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28 Cards in this Set
- Front
- Back
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Partners must resolve and settle down on number of issues in their agreement. List 3 |
- purpose of business - management responsibilites - consequences of withdrawal and retirement |
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Corporations can be - list 2 |
Private: - not traded on any stock exchange - limited to 50 or fewer stockholders
Public: - shares are traded on one or more stock exchanges - can issue shares to public |
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Financial Analysis |
Tracks performances and make better decisions |
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Accounting |
Process of recording, classifying, summarizing financial transactions and events |
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Financial transactions |
Include buying and selling goods and services. - acquiring insurance - paying employees - using supplies |
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Accounting system |
Method used to record and summarize accounting data into reports |
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Examples of financial transactions. List 3 |
- sales - payroll - rent |
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Inputs are processed and categorized according to 5 types of accounts |
- assets: bal. Sheet - liabilites: bal. Sheet - equity: bal. Sheet - revenue: inc. Stmt - expenses: inc. Stmt |
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Why are financial statements important? List 3 |
- essential documents of business - summary of all transactions that occur over a particular period - communicate financial performace |
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Who might use financial statements and why? Internal and external users |
Internal: managers to assess performance
External: - creditors - owners - government - other stakeholders
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Accuracy |
How close a measured value is to the actual value |
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Precision |
How close the measured values are to each other |
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Relevant |
Presented in a way that is useful to those who must use them |
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Timely |
Produced in time to be useful to those who need it |
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Compliant |
Conform with Generally Accepted Accounting Principles |
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Source of funding: Definition - Common Stock |
Value of shares in the company |
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Cash flow statement List 3 |
- Does not Equal profitability - firms use of cash - reflects changes in cash due to activties, investments and financing |
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7 important accounting concepts |
1. Accounting period 2. GAAP 3. Accrual verses Cash accounting 4. Historical Costs 5. Cost accounting 6. Pricing of inventory using fifo, lifo or average 7. Depreciation and Amoritization |
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Generally accepted accounting principles (GAAP) |
Body of conventions, rules and procedures |
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The cash method List 2 |
- revenue when cash is actually received - expenses when cash is paid out |
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The accrual method List 3 |
- matches costs to revenue of a product - recognizes economic event not exchange of cash - represents a more accurate depiction of operating performace |
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Why do we need cost accounting? List 3 |
- develop selling prices for products and services produced - identify and target specific costs - determine what products and services are profitable |
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Intangible assets |
Are amortized over the period when benefit is obtained over a period |
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Depreciation |
A non-cash expense that reduces the value of an asset over its useful life |
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Salvage value |
Expected selling price of the asset less any removal costs at the end of its useful life |
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Depreciable cost |
Difference between cost of an asset and Salvage value |
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2 methods of depreciation |
Straight line: equal portion of the depreciable cost is charge each year according to the assets useful life. Cost-Salvage Value= useful life
Declining balance: charging a larger portion of the total depreciation expense in the early years of life |
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Calculating Depreciable cost 3 steps |
Step 1: what method of depreciation are we using?
Step 2: is Salvage Value applicable?
Step 3: What costs are we including? |
