Chapter 2- Financial Statements & Accounting Concepts/Principles Flashcards
(62 cards)
What is an account?
A record in which transactions affecting individual assets, liabilities, stockholders’ equity, revenues, and expenses are recorded.
What is the accounting equation?
Assets = Liabilities + Stockholders’ equity (A = L + SE).
The fundamental relationship represented by the balance sheet and the foundation of the bookkeeping process.
What are accounts payable?
A liability representing an amount payable to another entity, usually because of the purchase of merchandise or services on credit.
What are accounts receivable?
An asset representing a claim against another entity, usually arising from selling goods or services on credit.
What is accrual accounting?
Accounting that recognizes revenues and expenses as they occur, even though the cash receipt from the revenue or the cash disbursement related to the expense may occur before or after the event that causes revenue or expense recognition.
What are accrued liabilities?
Amounts that are owed by an entity on the balance sheet date.
What is accumulated depreciation?
The sum of the depreciation expense that has been recognized over time. Accumulated depreciation is a contra asset-an amount that is subtracted from the cost of the related asset on the balance sheet.
What is additional paid-in capital?
The excess of the amount received from the sale of stock over the par value of the shares sold.
What are assets?
Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
What is a balance sheet?
The financial statement that is a listing of the entity’s assets, liabilities, and stockholders’ equity at a point in time.
Sometimes this statement is called the statement of financial position.
What is another term for the accounting equation?
Balance sheet equation
What does cash represent on the balance sheet?
An asset that represents the amount of cash on hand and balances in bank accounts maintained by the entity.
What is common stock?
The class of stock that represents residual ownership of the corporation.
What is a corporation?
A form of organization in which ownership is evidenced by shares of stock owned by stockholders; its features, such as limited liability of the stockholders, make this the principal form of organization for most business activity.
What is cost of goods sold?
Cost of merchandise sold during the period; an expense deducted from net sales to arrive at gross profit.
Frequently used synonyms are cost of sales and cost of products sold.
What are current assets?
Cash and those assets that are likely to be converted to cash or used to benefit the entity within one year of the balance sheet date.
What are current liabilities?
Those liabilities due to be paid within one year of the balance sheet date.
What is depreciation?
The accounting process of recognizing the cost of an asset that is used up over its useful life to the entity.
What is depreciation expense?
The expense recognized in a fiscal period for the depreciation of an asset.
What is a dividend?
A distribution of earnings to the stockholders of a corporation.
What is earnings per share of common stock outstanding?
Net income available to the common stockholders divided by the average number of shares of common stock outstanding during the period.
Usually referred to simply as EPS.
What is equity?
The ownership right associated with an asset.
See stockholders’ equity.
What are expenses?
Outflows or other using up of assets or incurring a liability during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s major operations.
What is a fiscal year?
The annual period used for reporting to owners, the government, and others.
