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