Accounting Chp 1-6

Front 1

What info does the balance sheet convey?

Back 1

It is a statement of financial position that reports dollar amounts for the assets, liabilities, and stockholders' equity at a specific point in time.

Front 2

What is the equation used on the balance sheet?

Back 2

Assets = Liabilities + Stockholders' Equity

Front 3

What info does the income statement convey?

Back 3

It is a statement of operations that reports revenues, expenses, and net income for a stated period of time.

Front 4

What is the equation used on the income statement?

Back 4

Revenues - Expenses = Net Income

Front 5

What does the statement of retained earnings convey?

Back 5

It explains changes to the retained earnings balance taht occurred during the reporting period.

Front 6

What is the equation used on the statement of retained earnings?

Back 6

Retained Earning, beginning of the period + Net Income - Dividends = Retained Earnings, end of the period

Front 7

What does the statement of cash flows convey?

Back 7

It reports inflows and outflows of cash for a stated period of time.

Front 8

What equation is used on the statement of cash flows?

Back 8

+/- Cash flow from Operating Activities +/- Cash Flow from Investing Activities +/- Cash Flow from Financing Activities = Net Change in Cash Flow

Front 9

What are the GAAP?

Back 9

Generally Accepted Accounting Principles are the measurement rules used to develop the info in financial statements.

Front 10

Who is FASB?

Back 10

The Financial Accounting Standards Board is the private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles.

Front 11

What is the difference between the roles of managers and auditors in the accounting communication process?

Back 11

Managers have the primary responsibility for the accuracy of a co's financial info and auditors are responsible for expressing an opinion on the fairness of the finacial statement presentation based on their examination of the reports and records of the co.

Front 12

What is the primary objective of external financing reporting?

Back 12

It provides useful economic info about a business to help external parties, primarily investors and creditors, make sound financial decisions.

Front 13

define assets

Back 13

probably future economic benefits owned by the entity as a result of past transactions

Front 14

define liabilities

Back 14

probably debts or obligations acquired by the entity as a result of past transactions, to be paid with assets or services

Front 15

define stockholders' equity

Back 15

the financing provided by the owners and by business operations

Front 16

What constitutes a business transaction?

Back 16

An exchange between a business and one or more external parties to a business OR a measurable internal event, such as adjustments for the use of assets in operations.

Front 17

What accounts are found under assets on the balance sheet==?

Back 17

cash, accounts receivable, inventor, prepaid expenses, and buildings and equiptment

Front 18

What accounts are found under liabilities on the balance sheet?

Back 18

accounts payable, notes payable, accrued expenses payable, unearned revenues, and taxes payable

Front 19

What accounts are found under stockholders' equity on the balance sheet?

Back 19

contributed capital and retained earnings

Front 20

How are classified balance sheets structured?

Back 20

Assets are categorized as current and non current assets. Liabilities are classified as current and long-term liabilities. Stockholders' equity is listed as CC then RE.

Front 21

How do you find the financial leverage ratio and what is it good for?

Back 21

average total assets/average stockholders' equity
The higher the ration, the more debt is used to finance assets. as the ratio increases, so does risk.

Front 22

What are investing activities?

Back 22

purchasing and selling long-term assets and making loans and receiving principal repayments from others

Front 23

What are financing activities?

Back 23

borrowing and repaying to banks the principal on loans, issuing and repurchasing stock, and paying dividends

Front 24

What is the operating cycle (or cash-to-cash cycle)?

Back 24

the time needed to purchase goods or services from suppliers, sell the goods or services to customers, and collect cash from customers

Front 25

Why is the time assumption necessary?

Back 25

to measure and report financial info periodically, we assume the long life of a company can be cut into shorter pieces

Front 26

define revenues

Back 26

increases in assets or settlements of liabilities from ongoing operations

Front 27

define expenses

Back 27

decreases in assets or increases in liablilities from ongoing operations

Front 28

define gains

Back 28

increases in assets or settlements of liabilities from peripheral activities

Front 29

define losses

Back 29

decreases in assets or increases in liabilities from peripheral activites

Front 30

explain the accrual basis of accounting

Back 30

revenues are recognized when earned and expenses are recognized when incurred

Front 31

What does 2/10,n/30 mean?

Back 31

The customer may deduct 2 percent from the invoice price if cash payment is made within 10 days from the date of sale. If cash payment is not made within the 10-day discount period, the full sales price (less any returns) is due within a maximum of 30 days.

Front 32

define bad debt expense

Back 32

It's the expense associated with estimated uncollectible accounts receivable

Front 33

define allowance for doubtful accounts

Back 33

It's a contra-asset account containing the estimated uncollectible accounts receivable.

Front 34

What are the two ways to estimate bad debts?

Back 34

the percentage of credit sales method and the aging of accounts receivable method

Front 35

explain the percentage of credit sales method

Back 35

It bases bad debt expense on the historical percentage of credit sales that result in bad debts.

Front 36

explain the aging of accounts receivable method

Back 36

It estimates uncollectible accounts based on the age of each account receivable. As receivables become older and more overdue, it is less likely that they will prove to be collectible.

Front 37

What is the structure of the classified income statement?

Back 37

Net Sales-COGS=Gross Profit
-Operating Expenses=Income from Operations
+/-Nonop rev/exp and gains/losses=Pretax Income
-Income Tax Expense=Net Income

Front 38

How you do find earnings per share (EPS)?

Back 38

Net Income Available to Common Shareholders/Weighted Average Number of Shares Outstanding During the Reporting Period

Front 39

What are the differences between the Forms 10-K, 10-Q, and 8-K?

Back 39

The 10-K is an annual report that must be filed with the SEC. The 10-Q is a quarterly report that must be filed with the SEC. The 8-K is used by publicly traded co.s to disclose any important current events.