Using Financial Accounting Information Ch. 1 – Flashcards

Unlock all answers in this set

Unlock answers
question
business
answer
all of the activities necessary to provide the members of an economic system with goods and services
question
business entity
answer
an organization operated to earn profit
question
sole proprietorship
answer
a form of organization with a single owner
question
economic entity concept
answer
the assumption that a single identifiable unit must be accounted for in all situations
question
partnership
answer
business owned by 2 or more individuals; the organization form used by accounting firms and law firms
question
corporation
answer
form of entity organized under laws of a particular state; ownership evidenced by shares of stock
question
share of stock
answer
certificate that acts as evidence of ownership in a corporation
question
bond
answer
a certificate that represents a corporation's promise to repay a certain amount of money and interest in the future
question
nonbusiness entity
answer
organization operated for some purpose other than to earn a profit; govt entities/private orgs: hospitals universities etc
question
liability
answer
an obligation of a business
question
capital stock
answer
indicates the owners contributions to a corporation
question
stockholder
answer
one of the owners of a corporation aka shareholder
question
creditor
answer
someone to whom a company or person has a debt aka lender
question
asset
answer
future economic benefit
question
revenue
answer
an inflow of assets resulting from the sale of goods and services
question
expense
answer
an outflow of assets resulting from the sale of goods and services
question
accounting
answer
the process of identifying measuring and communicating economic information to various users
question
management accounting
answer
branch of accounting concerned w providing management with information to facilitate planning and control
question
financial accounting
answer
branch of accounting concerned w the preparation of financial statements for outsider use
question
Internal Users
answer
What kind of "users" are the management of a company?
question
external users
answer
those not involved in the operations of a business; stockholders/bankers/govt agencies/
question
owner's equity
answer
the owner's claims on the assets of an entity
question
stockholder's equity
answer
the owner's equity in a corporation; mathematical difference between a corporation's assets and its liabilities
question
retained earnings
answer
part of stockholders equity that represents the income earned less dividends paid over the life of an entity
question
balance sheet
answer
financial statement that summarizes the assets, liabilities, and owners' equity at a specific point in time
question
income statement
answer
a statement that summarizes revenues and expenses
question
net income
answer
the excess of revenues over expenses aka profits, earning
question
dividends
answer
a distribution of the net income of a business to its owners
question
statement of retained earnings
answer
statement that summarizes the income earned and dividends paid over the life of a business
question
statement of cash flows
answer
Financial statement that summarizes a company's cash receipts and cash payments during the period from operating, investing, and financing activities
question
cost principle
answer
assets are recorded at the cost to acquire them
question
going concern
answer
the assumption that an entity is not in the process of liquidation and that it will continue indefinitely
question
monetary unit
answer
the yardstick used to measure amounts in finacial statements; the $ in the US
question
time period
answer
artificial segment on the calendar used as the basis for preparing financial statements
question
GAAP (Generally accepted accounting principles)
answer
various methods, rules, practices, and other procedures that have evolved over time in response to the need to regulate the preparation of financial statements
question
SEC (securities and exchange commission)
answer
federal agency with ultimate authority to determine the rules for preparing statements for companies whose stock is sold to the public
question
FASB (Financial Accounting Standards Board)
answer
group in the private sector with authority to set accounting standards
question
AICPA (American Institute of Certified Public Accountants)
answer
the professional organization of certified public accountants
question
CPA (Certified Public Accountant)
answer
designation for an individual who has passed a uniform exam administered by the AICPA and has met other requirements as determined by individual states
question
PCAOB (Public Company Accounting Oversight Board)
answer
A five-member body created by an act of Congress in 2002 to set auditing standards
question
IASB (International accounting standards board)
answer
the org formed to develop worldwide accounting standards
question
auditing
answer
the process of examining the financial statements and the underlying records of a company to render an opinion as to whether the statements are fairly presented
question
Sarbanes Oxley Act
answer
An act congress in 2002 intended to bring reform to corporate accountability and stewardship in the wake of a number of major corporate scandals
question
Financial Activities
answer
Borrowing; Sale of stock (example of a type of activity)
question
Investing Activities
answer
purchase of assets (example of a type of activity)
question
Operating Activities
answer
sale of products/services; costs incurred to operate business (example of a type of activity)
question
Basic Financial Statements
answer
Balance Sheet Income Statement Statement of Cash Flows Statement of Retained Earnings (These are examples of what?)
question
Foundation for Financial Statements
answer
1. Aids accountants in their role as interpreters and communicators of relevant information 2. Act as a foundation for the specific principles and standards needed by the profession
question
Conceptual Framework (First level)
answer
Objective of Financial Reporting
question
Conceptual Framework (Second level)
answer
Qualitative Characteristics Elements
question
Conceptual Framework (third level)
answer
Assumptions Principles Constraints
question
Elements of a 10K
answer
1. Letter to stockholders 2. Management discussion and analysis (MD&A) 3. Financial statements 4. Notes to financial statements 5. Statement of management's responsibility 6. Report of independent accountants (These are elements of what?)
question
Assets
answer
Thesum of liabilities and stockholders equity equals this.
question
Balance Sheet
answer
A "snapshot" of the investing and financing activities of the firm at any given point in time. A = L + SE
question
Assets
answer
Probable and measurable future economic benefits controlled by an entity as a result of past transactions
question
Components of Assets
answer
1. Ownership or control 2. Measurability 3. Probability
question
Liabilities
answer
Obligations to sacrifice reasonably definite amounts of cash or goods/services at reasonably certain times in the future, in exchange for past or current benefits.
question
Shareholders' equity
answer
Residual interest of a firm's owners in the firm's assets, after deducting liabilities
question
Market value
answer
Stock price multiplied by outstanding shares
question
Income Statement
answer
A schedule that presents a "moving picture" of the operating results of the firm over a given time period
question
Net Income (Found on Income Statement)
answer
Total Revenue - Total Expenses
question
Revenue
answer
Inflows of assets from selling goods or providing services
question
Expenses
answer
Outflows of assets as a result of generating revenues
question
Irregular Items
answer
Discontinued operations Extraordinary items Changes in accounting principle
question
Extraordinary Items
answer
1. Unusual in nature 2. Infrequent in occurrence or essentially nonrecurring
question
Statement of Cash Flows
answer
A schedule that presents a "moving picture" of the change in cash over a given time period as a result of operating, investing, and financing activities
question
Statement of Shareholders' Equity
answer
A schedule that reconciles the change in shareholders' equity during the period (a kind of statement)
question
Statement of Comprehensive Income
answer
Optional schedule that augments traditional net income by including other items that have changed the shareholders' claim on assets during the period
question
Statement of Retained Earnings
answer
A schedule that connects the related changes in the Balance Sheet and the Income Statement
question
Formula for Retained Earnings
answer
Beginning balance, add net income, deduct dividends.
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New