ACC Chapter 1 – Flashcards
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When a company earns net income, its retained earnings
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increase
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The two primary functions of financial accounting are to
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communicate measurements to external parties and to measure business activities
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An essential assumption in accounting is that all economic events can be identified specially with an individual economic
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Entity
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A balance sheet has what on it
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liabilities, assets, SHE
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Income statement contains what
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revenues and expenses
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Statement of cash flow contains what
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operating, investing, and financing activities
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2 sources of stockholders equity are amounts
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paid in from shareholders, earned by the corporation
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Fundamental model of business valuation is commonly referred to as the
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accounting equation
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Income statement
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reports the profit generating activities of the firm during a period of time
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Corporation
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Business organization where an entity is legally separate from its owners and issues shares of stock
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Accounting
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Maintains records of a company's operations and communicates info to decision makers
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Purpose of a statement of cash flow
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Cash receipts and cash disbursements during a period
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On the statement of SHE
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Dividends, net income, beginning balance of retained earnings
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Accounting equation
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Assets=liabilities + SHE
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Creditors
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Decide whether to lend money
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Regulators
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Decide on social welfare issues
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Customers
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Decide whether to purchase products
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Managers
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Decide production and expansion
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Dividend
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Distribution of net income to the stockholders of a corp
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Managerial accounting
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Concepts and methods used to provide info to organizations internal users
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GAAP
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Monetary unit, economic entity, going concern, periodicity
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Retained earnings
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Total net income earned over the life of the company that hasn't been distributed as dividends
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SHE
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Investment by owners
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Dividends
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Distributions to stockholders
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Financial statement that summarizes revenues and expenses for a period of time
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Income statement
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Going concern assumption
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Anticipates that a business will continue to operate indefinitely
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Periodicity assumption
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Allows life of the company to be divided into artificial time periods to provide timely info
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Retained earnings
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Accumulated net income earned since the inception of the corporation and not yet paid to shareholders
