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ACCT 3008-006 > CHAPTER 1 > Flashcards

CHAPTER 1 Flashcards

1
Q

What are the 3 forms of business organizations?

A

Sole Proprietorship, Partnership, Corporation

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2
Q

Simple to establish, shared control, broader skills and resources - what type of business organization is this?

A

Partnership

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3
Q

Simple to establish, owner controlled, and tax advantages are aspects of which form of business organization?

A

Sole Proprietorship

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4
Q

Which type of business organization do you get taxed twice, no personal liability and easier to raise funds?

A

Corporation

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5
Q

How many types of users are their for financial information and what are they?

A

2 - internal users, external users

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6
Q

Which type of user gains more financial information?

A

Internal

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7
Q

What are some examples of internal users of financial information?

A

Marketing team, Finance team, Human Resources, Management

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8
Q

Who are the external users a company would refer to when speaking about financial information?

A

Investors and Creditors

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9
Q

Financing, Investing, Operation - what are these?

A

The 3 principal types of business activities

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10
Q

What does the financial information system do?

A

Keeps track of all business activities

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11
Q

What are the 2 primary sources of outside funds?

A

Borrowing Money (Debt Financing). Issuing (Selling) shard of stock for cash (equity financing)

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12
Q

Notes Payable and Bonds Payable are examples of what?

A

Debt Financing - they are also liabilities

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13
Q

Common Stock and Dividends are examples of what?

A

Equity Financing - Common stock is what the inventors have put into the business and Dividends are what the owners have taken out.

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14
Q

Resources purchased by the company in order to operate are what?

A

Assets

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15
Q

If you see the word revenue, what does that mean?

A

Income

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16
Q

What are some examples of Assets?

A

Supplies, Inventory, Accounts Receivable, Cash, Prepaid, Equipment, Land.

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17
Q

What classifies as an Expense?

A

Anything you consumed to earn revenue

18
Q

Accounts Payable, interest payable, wages payable, sales taxes payable and income taxes payable are examples of what?

A

Liabilities

19
Q

What is the Accounting Equation?

A

Assets = Liabilities + Stockholder’s Equity (A=L+SE)

20
Q

True or False - The accounting equation must always balance?

A

TRUE

21
Q

What are 3 Financial Statements?

A

Income Statement, Statement of Retained Earnings, Balance Sheet

22
Q

Revenues - Expenses = Net Income/Net Loss (R-E=NI/NL)
What statement is this equation for?

A

Income Statement

23
Q

What is the purpose of the Income statement?

A

To detail the revenue and expenses of the business

24
Q

What is the purpose of the Statement of Retained Earnings?

A

To detail the earnings (Net income, Above) let in the business

25
Q

What is the equation for a Statement of Retained Earnings?

A

Beginning Retained Earnings + Net Income = Subtotal - Net Loss - Dividends = Ending Retained Earnings
(you will either have net income or net loss, not both)

26
Q

What is the purpose of a balance sheet?

A

To detail the Assets, Liabilities, and Shareholders Equity of the business

27
Q

What is the equation for a balance sheet?

A

Assets = Liabilities + Shareholder’s Equity (A=L+SE)

28
Q

What is Shareholder’s Equity made up of?

A

Shareholder’s Equity (SE) is made up of Common Stock and the Ending Retained earnings

29
Q

What are some examples of a Liability?

A

Anything with the world Payable in it, unearned revenue (deposits)

30
Q

What does DALISE stand for?

A

Dividends
Assets
Liabilities - Payable, Unearned
Income - Revenue, Earned
Shareholder’s Equity
Expenses

31
Q

What are the equations for the following:
Income Statement (I/S)
Statement of Retained Earning’s (SRE)
Balance Sheet (B/S)

A

I/S = R - E = NI/NL
SRE = Beg RE + NI = Subtotal - NL - D = End RE
B/S = A = L + SE

32
Q

What must all financial statements have?

A

WHO, WHAT, TIME FRAME
Company Name
Name of Statement
Date (I/S and SRE = For the year ended, ____) (B/S = date only)

$ at the top of each row and the objective
Single line means add or subtract
Double Line means finished

33
Q

What does the Income Statement look like?

A

Company Name
Income Statement
For the year ended, _______

Revenue
list of all revenues
subtotal

Expenses
list of all expenses
subtotal

Equals either a NI or NL

34
Q

What does a SRE look like?

A

Company
Statement of Retained Earnings
For the year ended, _______

Retained earnings, (date)
Add: Net Income (if applicable)
Subtotal

Less: Net Loss (if applicable)
Less: Expenses

Equals Retained Earnings, (Date)

35
Q

What does a balance sheet look like?

A

Company
Balance Sheet
Date

Assets:
In order of liquidity
Total Assets:

Liabilities and Shareholder’s Equity:
Liabilities:
in order of liquidity
Total Liabilities:

Shareholder’s Equity:
Common Stock
Retained Earnings
Total Shareholder’s Equity:
Total Liabilities & Shareholder’s Equity

ASSETS & LIABILITIES + SE MUST BALANCE

36
Q

What does a Statement of Cash Flows provide?

A

answers the questions of where the case came from, what is was used for and what the change in cash balance was during a period of time

37
Q

Direct method and indirect method are methods used for what purpose?

A

methods to prepare statement of cash flow by operating activities

38
Q

What are the 4 sections of a SCF (statement of cash flow)

A

Net cash flow provided (used) by operating activities
(how much cash was generated by day to day activities)

Net cash flow provided (used) by investing activities (only investing paid with cash)

Net cash flow provided (used) by financing activities ( how much cash was used to pay lenders (principal) and investors (dividend))

Noncash investing and financing activities (ie: mortgage)

39
Q

What does a Statement of Cash Flow (SCF) look like?

A

Company
Statement of cash flow
For the year ended, _____

Cash Flow from operating activities
*
*
Net cash provided from operating expenses
Cash flow from investing activities
*
*
Net cash used from investing activities
Cash flow from financing activities
*
*
Net cash used from financing activities
Net Increase/Decrease in cash
cash balance, Jan 1___
Cash balance, Dec 31____

40
Q

What is the interrelationships of statements

A

Income statement provides the net income/loss

Net income/Loss is used in Retained earnings statement.

Ending balance in Retained earnings statement is used in the balance sheet.

*Ending Balance from Statement of Cash Flow is also used in Balance sheet to determine all the cash in the asset section.

41
Q

What is MD&A?

A

Management Discussion and Analysis - the managements view of the company ( must highlight the favorable and unfavorable trends and identify the significant events and uncertainties)

42
Q

Notes are ___________ to understanding a companies operating performance and financial position

A

Essential

ACCT 3008-006 (2 decks)

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