ADM1340 CH.1 – Flashcards
57 test answers
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accounting equation
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assets=liabilities+shareholder's equity
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assets
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the resources owned or controlled by a business that provide future economic benefits
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corporation
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a business organized as a separate legal entity having ownership divided into transferable shares held by share holder
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deficit
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a negative balance in retained earning as a result of accumulated losses from the prior and current periods exceeding the profits
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dividends
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the distribution of retained earnings from a corporation to its shareholders, often in the form of cash
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expenses
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the decrease in economics benefits that result from the costs of assets consumed or service used in ongoing operations to generate revenue
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financing activities
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activities that include borrowing (or repaying) cash to lenders, and issuing (or reacquiring) shares or paying dividends to investors
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fiscal year
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an accounting period that one on year long
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gaap
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a general guide having substantial authoritative support, that describes how economic events should be recorded and reported for financial reporting purposes
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income statement
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a financial statement that presents the revenues and expenses and resulting profit or loss of a company for a specific period of time
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investing activities
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activities that include purchasing and disposing of long-lived assets such as property, plant, and equipment and long term investments
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liabilities
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the debts and obligations of a business. liability are claims of lender and other creditors on the assets of a business
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loss
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the amount by which expenses are more than revenues. the opposite of profit
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operating activities
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activities that result from day to day operations and include revenues and expenses and related accounts such as receivables, supplies, inventory and payables
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partnership
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a business owned by more than one person
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profit
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the amount by which revenues are more than expenses
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proprietorship
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a business owned by one person
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reporting entity concept
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the concept that economic activity that can be identified with a particular company must be kept separate and distinct from the activities of the owners and of all other economic entities
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retained earnings
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the amount of accumulated profit (less losses, if any) from the prior and current periods, that has been kept in the corporation for future use and not distributed to shareholders as dividends
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revenue
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the increase in economic benefit that result from the operating activities of a business, such as the sale of a product or provision of a service
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share capital
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shares representing the ownership interest in a corporation. if only one class of shares exists, it is known as common shares
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shareholders equity
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the shareholders claim on total assets, represented by the investments of the shareholders (share capital) and undistributed earnings (retained earnings) generated by the company
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statement of cash flows
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a financial statements that provide information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time
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statement of changes in equity
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a financial statement that summarizes the changes in total shareholders equity, as well as each component of shareholders equity, for a specific period of time
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statement of financial position
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a financial statement that reports the assets, liabilities and share holders equity at a specific date
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investors
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use info to buy, hold, or sell their ownership interest
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lenders
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evaluate risks of lending money
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external users
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users who are outside the organization, accounting information helps to make decisions, is the company earning enough to give me my required investment?
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other creditors
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suppliers (decide on whether or not to grant credit)
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publicly traded corporations
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use international financial reporting standards (IFRS)
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private corporations
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may use international financial reporting standards (IFRS) or Accounting Standards for Private Enterprises (ASPE)
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public corporations
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distribute financial statement, listed in TSX, NYSE
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private corporations
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issues shares but not for the general public
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proprietorship
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simple to establish, owner controlled
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proprietorship
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unlimited liability, financing may be difficult, limited life
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partnership
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simple to establish, broader skills and resources, shared financial resources and control
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partnership
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partners personally liable, transfer of ownership may be difficult, limited life
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corporation
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easy to sell or transfer ownership, greater capital raising potential, legal liability, indefinite life
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corporation
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more expensive and complex to set up, must file corporate income tax returns annually
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debt
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borrowing money from lenders and other creditors which creates a liability
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equity
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issuing (selling) ownership interests in the corporation to share holders
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operating line of credit
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pre arranged bank load for a maximum amount that allows a company to draw more money then there is in hand in its bank account
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bank indebtedness
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when a company uses its operating line of credit to cover ash short falls and overdrawn its bank account
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common shares
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amount paid by investors got shares of ownership in a company
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loan payable
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payable sum of money borrowed from the bank
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investing activity
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purchase or sale of long term investments
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investing activity
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purchase or sale of long lived assets such as equipment
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goodwill
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results from the acquisition of another company when the price paid is higher then the value of the purchased company's net identifiable assets
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intangible assets
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assets that do not have any physical substance themselves but represent a privilege or a right granted to or held by a company (patents, copyrights, trademarks)
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profit/loss
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revenues-expenses
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accounting equation
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assets=liabilities+shareholders equity
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annual report
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publicly traded companies must prepare an " " each year
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financial and non financial information
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annual reports include
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