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34 Cards in this Set
- Front
- Back
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Corporation |
Business that raises money by issuing shares of stock |
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Creditor |
A party whom business owes money |
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Common Stock |
The portion of stockholders equity that results from receiving cash from investors |
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Stockholder |
A party that invests in common stock |
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Accounts Receivable |
Amounts due from customers -right to receive money in the future from a sale |
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Accounts Payable |
Obligations to suppliers of goods |
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Auditor's opinion |
An expression about whether financial statements conform with generally accepted accounting principles |
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Investing activities (long-lived assets) |
Purchase of the resources a company needs in order to operate -Making and collecting loans -Acquiring and disposing of investments and productive long-lived assets |
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Financial Activities |
Collecting the necessary funds to support the business -Borrowing money (liabilities obligation to pay $ in future - Issuing shares of stock for cash "dividends" -Notes payable -Bonds payable |
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Operating activities |
Involve putting the resources of the business into action to generate a profit -Rev -Inventory- G available for sale to customer -Supplies- A used in day to day operations -Accounts rec -Expenses -Liabilities Net income (loss) |
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3 steps in Accounting process |
Identifies, records, and communicates the economic events |
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External users |
Investors- (owners) Use acct info to make decisions on buying, holding, or selling stock Creditors- (suppliers/bank) To evaluate risk of selling on credit or lending money |
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2 primary sources of financial activities |
Borrowing money and selling stock |
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Liabilities |
Amounts owed to creditors in form of debt of other obligations Claims of creditors in the balance sheet |
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Notes payable |
Borrowing money / paying debt |
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Bonds payable |
Debt securities sold to investors that must be paid back at a particular date, years in the future |
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Dividends |
Cash payments to stockholders |
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Assets |
Resources owned by a business -PPE -Cash -Investments |
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Revenue |
Amounts earned on the sale of products - *Increase in assets / decrease in liabilities* -Sales rev -Service rev -Interest rev - *Supplies- assets used in day to day buisness* |
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Inventory |
Goods available for future sales to customers |
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Accounts receivable |
The right to receive $ in the future |
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Expenses |
Costs of running a business -cost of good sold -Selling expenses (salaries) - Marketing expenses -Administrative expenses -Interest expenses (interest paid on debt) - income taxes |
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Liability expenses (6) |
Accounts pay interest pay wages pay sales tax pay property taxes payable Income taxes pay |
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Financial Statements |
The way info is arranged in 4 different formats |
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4 different Financial Statements |
1. Income statement 2. Retained Earning statement 3. Balance sheet 4. Statement of cashflow |
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Income statement |
Reports rev/exp for a specific period of time Lists the company rev followed by exp - determines net income(loss) by detecting expenses from rev |
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Retained Earning Statement |
Net income retained in a corporation to allow for further expansion Shows the amts and causes of changes in retained earnings for a specific time period 1. Beginning retained earnings amt comes first 2. Then company adds net income and deducts dividends 3. If net loss, it deducts that amt from R.E. |
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Balance Sheet |
Reports assets and claims to assets at a specific point in time 1. Lists assets first 2. Liabilities second 3. Stockholders equity third *Assets must balance with the claims to assets* |
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Statement of cash flows |
Shows where your business OBTAINED CASH during a period of time and HOW THE CASH WAS USED - reports a companys operating, investing, and financial activities -Shows net increase/decrease in cash Questions to ask 1) Where did the cash come from? 2) How was the cash used? 3) What was the change in cash balance |
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Stockholders equity |
The owners claim to assets 1. Common stock 2. Retained earnings |
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Basic Accounting Equation |
A = L + SE |
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Proprietorships |
Owned by one person Owner supplies cash/assets Owner receives profits/suffers loses |
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Partnership |
-Owned by two or more people -Partners supply resources and share the profits/losses -Generally unlimited personal liability -Partnership agreement |
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Corporation |
-Ownership divide into shares of stock -Separate legal entity organized under state corp law -Limited liability |
