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87 Cards in this Set
- Front
- Back
Formula for Balance Sheet:
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A=L+O Assets = Liabilities + Owner's Equity
A-L=O Assets - Liabilities = Owner's Equity |
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Formula for Income Statement:
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NI = R - E Net Income = Revenue - Expenses
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Formula for Statement of Cash Flows:
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Cash flows from operating activities + cash flows from investing activities + cash flows from financing activities = change in cash
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Accounting Cycle: ______ make decisions about ________, whose activities are measured by __________ and in turn, this information is communicated to ______.
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Investors, Companies, Financial Accountants, Investors
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A type of accounting that deals with the methods accountants use to provide information to an organization's internal users; that is, its own managers
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Managerial Accounting
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A type of accounting that measures business activities of a company and communicates those measurements to external parties for decision-making purposes
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Financial Accounting
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resources owned by a company, such as cash, land, and inventory
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assets
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amount owed to credits, such as rent, accounts payable, and taxes
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liabilities
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What's left - the owner's claim. All the resources - what you owe.
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Stockholders' Equity
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the amount a company gets for selling their goods/services
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revenue
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3 categories of business activities and examples of each:
1. _______ Activities - involves funding from external sources 2. _______ Activities - involves transactions in primary operations of business 3. _______ Activities- involves purchase and sale of long-term resources. |
1. Financing - banks, stockholder's
2. Operating - selling, renting, taxes, utilities 3. Investing - vehicles, buildings, land |
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A type of business activity is for short-term use - used up < 1 year.
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operating
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Accounting is the language of ________.
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business
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If Revenue > Expenses, there is a net _______. If Revenue < Expenses, there is a net _____.
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income, loss
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Forms of Business Organizations:
1. __________ - Owned by a single person. 2. __________ - Owned by two or more persons. 3. __________ - Legally separate from its owners. |
Sole Proprietorship, Partnership, Corporation
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periodic reports published by the company for the purpose of providing information to external users
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financial statements
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a financial statement that reports the companies revenues and expenses over an interval of time
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Income statement
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The ____ Statement focuses on profitability and shows whether the company was able to generate enough revenue to cover the expense of running the business. Using this, you can calculate net income.
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Income
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a financial statement that summarizes the changes in stockholders' equity over an interval of time
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Statement of Stockholders' Equity
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Stockholders' Equity consists of what two things?
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Common Stock & Retained Earnings
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anytime a corporation issues stock in exchange for cash
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common stock
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the cumulative net income over the life of the company less dividends
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retained earnings
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You get the net income to transfer to the Statement of Stockholders' Equity from the _______ statement.
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Income
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financial statement that presents the financial position of the company on a particular date and is summarized by the basic accounting equation: Assets= Liabilities + Stockholders' Equity
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Balance Sheet
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financial statement that measures activities involving cash receipts and cash payments over an interval of time. Can be classified into three categories: ____ cash flows, ____ cash flows, _____ cash flows.
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Statement of Cash Flows, operating, investing, financing
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formal standards that financial accounting information is based on
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GAAP (Generally Accepted Accounting Principles)
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Current Accounting Standard Setting: The _______ sets standards for the U.S. and is governed by the _________, which is the ultimate authority. Globally, the _________ decides whether or not they'll adopt these standards.
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Financial Accounting Standards Board (FASB), Securities and Exchange Commission (SEC), International Accounting Standards Board (IASB)
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trained individuals hired by a professional company as an independent party to express a professional opinion of the accuracy of that company's financial statements
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auditors
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Role of auditors: Help ensure that management has in fact appropriately applied ____ in preparing the company's financial statements and to help _____ and ____ in their decisions by adding credibility to the financial statements.
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GAAP, investors, creditors
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Financial accounting should provide information that is useful to ___ and ___ in making decisions, helps to predict __ flow, tells about _______ resources, claims to resources, and changes in resources and claims.
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investors, creditors, cash, economic
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a code or moral system that provides criteria for evaluating right and wrong behavior
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ethics
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an act that provides regulation of auditors and the types of services they furnish to clients, increases accountability of corporate executives, addresses conflicts of interest for securities analysts, and provides for stiff criminal penalties for violators.
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Sarbanes-Oxley Act (SOX)
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There are 2 types of accounting: _____ and ______
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Public, Private
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Assumption for GAAP:
1. ______ Assumption - identify all economic events with a particular economic entity 2. ______ Assumption - provide information of an enterprise at regular time periods (quarterly, yearly) 3. ______ Assumption - need a uni or scale of measurement 4. ______ Assumption - business entity will continue to operate indefinitely |
Economic Entity, Periodicity, Monetary Unit, Going Concern
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Type of business activity? - issue common stock
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financing
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Type of business activity? - collect cash from a bank loan
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financing
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Type of business activity? - sell products to customers
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operating
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Type of business activity? - pay workers' wages
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operating
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Type of business activity? - purchase equipment for manufacturing
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investing
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Type of business activity? - pay dividends to stockholders
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financing
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Type of business activity? - sell factory
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investing
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Type of business activity? - purchase office supplies
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operating
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Type of business activity? - pay utilities
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operating
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Type of business activity? - pay for maintenance on delivery vehicles
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operating
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Accounts Receivable is what type of account?
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asset
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Land is what type of account?
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asset
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Prepaid Rent is what type of account?
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asset
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Salaries Expense is what type of account?
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expense
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Utilities Expense is what type of account?
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expense
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Service Revenue is what type of account?
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Revenue
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Accounts Payable is what type of account?
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Liability
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Notes Payable is what type of account?
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Liability
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Dividends is what type of account?
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Dividends
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Common Stock is what type of account?
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Stockholders' Equity
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resources owned
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assets
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amounts owed
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liabilities
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owners' claims
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stockholders' equity
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distributions to owners
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dividends
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sales of products or services
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revenues
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costs of earning revenues
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expenses
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Statement of Stockholder's Equity Formula:
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Common Stock + Retained Earnings (= Beg+ Net income - Dividends) = Stockholders' Equity
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Roles of Financial Accounting:
1. ______ business activities of the company. 2. ______ those measurements to external parties for decision-making purposes |
Measure, communicate
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a type of transaction with a separate economic entity
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external transaction
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a type of transaction that does not include a separate economic entity
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internal transaction
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a list of all accounts and their balances at a particular date, showing that total debits equal total credits
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trial balance
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The trial balance is used for _____ purposes only and provides a check on the equality of the debits and credits.
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internal
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A type of accounting that records revenues when earned (the revenue recognition principle) and expenses with related revenues (the matching principle).
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accrual-basis
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The _______ principle recognizes revenue when it is earned
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revenue recognition
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The Matching Principle states that ___ are reported with the ___ they help to generate.
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expenses, revenues
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_______ Accounting recognizes revenue when it is earned, records expenses with related revenues, and is a part of GAAP. _______ accounting recognizes revenue when cash is received, records expenses when cash is pain, and is not a part of GAAP.
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Accrual-Basis, Cash-Basis
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The purposes of _____ entries are to record events that have occurred but which have not been recorded, to record revenues in the period earned, to record expenses in the period they are incurred in the generation of those revenues, to correctly state assets and liabilities in the balance sheet.
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adjusting
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we paid cash (or had an obligation to pay cash) for the purchase of an asset before we incurred the expense
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prepaid expenses
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we received cash and recorded a liability before we earned the revenue
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unearned revenues
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we paid cash after we incurred the expense and recording a liability
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accrued expenses
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we received cash after we earned the revenue and recorded an asset
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accrued revenues
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types of prepayments - adjusting entries
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prepaid expenses, unearned revenues
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types of accruals - adjusting entries
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accrued expenses, accrued revenues
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costs of assets acquired in one period that will be expensed in a future period
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prepaid expenses
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The adjusting entry for an unearned revenue always includes a debit to a _____ account and a credit to a ______ account.
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liability, revenue
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When a company has incurred an expense but hasn't yet paid cash or recorded an obligation to pay, it should still record the expense.
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Accrued Expense
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When a company has earned revenue but hasn't yet received cash or recorded an amount receivable, it still should record the revenue.
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Accrued Revenue
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Post adjusting entries to the ___ accounts in the general ledger to update the account balances. Prepare an _______ balance.
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T, adjusted trial
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a list of all accounts and their balances after we have updated account balances for adjusting entries
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adjusted trial balance
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Closing entries are how we take ______ out of ________.
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dividends, retained earnings
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Closing entries, transfer the balance of a ______, ______, and _______ accounts to the balanced of _______ earnings.
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revenue, expense, dividend, retained
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After closing entries, the balance of each revenue, expense, and dividend equals ______.
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zero
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Closing entries do no affect the balances of permanent accounts other than __________.
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retained earnings
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