes payable 3. salaries payable 4. income taxes payable 5. utilities payable 6. unearned revenue
26
Examples of accrued liabilities ?
1. salaries payable 2. income taxes payable 3. utilities payable
27
What is this ? debts that will be paid in longer than one year
long term liabilities
28
Examples of long term liabilities ?
1. notes payable 2. mortgage payable 3. bonds payable
29
for a corporation (company that sells stock to its owners) there are two types of equity ?
1. contributed capital 2. retained earnings
30
What is this ? represents investments made by owners into the business through the purchase of the organizations stock
contributed capital (common stock)
31
What is this ? represents net income earned by the corporation that is kept within the company for growth and expansion (rather than given to the stockholders in the form of a dividend)
retained earnings
32
What is this ? the financial statement that shows the profitability of the company for a period of time
income statement
33
Two items found on the income statement ?
1. revenues 2. expenses
34
What is this ? represent amounts earned during the accounting period (year)
revenues
35
Examples of Revenues ?
1. sales revenue (result from sales of inventory) 2. service revenue 3. rental revenue 4. interest revenue 5. dividend revenue 6. gain on sale of land
36
What is this ? costs incurred in the process of earning revenues
expenses
37
Examples of expenses ?
1. cost of goods sold (cost of inventory sold) 2. salaries expense 3. rent expense 4. utilities expense 5. interest expense 6. advertising expense 7. income tax expense 8. loss on sale of land 9. advertising expense 10. deferred expense (prepaid expense) after it it is used up 11. freight out
38
Income statement equations include?
1. revenues - expenses = net income 2. sales revenue - cost of goods sold = gross profit
39
What is this ? represents the selling price of inventory ( 5 pieces of inventory each sold to customers for $10 would result in sales revenue of $50)
sales revenue
40
What is this ? is the cost of the inventory sold ( 5 pieces of inventory sold to customers with each piece costing the seller $6 to purchase would result in cost of goods sold of $30)
cost of goods sold
41
What is this ? represents the profit earned from selling inventory
gross profit
42
What is this ? this shows the changes in equity for a period of time (the same period of time as that covered by the income statement)
statement of owners equity
43
For common stock what is the equation?
beginning balance (Jan 1) + additional sales of common stock = ending common stock (Dec 31)
44
For the retained earnings what is the equation ?
beginning balance (Jan 1) + net income - dividends = ending retained earnings (Dec 31)
45
Dividends paid by the company to its stockholders are not considered ?
dividends
46
Equity goes up because of what two things ?
1. investments by owner 2. revenues
47
Equity goes down when what two things ?
1. dividends/withdrawals 2. expenses
48
Dividends have what effect on the company's net income ?
no effect
49
What is this ? this shows the changes in cash for a period of time (the same period of time as that covered by the income statement)
the statement of cash flows
50
What information does the statement of cash flows provide ?
1. cash receipts (inflows) 2. cash payments (outflows)
51
What are the 3 categories for cash inflows and outflows ?
1. operating activities 2. investing activities 3. financing activities
52
What category for cash inflows and outflows is this ? cash inflows and cash outflows associated with the primary operations of the business
operating activities
53
What category for cash inflows and outflows is this ? cash inflows and cash outflows associated with eh purchase or sale of long term assets such as P-P-E
investing activities
54
What category for cash inflows and outflows is this ? cash inflows and cash outflows associated with the sources of funding the business
financing activities
55
What's the equation for total equity for a corporation ?
total equity for a corporation = contributed capital (common stock) + retained earnings
56
Always right down current assets in order of liquidity which means put these four in order ? 1.inventory 2.cash 3.supplies 4.accounts receivable
1. cash 2. account recievable 3. inventory 4. supplies
57
To make an income statement what do you do ?
Find Gross Profit + Revenues - Expenses = NI
58
To make a balance sheet what do you do ?
Find Total Assets (current and long term) Find Total Liability (current and long term) Find Total Equity (current and long term)
59
Examples of Equity ?
1. common stock 2

Accounting (13 decks)

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