Accounting Terms Week 1

External

Financial accounting = ________________ focus

ending balance of Retained Earnings, Net Income, Dividends

What appears on the statement of retained earnings?

used to accumulate and report the effects of each different business activity.

What are accounts used for?

1. things the company OWNS 2. cash, inventory, supplies, accounts receivable, land, equipment, furniture

What are assets a company might have?

financial and managerial accounting

What are the two types of accounting reports?

financial statements

What do users look at for financial accounting?

specialized/customized reports

What do users look at for managerial accounting?

Accounts Receivable, Notes Payable, Cash, Retained Earnings

What is found on a balance sheet?

on a monthly basis, a quarterly basis, and on a fiscal year basis

When can financial statements be prepared?

investors, creditors, the government, directors, management, employees, etc

Who are the users of financial accounting?

Management

Who are the users of managerial accounting?

to earn profits for their stockholders

Why do most companies exist?

accounts

______ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together.

Partnership

a business owned by two or more people; they're personally liable for all business debts

paid-in capital

amounts they contributed to the business in exchange for its stock (common stock)

Limited Liability Company (LLC)

another form of business organization which combines characteristics of a partnership and a corporation

Assets = Liabilities + Stockholders' Equity (A=L+SE)

basic accounting equation

liabiilities

claims to the resources owned or controlled by a company (creditors)

assets

economic resources owned or controlled by a company

statement of cash flows, balance sheet, statement of retained earnings, income statement

examples of financial statements

operating, investing, and financing activities

three types of activities on the cash flow

1. Assets - Liabilities = stockholders equity 2. Assets - stockholders equity = liabilities

two other ways to represent the basic accounting equation

expenses, revenues, net income

what does a single step income statement include?

1. To measure business activities of a company (see if they have enough money to pay you back) 2. To communicate those measurements to external parties for decision-making purposes (you know they are going to contact you and have communication once you lend them money)

2 important things to know about a business before lending them money

Sole Proprietorship

A business owned by one person; owner is personally liable for all business debts

decrease retained earnings

A net loss will ______.

Corporations

A separate entity from both a legal and accounting perspective; public or private business whose owners are not liable for business debts

accounting

A system of analyzing, recording, and summarizing the results of a business's operating, investing, and financing activities and then reporting them to decision makers.

external exchange

A transaction that involves an exchange of assets, liabilities and/or stockholders' equity between the company and someone else is called a(n)

"language of business"

Accounting is the...

4

Companies typically prepare Blank______ financial statements each accounting period.

internal events

Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholders' equity are called

income statement

Expenses appear on the ______.

Internal

Managerial accounting = ________________ focus

accounts receivable

Money someone owes you for services EX: if you work on a Monday for $100, you then make a mental note of how much the company owes you, so you'd have $100 of ___________ ____________ until pay day. Once you are paid, your ____________ ___________ goes back to $0.

retained

Profits that have accumulated in the company over time are ______________ earnings.

revenue - expenses = net income

The accounting equations for an income statement

expected to be used or turned into cash

The order in which assets are reported on the balance sheet is based on when the asset is ______.

Stockholders' Equity

The owners' claim to a company's resources (stockholders/shareholders)

Paid-in Capital and Earned Capital

The two reasons for stockholders equity

short payable

payment will occur for less than a year

long payable

payment will occur for more than a year

earned capital

profits the company has earned through its operations (Retained Earnings).