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27 Cards in this Set
- Front
- Back
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Debt financing |
involves borrowing money from sources such as a bank by signing a note payable or directly from investors by issuing bonds payable |
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Creditors |
individuals who lend money to companies are called creditors |
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What is the principal? |
the dollar amount you borrowed from your creditor that you need to pay back (this is the initial amount, but then you need to add interest) |
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Equity financing |
involves selling shares of stocks to investors |
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What are the 5 major steps to the accounting cycle? |
analyze, record, adjust, report, and close |
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What are some examples of decisions managers make for the financial aspect of the business? |
analyze segments of the business and make decisions about opperations |
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What are some financial decisions the marketing team has to make? |
Was the advertising successful? |
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What is a financial decision HR has to make? |
can we afford to give raises? |
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What does the Finance team of a business decide? |
if they can afford to pay off their debts and purchase assetts |
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What are the 3 things the accounting process must do? |
1. Identify relevant activities of the business 2. Quantify these activities, and 3. Record the resulting measures in a systematic manner |
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What are the 2 purposes of accounting? |
1. Prepare reports that meet the need for the end user 2. Interpret the financial results for that end user
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What is GAAP? |
Generally Accepted Accounting Principals: standards and procedures used when preparing financial statements |
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What is IFRS? |
International Financial Reporting Standards: accounting standards used by 120 nations (not including the U.S.) which has been approved by the International Accounting Standards Board (IASB). |
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What is FASB? |
Financial Accounting Standards Board: this is a non-governmental agency that established GAAP |
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What is the SEC and what do they do? |
The Security and Exchange Commission, and they have the power to regulate the interstate sale of stock and bonds |
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The SEC has the power to set _____________ ____________ but they have delegated that power to _________. |
accounting principles, FASB |
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What are the 4 financial statements and in what order must they be prepared? |
1. Income Statement 2. Statement of Stockholders Equity 3. Balance Sheet 4. Cash Flow Statement |
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What is the equation for an income statement? |
Net income = REVENUES - EXPENSES |
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What is the balance sheet equation? |
ASSETS - LIABILITIES = STOCKHOLDERS EQUITY |
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List 7 examples of assets: |
1. Cash 2. Accounts Receivable 3. Inventory 4. Supplies 5. Land 6. Buildings 7. Equipment
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List 3 examples of Liabilities: |
1. Accounts payable 2. Salaries payable 3. Notes payable |
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What are two examples of Stockholders Equity? |
1. Common Stock 2. Retained Earnings |
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What is the FASB Conceptual Framework? |
a cohesive set of interrelated objectives and fundamentals for external financial reporting |
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What are 4 Qualitative Characteristics a Financial Statement should have? |
Relevance, Faithful representation, Comparable to other similar businesses, and consistency |
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What does Going Concern mean? |
The likelihood that the entity will continue to operate |
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What is a Materiality constraint? |
The amount is too small to affect the financial statement |
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What is the Cost-Benefit Constraint? |
The benefit of the information outweighs the cost of providing it |
