FA Chapter 1 Flashcards

1
Q

Investor

A

Contributes Money to business (maybe get dividends)

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2
Q

Creditor

A

Lender plus interest

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3
Q

Four Basic Financial Statements

A
  1. Balance Sheet
  2. Income Statement
  3. Statement of Retained Earnings
  4. Statement of cash Flows
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4
Q

A=

A

L+SE

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5
Q

Assets=

A

Liabilities+Stockholders Equity

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6
Q

Accrual Account

A

Revenue When It’s Earned, Expense When It’s Incurred

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7
Q

GAAP

A

Generally Accepted Accounting Principles

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8
Q

Securities and Exchange Commission (SEC)

A

has been given broad powers to determine measurement rules for financial statements.

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9
Q

Financial Accounting Standards Board (FASB) is NOT

A

Part of the government

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10
Q

Financial Accounting Standards Board (FASB)

A

the body to formulate GAAP.

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11
Q

What do independent auditors do?

A

ØAuditors express an opinion as to the fairness of the financial statements.
ØIndependent auditors have responsibilities that extend to the general public.
ØThe PCAOB issues detailed auditing standards that auditors must follow.

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12
Q

The American Institute of Certified Public Accounts

A

requires that all members adhere to a professional code of ethics.

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13
Q

Sole Proprietorship

A

owned by a single individual.

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14
Q

Partnership

A

owned by two or more individuals.

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15
Q

Corporation

A

ownership represented by shares of stock.

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16
Q

Advantages of Corporation

A

Limited liability, Continuity of life, Ease of transfer of ownership, Opportunity to raise large amounts of money

17
Q

Disadvantages of a corporation

A

Double Taxation

18
Q

Balance Sheet

A

reports the amount of assets, liabilities, and stockholders’ equity of an accounting entity at a point in time.

19
Q

Income Statement

A

reports the revenues less the expenses of the accounting period.

20
Q

Statement of Retained Earnings

A

reports the way that net income and distribution of dividends affected the financial position of the company during the accounting period.

21
Q

Statment of Cash Flows

A

reports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing.

22
Q

Contributed Capital=

A

Common Stock

23
Q

Common Stock=

A

Contributed Capital

24
Q

Rent expense includes…

A

months not yet paid for