Chapter 2 Flashcards
(26 cards)
Financial accounting
Identifying, recording, and communicating operational results and status of an organization
GAAP
Generally accepted accounting principles
Statement of Operations/Income Statement
Summary of an entity’s revenue and expenses over s period of time (accrual basis of accounting)
Revenue
Income
Deferred revenue
Fees collected in advance of providing services
Expense
The reduction in value of an asset as it is used to generate revenue
Balance sheet
Summarizes an entity’s total assets, liabilities, and net assets at a particular point in time
Assets
The potential future economic benefit derived from past transactions (cash, accounts receivable, inventory, land, buildings, equipment and intangible)
Liabilities
Accounts payable, notes payable, mortgages payable
Current assets
Assets consumed within one year
Classified balance sheet
A balance sheet that contains current and noncurrent assets and liabilities
Current liabilities
Financial obligations due within one year
Accounts Payable
Money owed by a business to its suppliers shown as a liability on a company’s balance sheet
Accounts Receivable
A legally enforceable claim for payment held by a business for goods supplied and/or services rendered that customers have ordered but not paid for (shown on a balance sheet as an asset)
Statement of cash flows
Shows where the cash came from and where it went during the period (accrual basis)
Accumulated depreciation
The total amount of depreciation on the value of an asset
Amortization
a measure of how much of an intangible asset has been used up during the accounting period
Depreciation
A measure of the degree to which a tangible asset has been consumed
Accrual basis of accounting
Focuses on the flows of resources and the revenues those resources help to generate; revenues must be recorded when earned and resources when incurred (ex: major corp)
Basic accounting equation
Assets = Liabilities + Net Assets
Liabilities = Assets - Net Assets
Net Assets = Assets - Liabilities
Cash basis of accounting
focuses on the flows of cash in and out of the organization; only records when cash is spent or receive
Charity care discounts
Discounts from gross patient accounts receivable given to patients who are not able to pay their bill
Comparative financial statements
Shows financial information for more than one date or accounting period
Fair value
The price that would be received to sell an asset or paid to transfer a liability at a particular point in time
