Accountancy 2036

what are the four financial statements accounting data is compiled and reported on

income statement statement of retained earnings balance sheet statement of cashflows

who has access to managerial accounting reports?

internal users (i.e. owners and managers)

what is the most popular form of business organization in the United States?

sole proprietorship

which two forms of business organizations are personally liable for debts of the business?

sole proprietorship partnership

how many owners can a corporation have?

1 or more

how many owners can a partnership have?

2 or more

Companies typically prepare ______ financial statements each accounting period.

4

True or false: Common Stock increases when a company earns a profit.

false

True or false: Retained Earnings increases when a company earns and keeps its profit.

false

True or false: The order of the heading of an income statement indicates the name of the statement first, the period of time covered, and the name of the company third.

false

true or false: financial statements must have a year end of december 31.

false

separate entity assumption

financial reports of a business only include the results of that business' activities

The underlying rules of accounting in the US are called ______

generally accepted accounting principles (GAAP)

income statement (statement of operations)

includes all revenue accounts and all expense accounts (used to report net income or net loss)

Expenses appear on the ______.

income statement

Which financial statement reports the financial performance of the business during the current accounting period?

income statement

A financial statement heading states that it was prepared: "For the Year Ended December 31, 2020." What types of financial statements could this be?

income statement statement of cash flows statement of retained earnings

creditor

interested in assessing from the financial statements of the company whether its operating activities are generating positive cash flows and whether its assets are enough to cover its liabilities.

investors

interesting in assessing the company's abilities to generate profits and distribute dividends

who has access to financial accounting reports?

internal users (i.e. owners and managers) external users (i.e. creditors, investors, directors, and government)

______ are measurable amounts that the company owes to creditors

liabilities

payable =

liability

The statement of retained earnings reports the amount

of earnings kept by the company of earnings distributed to the company's owners during the accounting period

how many owners can a sole proprietorship have?

only 1

statement of cash flows includes

operating activities, investing activities, financing activities

An asset is an amount ______, while a liability is an amount ______.

owned; owed

paid-in capital (common stock)

owners' claim for amounts they contributed directly to the company in exchanged for its stocks

The main reason companies exist is to maximize their ______.

profits owners' wealth

examples of expense accounts

rent expense salaries and wages expense supplies expense advertising expense insurance expense utility expense operating expenses

statement of cash flows

reports only cash exchanges

Net income is accumulated in

retained earnings until a decision is made to distribute them to stockholders

income statement equation

revenue - expenses = net income

net income/net loss =

revenues - expenses

examples of revenue accounts

sales revenue service revenue

revenues are earned by

selling goods or services to customers

what are the three primary forms of business organizations?

sole proprietorship partnership corporation

The heading of an income statement should include ______.

the accounting period covered by the statement the title "Income Statement" the name of the business

earned capital (retained earnings)

the owners claim on profits the company has earned for them through its business operations

stockholders' equity

the owners claims on the assets of the business after creditors claims have been fulfilled

what enhances the usefulness of financial information?

timely verifiable comparable understandable

True or false: A fiscal year can end on a date other than December 31. A calendar year ends on December 31.

true

True or false: Creditors would like a company that owes them money to have a large positive cash flow from operating activities.

true

True or false: Retained Earnings increases when owners give a company money in exchange for stock.

true

True or false: Understanding accounting is useful for all business majors given many business decisions rely on accounting information.

true

balance sheet (statement of financial position)

used to report assets, liabilities, and stockholders equity accounts

statement of retained earnings

used to report the ending balance in retained earnings and the change in retained earnings from the beginning to the end of the period

Creditors want to see that a company that owes them money has ______

assets that are greater than its liabilities

When a company is owed for sales made to customers on credit, the asset called

Accounts Receivable will be reported on the balance sheet

liabilities

a measurable amount the company expects to give up in the future to settle what it presently owes to creditors. (i.e. notes payable, accounts payable, salaries and wages payable)

assets

a resource controlled by the company that will benefit the company in the future. (i.e. cash, accounts receivable, supplies, equipment, buildings, and software)

The unit of measure concept is the idea that a company should report its financial results on its financial statements using

a single monetary unit, such as the US dollar

expenses

all cost of doing business business that are necessary to earn revenues

basic accounting equation (balance sheet equation)

assets = liabilities + stockholders' equity

statement of retained earnings equation

beginning retained earnings + net income - dividends = ending retained earnings

which form of business organization requires ownership acquired via stock

corporation

which form of business organization requires the business pays tax on income

corporation

A net loss will ______

decrease retained earnings

Financial Accounting Standards Board

determines the rules for reporting accounting information and producing financial statements

dividend are

distributions to stockholder generally in the form of cash (not an expense