INTRODUCTION TO FINANCIAL ACCOUNTING – Flashcards

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Types of Business Activities
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*Financing -sources of outside funds used to operate the business *Investing -purchase of resources (assets) the business needs to operate *Operating -the daily activities of the business
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Accounting Equation and components
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*Assets = Liabilities + Stockholder's Equity *Assets, Liabilities, Stockholders Equity *Revenue, Expense, Dividends, Stock, Retained Earnings *The accounting equation must always balance
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Basic Financial Statements
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*Income Statement-revenue accounts and expense accounts, net income *Statement of Retained Earnings-retained earnings account, net income and the dividends account *Balance Sheet-asset accounts, liability accounts and owners' equity accounts -capital stock and retained earnings *Statement of Cash Flows-explains how the changes in account balances during an accounting period affect the balance in the cash account *Interrelationship among the financial statements
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Income Statement
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*Revenues -Expenses = Net Income *Net Income vs. Net Loss *Prepare an Income Statement
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Retained Earnings Statement
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*Beginning balance in Retained Earnings + Net Income -Dividends = ending balance in Retained Earnings *Retained Earnings Statement links the income statement and dividends to the Balance Sheet *Prepare a retained earnings statement
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Balance Sheet
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*Assets = Liabilities + Owners' Equity *Owners' Equity = Common Stock + Retained Earnings *Prepare a balance sheet
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