Financial Accounting

Front 1

Expenses

Back 1

Are the cost of assets consumed or services used in the process of earning revenue

Effect of Expenses is negative, decreases stockholders equity n assets or increase in liabilities

Hint 1

Salaries Expenses, Salaries Expenses, Rene Expenses, Utilities Expenses, Tax Expenses etc.

Front 2

Liabilities

Back 2

Claims against assets, existing debts and obligations. Creditorship on total assets.

Hint 2

Business borrow money and purchases on credit:

Ingredients- cheese, sausage, flour, beverages also called account payable.

Note payable- purchase of food delivery truck through First national bank.

Salaries and wages payable to employees , also sales and real estate taxes payable to local government.

Front 3

Stockholders equity

Back 3

Is equal to total assets minus total liabilities, consists of common stock n retained earnings

Front 4

Common stock

Back 4

Is the total amount paid in by stockholders for the shares they purchased

Hint 4

Obtain funds by selling shares of stock to investors.

Front 5

Assets

Back 5

Are resources a business owns

Hint 5

Delivery truck, tables, cash register, chairs, oven, table ware , jukebox, cash etc.

Front 6

Revenues

Back 6

Are the gross increases in stockholders equity resulting from business activities entered Ed into for the purpose of earning income

Front 7

Dividends

Back 7

Are distributions of cash or other assets to stockholders

Hint 7

Dividends reduce retained earnings but are not Expenses

Front 8

Basic accounting equation

Back 8

Assets = liabilities + stockholders equity

Front 9

Basic accounting equation provides

Back 9

Underlying framework for recording and summarizing economic events

Front 10

Assets equals

Back 10

The sum of liabilities and stock holders equity

Front 11

Revenues

Back 11

Business activities entered for the purpose of earning income.

Revenues result in an increase in assets.

Hint 11

Ex: selling merchandise, performing services, renting property, n lending money.

Front 12

Types of owners

Back 12

Owner’s - one owner (proprietorship)

Owners’- multiple partners (partnerships)

Stockholders’- ownership in corporations

Front 13

Retained earnings

Back 13

Section of balance sheet determined by three items: revenues, Expenses, n dividends

Front 14

Income statement

Back 14

Presents the revenues and expenses n resulting net income or net loss for a specific period of time.

Front 15

Retained earning statement

Back 15

Summarizes the changes in retained earnings for specific period of time

Front 16

Balance sheet

Back 16

A financial statement that reports the assets, liabilities, and stockholders equity at a specific date

Front 17

Statement of cash flow

Back 17

Summarizes information about the cash inflows (receipts) n outflows (payments) for specific period of time

Front 18

Heading of statements

Back 18

Identifies the company, the type of statement and the specific date or time period covered by the statement

Front 19

Final sums n negative amounts

Back 19

Final sums are double-underlined and negative amounts (in the statement of cash flows) are presented in parantheses.

Front 20

Income statement is referred

Back 20

The statement of operations, earnings statement, or profit and loss statement

Front 21

What is accounting

Back 21

An information system that identifies, records, and communicates the economic events of an organization to interested users

Front 22

Users and uses of accounting

Back 22

A) management uses acc. Information to plan, organize n run business

B) investors (owners) decide whether to buy, hold or sell their financial interest on the basis of accounting data.

C) creditors (suppliers/bankers) evaluate the risks of granting credit or lending money.

D) other taxing authority, regulatory agencies, customers, and labor unions.

Front 23

Ethics

Back 23

Ethics are the standards of conduct by which actions are judged as right or wrong. Effective financial reporting depends on sound ethical behavior

Front 24

(GAAP) General accepted accounting principles

Back 24

Common set of standards used by accountants

Front 25

Monetary unit assumptions

Back 25

Requires companies include in the accounting records only transaction data that can be expressed in terms of money

Front 26

Economic entity assumption

Back 26

Requires that the activities of each economic entity be kept separate from the activities of its owners and other economic entities

Front 27

Expanded accounting equation

Back 27

Assets= liabilities + common stock + revenues - Expenses - dividends

Front 28

Business transactions

Back 28

Must have a dual effect on the accounting equation.

Front 29

Book keeping

Back 29

A part of accounting that involves only the recording of economic events

Front 30

Convergence

Back 30

The process of reducing the differences between US, GAAP, and IFRS.

Front 31

Corporation

Back 31

A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock.

Front 32

Managerial accounting

Back 32

Provides internal reports to help users make decisions about their companies

Front 33

Monetary unit

Back 33

Only transaction data that can be expressed in terms of money is included in the accounting record

Front 34

Economic entity

Back 34

Activities of one entity be kept separate and distinct from all others

Front 35

Proprietorship

Back 35

A business owned by one person

Front 36

Partnership

Back 36

A business owned by two or more associated as partners

Front 37

Corporation

Back 37

A business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock

Front 38

Relevance

Back 38

Financial information that is capable of making a difference in a decision

Front 39

Faithful representation

Back 39

Numbers and descriptions match what really existed or happend they are factual

Front 40

Historical cost principle

Back 40

An accounting principle that states that companies should record assets at their cost.

Front 41

Fair value principle

Back 41

An accounting principle stating that assets and liabilities should be reported at fair value.

The price received to sell an asset or settle a liability.