Powerpoint 1 Flashcards

1
Q

Accounting definition

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Self proprietorship

A

A business owned by one person

ex. A small owner-operated barber shop

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Partnership

A

A business owned by two or more persons associated as partners

often because indivdual lacks sufficient economic resources

ex. lawyers, artchitects, CPAs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Corporation

A

A business organized as a seperate legal entity owned by stockholders

Investors receive shares of stock to indicate their ownership claim

Ex. NYSE members

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Most of business is done by what?

Most common business is what?

A

Most of business- corporation

Most common - sel proprietorshipp and partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

External users

A

Creditors/lendors

Private investors

Vendors

Customers

Taxing authorities

Regulators

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Internal users

A

Managers who plan, organize, and run a business

ex. marketing manager, production supervisor, finance director, company officer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Investors

A

Use accounting information to make decisions to buy, hold, or sell stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Creditors

A

Use accounting information to evaluate the risks of selling on credit or lending money

external user

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Specific examples of external users

A

Taxing authorities

Customers

Labor unions

Regulatory Agencies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Ethics in financial reporting

A

Regulators and lawmakers concerned that the conomy would suffer if investors lost confidence in corporate accounting due to unethical financial reporting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

3 business activities

A

Financing

Investing

Operating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Creditors

A

Persons or entities to whom a company owes money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Liabilities

A

Amonts owed to creditors

Have the legal right to be paid according to pre-determined schedule

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Common stock

A

Total amount paid in by stockholders for the shares they purchase

Investors have no legal right to corporate cash until claims of creditors are satisfied

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Dividends

A

Payments to stockholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Two financing activities

A
  1. Borrow money
  2. Issue (sell) shares of stock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Investing activities

A

Involves the purchase of resources a company needs in order to operate

buying of LONG TERM assets

19
Q

Assets

A

Resources owned by a business

Eg. property, plant, and equipment, investments, cash

20
Q

Revenue

A

The increase in assets resulting from the sale of a product or service in the normal course of business

21
Q

Inventory

A

Goods (assets) available for future sales to customers

22
Q

Account receivable

A

right to receive money in the future

23
Q

Expenses

A

The costs of assets consumed or services used in the process of generating revenues

es. cost of goods sold, selling expenses, marketing expenses, administrative expenses

24
Q

Accounts payable

A
25
Q

Operating activities

A

Revenue

Inventory

Account receivable

Expenses

Accounts payable

26
Q

Net income =

A

Revenues > expenses

27
Q

Net loss =

A
28
Q

4 financial statements (in order)

A

IRBS

  1. Income statement
  2. Retained Earnings statement
  3. Balance Sheet
  4. Statement of Cash Flows
29
Q

Income statement

A

Reports the successes or failures of the company’s operations for a period of time

Investors and creditors are interested in past income to predict future income

  • relates to a company’s stock price
  • helps creditors determine if company has ability to repay in the future
30
Q

Retained Earnings Statement

A

Shows the amounts and causes of changes in retained earnings during the period

Allows users to evaluate the dividend payment practices

  • investors may prefer high or low dividend payouts
  • creditors take notice because dividends reduce ability to repay debts
31
Q

Retained earnings

A

The net income retained in the corporation

32
Q

Balance Sheet

A

Reports assets and claims to assets at a specific point in time

2 types of claims

  1. liabilties (claims of creditors)
  2. Claims of owners ( stockholder’s equity)

Assets = liabilities + stockholders’ equity

33
Q

Basic Accounting Equation

A

Assets = liabilities + stockholders’ equity

34
Q

Statement of Cash Flows

A

Provide financial information about the cash receipts and cash payments of a business for a specific period of time

Reports cash effects of a company’s operating, investing, and financing activities as well as net increase or decrease in cash

35
Q

Questions statement of Cash Flows answers

A

Where did the cash come from?

How was the cash used during the period?

What was the change in the cash blance during the period?

36
Q

Annual Report

A

Publicly traded companies MUST provide an annual report

Include:

Financial statements

MD&A

Notes to financial statements

Independent Auditor’s Report

37
Q

Management Discussion & Analysis

A

Includes:

Ability to pay near-term obligations

Ability to fund operations and expansion

Its results of operations

*SEVERAL SUBJECTIVE STATEMENTS AND OPINIONS

38
Q

Notes to the Financial Statements

A

Clarify the financial statements and provide additional detail

Info not all quantifiable

-descriptions of policies and methods

INTEGRAL

39
Q

Auditor’s Report

A

Independent outside auditor peforms it

States auditor’s opinion as to the fairness of the statements

auditor’s must have CPA

Unqualified opinion- financial statements are fair

40
Q

Unqualified opinion

A

Issued when the auditor is satisfied that the financial statements provide a fair representation of the company’s financial position and results of operations are in accordance with GAAP

41
Q

Why so much in annual report?

A

Not all relevant info in financial statements

Users are interested in non-financial info

42
Q

IFRS properties

A

Principles based

Developed by the International accounting Standards Board (IASB)

Non-US companies to not have to comply with SOX

43
Q

U.S. GAAP properties

A

Rules based

Developed by the Financial accounting standards board (FASB)

SOX applies to large public companies on U.S. exchanges

44
Q
A