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20 Cards in this Set
- Front
- Back
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What are the functions of accounting?
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to measure the activites of a company and communicate those measurements to people
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What is managerial accounting?
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deals with the methods accountants use to provide info to an organizations internal users (its own managers)(not a subject of this course!)
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What is financial accounting?
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measure business activities of a company and communicate those measures to external users for decision making purposes (investors and creditors)
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What is the accounting equation?
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Assets = liabilities + stockholders equity
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What are assets?
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resources with future value
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What are liabilities?
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a creditors claims to resources (what the company owes)
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What is stockholders equity?
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the owners claim to resources (the difference between assets and liabilities)
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What is common stock?
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amount invested by stockholders when they purchase shares of stock
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What are retained earnings?
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a cumulative amount of net income earned over the life of a company that has not been distributed to stockholders as dividends
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What are revenues?
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amounts earned from selling products or services
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What are expenses?
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cost of providing products or services
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What are the advantages of being a corporation?
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limited liability of the stockholders
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What are the disadvantages of being a corporation?
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higher tax burdens
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What is an income statement?
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reports a company's revenues/expenses over an interval or time
they're prepared frist, there is no account for net income, and net income has a huge affect on the investors |
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What is a statement of stockholder's equity?
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summarizes changes in SE over a period of time
produces RE for a balance sheet |
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What is the equation for total stockholders equity?
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common stock + retained earnings
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What is a balance sheet?
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presents financial position of a company at a particular date
a=l+se |
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any transaction that affects the income statement ultimately affects the ________ _____ through the balance of retained earinings
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balance sheet
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What is the generally accepted accounting principles (GAAP)?
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general rules that all companies must follow
allows for accurate comparison between companies when deciding where to invest/lend their resources |
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What is an auditor?
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independent party that expresses a personal opinion of the accuracy of a company's financial statements
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