Accounting Chapter 1 and 2 – Flashcards

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Net income equals total __ minus total __
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revenues, expenses
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Cash flow and activity of: Purchase of equipment
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negative cash flow, investing activity
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Cash flow and activity of: Sale of equipment
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positive cash flow, investing activity
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Cash flow and activity of: Borrow from a bank
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positive cash flow, financing activity
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Cash flow and activity of: Purchase Inventory
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negative cash flow, operating cash flow
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Net income normally _____ equal the cash generated from operations because ______
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negative cash flow, financing activity
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Cash flow and activity of: Cash collected from customers
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positive cash flow, operating cash flow
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Accounting equation
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Assets = Liabilities + Stockholder's Equity
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Two elements of stockholders' equity
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Retained earnings and common stock
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Profits earned by a company that haven't been paid to the stockholders
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Retained earnings
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___ is a cost of doing business that is necessary to earn _____
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Expenses, profit
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What elements does a balance sheet show?
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Assets, liabilities, stockholders' equity
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Headings and accounts on balance sheet
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A, L, SE, Cash, Retained earnings
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Decide on whether or not to lend money
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Creditors
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Decide on social welfare issues
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Regulators
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Refers to a code or moral system that provides criteria for what is right and wrong
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Ethics
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Net income is:
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Revenues less expenses, profit
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Assets are initially recorded at:
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Historical cost
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Heading for statement of cash flow
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For the year ended...
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Heading for income statement
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For the year ended...
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Heading for statement of stockholders' equity
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For the year ended...
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Classifications of inflow and outflow of cash
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Operating, Financing, Investing
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Shareholders' equity arises mainly from:
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amounts invested by shareholders and amounts earned by the corporation
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What does the statement of stockholders' equity report?
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Changes in earnings and dividends for a specific period of time
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Net income equals:
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Revenues minus expenses
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Line items on a balance sheet
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Cash, common stock, retained earnings, accounts receivable
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Line items on income statement
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Sales, income tax expense, cost of goods sold
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These activities involve purchasing goods, designing and manufacturing products, and selling goods to customers
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Operating activities
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Revenues and expenses relate to which activity on the statement of cash flow?
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Operating
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Legal documents representing ownership in a company
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Capital stocks
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Earned by selling goods or services to customers
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Revenues
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What statements does net income appear on?
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Income statement and statement of stockholders' equity
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Financing activities involve:
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Exchanges between a company and its creditors and stockholders
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Investing activities involve:
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Purchases of productive assets
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Ending cash balance on balance sheet is equal to the sum of what other statements?
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The change in cash of statement of cash flows Beginning of the year cash balance
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Which activities involve the buying and selling of land, buildings, and equipment used in the business?
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Investing
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What kind of activity is involved borrowing money from the bank?
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Financing
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A business's assets are financed by whom?
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Creditors and stockholders
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Heading for a balance sheet
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At ......
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Income statement equation
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BEGINNING retained earnings + net income - dividends = ENDING retained earnings
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Steps of ethical decision making
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1) Determine facts of situation 2) Identify the ethical issue and stakeholders 3) Identify the values related to the situation 4) Specify the alternative courses of action 5) Evaluate the courses of action in terms of their consistency
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Ending retained earnings appear on which statements?
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Balance sheet and statement of stockholders' equity
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Which groups have claims on business's assets?
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Stockholders and creditors
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Services that CPAs perform
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Tax planning Assurance services Not-for-profit assurance services
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Separate legal entity
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Corporation
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Cash is reported on the:
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Balance sheet and statement of cash flows
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An accountant who is employed by a company like Best Buy has a career in:
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Private accounting
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Net income is equal to:
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Revenue minus expenses Net amount earned
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Net income normally _____ equal the cash generated from operations because ______
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does not; revenues are earned even if cash has not been collected
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Steps of the accounting system
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1) Analyze transactions 2) Record journal entries 3) Post amounts to general ledger 4) Prepare a trial balance 5) Adjust revenues and expenses
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