D196 - Module 3

¡Supera tus tareas y exámenes ahora con Quizwiz!

cash assets

Coins, currency, checks

Dividends

Earnings that are not retained in the business are called ________

Retained Earnings

Earnings that are retained in the business

Comparitive Financial Statements

Financial statements that include information for both the current year and preceding year(s) that are prepared for users to identify any significant changes in particular items.

Owners' Equity

How much the owners originally invested in the business, in addition to profit left in the business ( = assets - liabilities)

inflows, outflows

In considering revenues and expenses, remember that not all __________ of assets are revenues; nor are all _____________ of assets considered to be expenses. For example, cash may be received by borrowing from a bank, which is an increase in a liability, not a revenue. Similarly, cash may be paid for supplies, which is an exchange of one asset for another asset, not an expense.

Inventory (Asset)

Items that are purchased or manufactured by a company that are being held for resale

net assets, retained earnings, owner's equity

Net income results in an increase in _________ and a corresponding increase in ___________, which increases ___________.

Liabilities

Obligations that will require probable future sacrifice of economic benefit in the form of transfer of assets or the providing of services

Sales − cost of goods sold − operating expenses

Operating income (formula) =

Assets

Resources owned or controlled by a company that will provide probable future benefit

Buildings (Asset)

Structures used in the operations of a business

supplementary

The FASB and SEC both require ___________information

income statement, retained earnings

The _________ explains the change in the ___________ balance in the balance sheet

Capital Stock

The amount given by shareholders to obtain shares of stock from a company

Earnings (loss) per share (EPS)

The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of stock outstanding during this period.

60 days

The company is required to file its 10-K with the SEC within ____________ of the end of its fiscal year.

Gross Profit

The difference between sales and cost of goods sold; gross margin

stockholders or shareholders

The owners of a corporation are called

statement of cash flows, balance sheet

The statement of ______________ explains the change in the cash balance in the _____________

One accounting period to the next

The statement of retained earnings therefore displays the changes in retained earnings from _____________

dollar amount

To be summarized and aggregated on a balance sheet, each asset must be assigned a ______________

Current Assets

cash and other assets that are expected to be converted to cash within a year.

Captures cash inflows and outflows from Operations, Investing, and Financing

cash flow statement

publicly traded companies

companies whose ownership shares are trading on stock exchanges

selling goods or providing services, selling other assets, borrowing, and receiving cash from investments by owners.

What are common forms of cash inflows?

Getting the money you need to buy assets borrowing repaying loans get cash from shareholders paying dividends Not daily, but important!

What are financing activities?

buying and selling long term assets - investing in the long-term productive capacity of the business buildings equipment land machines Important, but not common

What are investing activities?

Normal business activities such as: Collecting cash from customers paying cash for inventory purchases paying for employee salaries paying rent

What are operating activities?

1. Summary of significant accounting policies 2. Additional information about the summary totals found in the financial statements 3. Disclosure of important information that is not recognized in the financial statements 4. Supplementary information required by the Financial Accounting Standards Board (FASB) or the Securities and Exchange Commission (SEC)

What are the four general categories of financial statement notes?

annual, quarterly

What are the most common intervals for income statements and cash flow reports to be published?

interest and income taxes

What are the primary non-operating expenses?

the balance sheet, the income statement, and the statement of cash flows.

What are the three primary financial statements?

10-K (annual) and 10-Q (quarterly)

What financial disclosures are monitored by the SEC?

The physical store itself

What is an example of a building asset?

The amount in a company's bank account

What is an example of a cash asset?

The loan associated with the purchase of a home or building

What is an example of a mortgages payable liability?

Corporate income tax or employment taxes owed but not yet paid

What is an example of a taxes payable liability?

The amount owed by a company for inventory that was purchased on credit and has not been paid for yet

What is an example of an accounts payable liability?

If you have a balance on your credit card, the credit card company classifies the amount you owe them as this type of asset

What is an example of an accounts recievable asset?

The items you see on the shelves in Walmart

What is an example of an inventory asset?

Magazines a company owes a customer who bought a 12-month magazine subscription

What is an example of an unearned revenue liability?

A company sells shares of stock to the public. The amount the company receives is capital stock. Partnerships and limited liability corporations (LLCs) also have forms of _______________ accounts that are adapted to the legal formation of these types of entities.

What is an example of capital stock?

If a company reports net income for the year of $100,000 and reinvests the entire amount in the business (does not distribute dividends to its owners), ___________________ are $100,000

What is an example of retained earnings?

1. Inventory makeup - raw materials, WIP, finished goods 2. Receivables - gross amount and allowance for bad debts 3. Pension liability - assumptions about interest rates. etc

What is contained in the Additional Information about Summary Totals section of the notes to the financial statements?

1. status of legal proceedings 2. subsequent events (event after the statements period)

What is contained in the Disclosure of Information Not Recognized section of the notes to the financial statements?

1. Business Segment Breakdown 2. Domestic/International sales breakdown

What is contained in the Supplementary Information section of the notes to the financial statements?

1. Revenue Recognition 2. Inventory Methods 3. Depreciation Methods 4. Use of Estimates

What is contained in the summary of significant accounting policies section of the notes to the financial statements?

What a business does (products or services, and markets of operation) Risks to which the company is exposed Significant properties owned by the company Significant Legal Proceedings Management's discussion and analysis of the company's financial condition and results The company's financial statements Other miscellaneous items

What is included in form 10-k?

= Sales−Cost of Goods Sold (COGS)

What is the Gross Margin (Profit) Formula

Balance Sheet = What do you have or owe right now? Income Statement = What did you make last month, last quarter, or last year?

What is the difference between a balance sheet and an income statement?

= Net Income / Outstanding Number of Shares of Stock

What is the earnings (loss) per share formula?

EDGAR

What is the name of the SEC search tool that allows interested individuals access to financial information about many different companies?

it does not reflect the current value or worth of a company some assets cannot be measured/quantified, therefore it is not equal to the market value of the company

What is the primary limitation of the balance sheet?

1933

When was the Securities and Exchange Commission created?

Central Index Key (CIK)

Which resource or tool is used to identify unique companies in the SEC's 10-K filing database?

many assets are recorded at cost, and som intangible assets are not recorded at all

Why does the balance sheet not reflect the current value or worth of a company?

Statement of Retained Earnings

a statement of the earnings that have been retained in the business reports how the company's retained earnings balance changed from the beginning to the end of the period Although this is not one of the three primary financial statements, it is important because it links the income statement and balance sheet together.

Long-term assets

assets that are expected to be used in business operations for longer than one year

Classified Balance Sheet

A balance sheet that distinguishes between current and long-term assets

Net Income

A line on the income statement that reports a company's operating income minus interest expense and taxes.

Operating Income

A line on the income statement that reports the results of what a company does on a daily basis

Accounts Payable (Liability)

Amount owed as a result of the purchase of goods and services on credit

Unearned Revenue (Liability)

Amount owed in services or products (not money) to a customer who paid in advance

Mortgage Payable (Liability)

Amount owed relating to the purchase of property

Taxes Payable (Liability)

Amount owed to federal and state governments resulting from the application of tax laws

Accounts receivable assets

Amounts owed to a company that sold goods or services to a customer on credit

Expanded Accounting Equation

Assets = Liabilities + [Capital Stock + Cumulative Net Income - Cumulative Dividends]

Liquid

Assets in the form of cash or can be easily converted into cash

Illiquid

Assets like undeveloped land that take time and effort to convert into cash

Assets = Liabilities + Owner's Equity

Balance Sheet Formula

Retained Earnings Equation

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

disclosure

does not include estimates and judgments in the financial statements but instead to explain them in the notes to the financial statements

recognition

include estimates and judgments in the financial statements

Revenues - Expenses = Net Income

income statement equation

operating, investing, financing

individual cash flow items are classified according to three main activities: (in order)

losses

money lost on activities outside the normal operation of a company

gains

money made on activities outside the normal operation of a company

Current Liabilities

obligations expected to be satisfied within a year

long-term liabilities

obligations that a company expects to pay after one year

file their financial statements with the Securities and Exchange Commission (SEC).

publicly traded companies are required to:

gross, net

revenues represent total resource increases; expenses are subtracted from revenues to derive net income or net loss. Thus, whereas revenue is a ______ concept, income (or loss) is a ________ concept.

Statement of Cash Flows

shows the cash inflows (receipts) and cash outflows (payments) of an entity during a period of time.

Revenues

the amount of assets created through the sale of goods and services.

articulation

the interrelationships between the financial statements

Stockholders' Equity

the owners' equity section of a corporate balance sheet is sometimes referred to as

Market Value

the price that would have to be paid to buy the same asset today. For example, if land was obtained ten years ago, it would still be reported on the balance sheet at its original cost, even though its _____________ may have increased dramatically

book value

the value of a company measured by the amount of owners' equity, usually less than the market value

pay current operating expenses such as wages, utilities, and taxes; purchase additional buildings, land, and otherwise expand operations; repay loans; and pay their owners a return on the investments that have been made.

what are common forms of cash outflows?


Conjuntos de estudio relacionados

Physical Activity - Lesson Three

View Set

Micro Economics Practice Final Exam

View Set

Ch 5 Cisco Routing and Switching Essentials

View Set

SCHM Exam 3 - Chapters 9, 6, 11, 14

View Set