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A2 > Section2 > Flashcards

Section2 Flashcards

1
Q

resources

A

property or rights

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2
Q

assets

A

property or rights that provide probable FUTURE ECONOMIC BENEFIT

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3
Q

What is the basic accounting equation?

A

Assets = Liabilities + Owners’ Equity

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4
Q

liabilities

A

probable FUTURE OBLIGATIONS to pay assets (usually cash) or provide services to another entity

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5
Q

owner’s equity

A

amount of ASSETS PROVIDED BY OWNERS
or
amount of owners’ rights to assets in the event of business termination

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6
Q

2 ways owners provide assets

A
  1. cash or asset contributions in exchange for shares of stock
  2. allowing increases in assets arising from profitable operations to be retained
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7
Q

balance sheet

A

statement of FINANCIAL POSITION
and HOW RESOURCES HAVE BEEN OBTAINED
at various POINTS IN TIME

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8
Q

financial position

A

assets, liabilities, and owners’ equity

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9
Q

income statement

A

statement of

  • operations
  • profit
  • earnings
  • loss

for various PERIODS of time

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10
Q

statement of cash flows

A

presents the major inflows and outflows of cash for a company
for various periods of time

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11
Q

what are a company’s assets financed through debt?

A

liabilties

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12
Q

what are a company’s assets financed through equity?

A

owners’ equity

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13
Q

expenses

A

the amount of outflowing assets representing a cost of providing goods or services for sale

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14
Q

revenues

A

the amount of inflowing assets from the sale or providing of goods or services to customers

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15
Q

cost of goods sold

A

an expense representing the cost of inventory sold to customers

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16
Q

profit or net income is ALWAYS defined in terms of

A

revenues minus expenses equals net income

R—E=NI

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17
Q

dividends

A

the amount of assets distributed to owners (stockholders) from current or previous profits

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18
Q

2 ways that owners may provide capital to a business

A

capital contributions

retained earnings

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19
Q

net income equals

A

revenues minus expenses

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20
Q

profit is synonymous with

A

earnings or net income

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21
Q

NI

A

net income

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22
Q

RE

A

retained earnings

23
Q

D

A

dividends

24
Q

R

A

revenues

25
Q

E

A

expenses

26
Q

inflows of cash or any asset are recorded as revenues only when

A

received as a result of providing goods and services

27
Q

t/f an owner’s contribution/investment of cash into his or her business would be recoded as revenue to the business

A

false

28
Q

capital contributions are also known as

A

capital stock

29
Q

capital contributions + retained earnings =

A

owners’ equity

30
Q

t/f warranty obligations might be an example of probable future obligations to provide services

A

true

31
Q

t/f assets are recorded as assets only to the extent they have probable future economic benefit to the company

A

true

32
Q

retained earnings is not a description of an asset, it is a description of

A

HOW some of a company’s ASSETS WERE RECEIVED

33
Q

the increase in a business’ cash as a result of borrowing from a bank would

A

increase the business assets and increase its liabilities

34
Q

a company’s purchase of inventory with cash would

A

have no net effect on the business assets, liabilities, or owners’ equity

35
Q

an owner’s contribution of cash into his or her business would

A

increase the business assets and increase its owner’s equity

36
Q

a company’s profitable sale of inventory to a customer for cash would

A

increase the business’ total assets and increase its total owner’s equity

37
Q

revenues and expenses affect a company’s profit or net income, which affects its

A

retained earnings, a part of owners’ equity

38
Q

revenues—expenses=

A

net income

39
Q

owner’s equity accounts

A

revenues

expenses

40
Q

revenues and expenses are owners equity accounts because

A

they indirectly affect retained earnings

41
Q

t/f cash is considered revenue

A

false, cash is an asset

42
Q

The balance sheet is affected by activity over a period of time, but does not

A

show that activity, instead it reflects only the balance at the end of that period

43
Q

What is directly reflected in a statement of retained earnings?

A

dividends

44
Q

is “prepaid” an asset or expense?

A

asset

45
Q

t/f divdends do not appear on the balance sheet or the income statement

A

true

46
Q

unearned revenue is a….

A

liability

47
Q

a balance sheet is affected by, but does not show

A

activity

48
Q

Which statement or statements show activity over a period of time?

A

income statement and statement of cash flows

49
Q

the income statement reports net income for

A

a period of time

50
Q

the balance sheet portrays the financial position

A

at the end of a period

51
Q

Which financial statement is not required under GAAP, but typically provided?

A

Statement of Retained Earnings/Owners’ Equity

52
Q

Which General Purpose Financial Statements are required under GAAP?

A

Income Statement, Statement of Cash Flows and Balance Sheet

53
Q

T/F Supplemental and explanatory footnotes to the financial statements are also required under GAAP to provide additional information to statement users

A

true

54
Q

Which financial statement embodies the basic accounting equation?

A

the balance sheet

A2 (16 decks)

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