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57 Cards in this Set
- Front
- Back
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What are 3 primary activities all business engage in?
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1. Financing
2. Investing 3. Operations |
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Who are the primary users of financing information? (List 4)
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Managers and employees, Investment analyists, Creditors and suppliers, Shareholders and directors, Customers and strategic partners, Regulators and tax agencies
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What are the 4 primary financial statements required to be published by all public companies?
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Balance Sheet, Income Statement, Statement of Stockholder Equity, Cash Flow Statement
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Which financial statement reflects information as of a specific point in time?
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Balance Sheet
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Which financial statement shows information about a company's sales and expense?
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Income Statement
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Which financial statement shows a company's market value?
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None of the four primary financial statements
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What is the accounting equation?
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Assets = Liability + Stockholders' Equity
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What does ROE stand for?
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Return on Equity
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What term is used to describe the body of rules used in financial accounting?
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GAAP - Generally Accepted Accounting Principles
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What is FASB?
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Financial Accounting Standards Board - Sets the accounting standards for public companies in the U.S.
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SEC
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Securities and Exchange Commission - Enforces the nation's federal securities laws and regulations.
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IASB
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International Accounting Standards Board - Sets the accounting standards for use by countries other than the United States.
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What is Net Book Value?
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Assets less Liabilities; how the company is worth based on the accounting formula.
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What is net income?
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The difference between revenue and expenses
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Measuring Profit Margin
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Net income/Net sales - measures the profitability of each dollar of sales.
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Measuring Asset Turnover
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Sales/Average Assets - measures the productivity of assets
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Return on Assets
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Net income/Averages Assets - measures the return on total investment. Also profit margin x asset turnover
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Return on Equity
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Measures the return on owners investment
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AICPA
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American Institute of Certified Public Accountants - Standard setting and CPA oversight
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PCAOB
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Public Companies Accounting Oversight Board - regulatory oversight of auditors
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Costs
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Expenditures expected to result in a current (expense) or future benefit (asset)
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Depreciation
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Cost allocation of an asset over time
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Current Assets
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Assets expected to be converted in one year. (ie. cash, accounts receivable, inventory)
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Long-Term Investments
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Assets expected to be held longer than one year.
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Plant property and Equipment
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Assets used in operation that have a life longer than one-year.
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Intangible Assets
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Assets without physical substance. (ie. patents, trademarks, copyrights, goodwill)
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Working Capital
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Difference between current assets and current liabilities.
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Capital Stock
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par value of stock sold to original investors
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Additional paid-in-capital
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value of stock sold to original investors
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Retained Earnings
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Accumulated net profits not distributed to stockholders as dividends.
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Historical Cost Principle
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Assets and liabilities that are generally carried on the balance sheet at historical cost. Most objective and verifiable measurement.
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Exceptions to Historical Cost Principle
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Marketable securities where pricing is readily available. (ie bonds, stocks, etc)
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Revenue Recognition Principle
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Revenue that is recognized when: a) Earned b) Realizable.
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Matching Principle
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Expenses that are recognized when incurred to derive revenue (even if cash has not been paid)
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Account
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Individual accounting record to keep track of increases and decreases of specific assets, liabilities, equity, revenue, or expense items.
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Chart of Accounts
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A list of all accounts used by a company numerically in order starting with Assets, Equity, Revenue, and Expenses
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Journal
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Listing of all transactions with summary totals (similar to checkbook)
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General Ledger
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Record of all accounts showing beginning balance, summary of transactions and ending balance
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Trial Balance
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A list of all accounts and their balance at a point in time (ie. end of month). Used to verify all transactions result in balanced accounting equation and to prepare financial statements.
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Debits and Credits
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If sum is greater on left side, DEBIT balance. If the right side, CREDIT Balance.
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Annual Filing
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10-K
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Quarterly Filing
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10-Q
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Material Information Filing with SEC
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8-K
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Prepaid Expenses
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Prepaid expense reflect advance cash payment that will ultimately become expenses. (ie. prepaid advertising)
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Unearned Revenue
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Unearned revenue reflect cash received from customers before any services or goods are provided. (ie. tickets sold for upcoming event)
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Accrued Expenses
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Expenses incurred and recognized on the income statement even though they have not been paid in cash. (ie. wages payable to employees)
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Accrued Revenue
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Revenues earned and recognized on the income statement even though cash is not yet received. (ie. sales on credit and long-term contracts)
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Accounting Information System
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Process company uses to systematically collect data about accounting transactions and summarizes that into a set of financial statements.
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Accrual Based Accounting
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Revenue and expenses are recognized when earned and incurred, not necessarily when cash is exchanged.
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Financial Statement Template: Issue Stock
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Increase Cash; Increase Contributed Capital
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Financial Statement Template: Purchasing Inventory on Credit
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Increase Non-Cash Liabilities; Increase Liabilities
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Financial Statement Template: Sell Inventory for $500 on credit
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Increase Non-Cash; Increase Earned Capital
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Financial Statement Template: Record Cost of Goods Sold
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Decrease Non-Cash Assets; Decrease Retained Earnings (Decrease Expenses)
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Financial Statement Template: Paying Dividends
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Decrease Cash, Decrease Earned Revenue (Do not touch Income Statement)
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Financial Statement Template: Wages not yet paid
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Increase Liabilities; Decrease Earned Capital
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Financial Statement Template: Received Payment for Service not yet completed
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Increase cash; Increase Liability
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Financial Statement Template: Paid for Advertising ahead of time
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Decrease Cash and Increase Non-Cash Assets
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