Unit 2 Financial Statements Flashcards Preview

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Flashcards in Unit 2 Financial Statements Deck (32):
1

Current Assests

Consists of any assets that can be liquidated in 1 operating cycle

2

Property and plant equipment

Are tangible assets

3

Other non current assests

Are items readily classifiable elsewhere

4

Equity consists of

Capital contributed by owners
Retained earnings
Accumulated other comprehensive income
The noncontrolling interest in a consolidated entity

5

Transactions not included in Net Income

Transactions with owners
Error Corrections
Items reported initially in other comprehensive income
Transfers to and from appropriated retained earnings
Effects on prior periods of accounting changes

6

Balance Sheet

The Statement of Financial Position

Left side=Entity resource
Right side=Finance structure

7

Operating Cycle

Is the acquisition of resources and the final receipt of cash from their sale.

8

Single Step Income Statement

One grouping for revenue and gains and another grouping for expenses and losses

9

Multi Step Income Statement

Matches operating revenues and expenses in a section from non operating items

10

Condescend Income Statement

Most common method of presentation

Only includes the section totals of the multi step format.

11

Cost of Goods Sold

Beg FG Inventory
+ Purchases or COGM
Goods Available for Sale
- Ending Inventory
Cost of Goods Sold

12

Cost of Goods Manufactured

Beginning Work In Process
+ Sum of Manufacturing costs
- Ending Work In Process
Cost of Goods manufactured

Ending FG
+ Cost of Goods Sold
- Beginning FG Inventory
Cost of Goods Manufactured

13

Selling Expenses

Incurred for selling and marketing.

Selling includes: Sales representatives salaries, commission, traveling expenses.
Sales department rent, salaries and depreciation.
Shipping costs are also classified as selling costs.

14

What happens to materials that are unusual in nature, infrequent in occurrence or both?

These items are recorded separately from the income from continuing operations.

These items are not reported net of taxes
Gains or losses that are not individually material must be aggregated
The nature and financial effect of each item is disclosed in the notes to the financial statements or reported in the income statement
The effects of these on the earnings per share must not be reported on the income statement

15

Discontinued operations

This must be represented in a seperate section after income from

16

Transaction not included in Income Statement

Transactions with owners
Prior period adjustments( error corrections)
Items reported initially in other comprehensive income
Transfers to and from appropriated retained earnings
Adjustments made in quasi recognition
Effects on prior periods of accounting changes

17

Intraperoid tax allocation

Intraperoid tax allocation is required in the income statement

Thus income tax expense or benefits is allocated to

18

_____are used when one entity holds a controlling financial interest in one or more other entitIes

Consolidated Financial statement

They report the:
Financial position
Results of operations
Cash flows

As if the consolidated entities were one entity

19

______ are used to combine the statements of the subsidiaries without consolidating them with those of the parent. They are not allowed substitute for consolidated statements.

Combined Financial Statements


Combined Financial Statements are useful when one individual owns a controlling financial interest in several entities with related operations

They may also be used to present the statements of entities under common management.

20

General and Legal Expenses

Are incurred for the direction of the entity as a whole and are not related entirely to a specific function.

- legal and accounting fees
- professional services
- officers salaries
- insurance
- wages of office staff
- miscleenous supplies
- office occupancy costs

21

Comprehensive Income

Comprehensive Income includes all changes in equity of a business during a period except those from investments by and distributions to owners. It includes all components of

- net income
- Other comprehensive income

22

Other Comprehensive Income

Always - Available for Sale securities

Desire - Derivatives

Real - Retirement

Friends - Foreign Currency

Each item of OCI must be presented net of tax

23

The components are not nominal accounts

True or False

False

The components of OCI are recorded in a nominal account and then later closed into the Accumulated OCI a permanent account that is reported in the equity section of the balance sheet.

24

OCI Income increases accumulated OCI.

True or False

True

25

OCI Loss decreases accumulated OCI for the period.

True or False

True

26

OCI

One continuous Statement

A total of net income with its components

A total of OCI with its Components

A total of comprehensive income

27

OCI

Separate but consecutive

The first statement presents the net income and total net income

The second statement is presented immediately after the first

28

Write down a simple income statement

Sales Revenue
COGS
Gross Margin
Operating expenses
Gain
Losses
Income tax expenses

29

Admistrative genral Expenses

Incurred for the direction of the entity as a whole and not releated to a specific function.. selling and manufacturing

Accounting and legal fees
Other fees for professional services
Officers salaries
Insurance
Wages of office staff
Miscellaneous supplies
Office occupancy costs

30

OCI- Other comprehensive income inculdes

Always Desire Real Friends

Available for sale security
Derivatives
Retirement
Foreign currency

31

Each component of OCI must be net of taxes

True or False

Each component of OCI must be net of taxes

Always
Desire
Real
Friends

Avaible for sale
Derivatives
Retirement
Foreign exchange currency

32

Going concern definition

Going concern is a basic underlying assumption in accounting. The assumption is that a company or other entity will be able to continue operating for a period of time that is sufficient to carry out its commitments, obligations, objectives, and so on.
Historcal cost measure is used because of the value at which it was bought
Fair value measure the worth of the asset in the market
Present value of future cash flows