Accounting chapters 1-2


Flashcards on Accounting chapters 1-2, created by Nolan Fontenot on 08/09/2015.
Nolan Fontenot
Flashcards by Nolan Fontenot, updated more than 1 year ago
Nolan Fontenot
Created by Nolan Fontenot over 8 years ago

Resource summary

Question Answer
What are the 3 types of business? 1. Sole Proprietorship 2. Partnership 3. Corporation
What are the 3 operating activities of a business? 1. Operating 2. Investing 3. Financing
What are some examples of operating activities? 1. Selling products 2. Receiving revenue 3. Purchasing raw materials
What are some examples of investing activities? 1. Purchasing resources needed to operate 2. Buying PPE
What are some examples of financing activities? 1. Taking out a loan 2. Issuing debt securities 3. Selling shares of stock
What is an income statement? Reports a comany's revenues, expenses, & net income or net loss over a specific period of time.
Why are users interested in income statements? Because it provides users w/ info that helps them predict future net income.
What are retained earnings? Net income used for the corporation
What is a retained earnings statement? Shows the amounts and causes of change in retained earnings for a specific period of time.
What is a balance sheet? Reports a users assets & claim to assets (liabilities & stockholder's equity).
What is the basic accounting equation? Assets=liabilities+stockholder's equity
What is a statement of cash flows? Provides info about the cash receipts and cash payments over a specific period of time.
What are the 4 standard setting organizations? 1. Security & exchange commission (SEC) 2. Financial Accounting Standards board (FASB) 3. International Accounting Standards board (IASB) 4. International Financial Reporting Standards
What is a annual report? Report prepared by management that presents financial info, including financial statements, a management discussion and analysis section, notes, and an independent auditor's report.
Management discussion & analysis Management's view on the company's ability to pay near term obligations, fund operations and expansion, and results of operations.
Notes to financial statements Notes that clarify financial statement info and provide additional detail.
Auditor's report Reports and outside auditor's opinion as to the fairness of presentation of financial position and results of operations and their conformance w/ generally accepted accounting principles.
Classified Balance sheet Groups similar assets & liabilities, using a number of standard classifications and sections.
What is included in a classified balance sheet? 1. Current assets 2. long term investments 3. PPE 4. intangible assets 5. Current liabilities 6. long term liabilities 7. stockholder's equity
Current assets Assets that a company expects to convert to cash or use up within one year or operating cycle.
Long term investments 1. investments in stock and bonds that is held for more than 1 year. 2. long term assets that a company is not currently using in it's operating activities 3. long term notes receivable
PPE Assets/ long useful lives that are currently in use within the operating cycle.
Intangible assets Assets without physical substance
Current Liabilities Obligations that a company expects to pay within the next year or operating cycle.
Long term liabilities Obligations expected to pay after one year
Stockholder's equity includes 1. common stock 2. retained earnings
Ratio analysis Relationship among selected items of financial statement data
Profitability Ratios Measures the income or operating success of a company over a given period of time
Liquidity ratios Measure short term ability of company to pay maturing obligations and to meet unexpected needs for cash
Solvency ratos Measure ability of company to survive over a long period of time
Earnings per share 1. Net income earned on each share of common stock 2. Net income-prefered dividends/ average common shares outstanding
Working capital Current assets-current liabilities
Current ratio Current assets/current liabilities
Debt to assets ratio Total liabilities/total assets
Free cash flow Net cash provided by operating activities-capital expenditures- cash dividends
Qualities of useful info 1. Relevance 2. Predict value 3. Confirmatory value 4. Size 5. Complete 6. Neutral 7. Error free
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