Accounting 201A Chapter 1 And 2

Front 1

Earnings per share=

Back 1

(Net income - Preferred dividends) / (Average common shares outstanding)

Front 2

Assets=

Back 2

Liabilities + Stockholder's equity

Front 3

dividends are?

Back 3

payments to stockholders. Part of financing activities.

Front 4

Liabilities are

Back 4

existing debts and obligations

Front 5

Expenses are

Back 5

the cost of assets consumed in the process of earning revenue

Front 6

Stockholder's equity is?

Back 6

ownership claim on total assets

Front 7

The three principal business activities are?

Back 7

financing, operating, investing

Front 8

financing activities are?

Back 8

1. borrowing from creditors (liabilities, notes payable(bank loans), and bonds payable(debt securities))
2. selling shares of stock to investors (common stock and dividends)

Front 9

What are prepaid services counted as?

Back 9

Current assets

Front 10

What are the three primary forms of a business organization?

Back 10

sole proprietorship, partnership, corporation

Front 11

What is solvency?

Back 11

The ability of a business to survive over long periods of time

Front 12

Current ratio =

Back 12

(current assets) / (current liabilities)

Front 13

Working capital =

Back 13

current assets - current liabilities

Front 14

Liquidity

Back 14

The ability to pay short-term payments as they become due and meet unexpected needs for cash

Front 15

Profitability

Back 15

Measures the income or operating success of a business over a given period of time

Front 16

What is the FASB?

Back 16

financial accounting standards board

Front 17

FASB key assumptions and principles

Back 17

1.monetary unit assumption
2.economic entity assumption
3. time period assumption
4. going concern assumption
5.cost principle
6.full disclosure principle

Front 18

monetary unit assumption

Back 18

Include in the accounting records only things that can be expressed in terms of money

Front 19

going concern assumption

Back 19

assumes business will be in existence in the future

Front 20

cost principle

Back 20

dictates that assets be recorded at their cost

Front 21

full disclosure principle

Back 21

requires all circumstances and events that would make a difference to financial statements users to be disclosed

Front 22

conservatism

Back 22

Allows accountants to choose the accounting method that will be the least likely to overstate assets and income

Front 23

Income statement order

Back 23

1st: revenue
2nd: expenses
3rd: net income /(Loss)

Front 24

payable =?

Back 24

liabilities

Front 25

receivable =?

Back 25

assets

Front 26

Retained earnings statement order?

Back 26

1st Retained earnings at start of time period
2nd Add:Net income
3rd Less: Dividends
4th Retained earnings at end of time period

Front 27

Beginning SE + revenue - expenses - dividends = end SE

Back 27

Beginning SE + revenue - expenses - dividends = end SE

Front 28

order of assets (in terms of liquidity)

Back 28

1. cash
2. short term investments(liquidity of 1 year or less)
3. receivables, bonds (short term), funds, bank accounts
4. inventory/supplies/goods
5. prepaid services
6. Long term investments (new section)
7. equipment (under PP&E)
8. Intangible assets (in it's own section)

Front 29

Liability order

Back 29

1.current liabilities
2.long term liabilities (liquidity greater than 1 year)

Front 30

balance sheet order

Back 30

1.assets
2.liabilities
3.stockholders equity

Front 31

What is listed under stockholders equity?

Back 31

common stock, paid in capital, retained earning, other accounts (treasury stock and preferred stock)

Front 32

going concern assumption

Back 32

(a)Is the rationale for why plant assets are not reported at liquidation value. (Note: Do not use the historical cost principle.)

Front 33

economic entity assumption

Back 33

(b)Indicates that personal and business record-keeping should be separately maintained.

Front 34

monetary unit assumption

Back 34

(c)Assumes that the dollar is the “measuring stick” used to report on financial performance.

Front 35

periodicity assumption

Back 35

(d)Separates financial information into time periods for reporting purposes.

Front 36

historical cost principle

Back 36

(e)Measurement basis used when a reliable estimate of fair value is not available.

Front 37

full disclosure principle

Back 37

(f)Dictates that companies should disclose all circumstances and events that make a difference to financial statement users.

Front 38

Earnings per share =

Back 38

(net income - preferred stock dividends) / average common shares outstanding

Front 39

Working capital =

Back 39

(cash + receivables + other current assets) - current liabilities

Front 40

current ratio =

Back 40

current assets / current liabilities

Front 41

debt to assets ration =

Back 41

total liabilities / total assets

Front 42

free cash flow =

Back 42

cash provided by operations - capital expenditures - cash dividends