accounting

intangible assets

assets that do not have physical substance, ex: goodwill, film library, customer lists, brands trademarks, patents

conservatism

in accounting means that when preparing financial statements, a company should choose the accounting method that will be least likely to overstate assets or income

debits:

increase assets and decrease liabilities

owner's investments & revenues

increase stockholder's equity (credit)

patents and copyrights are:

intangible assets

the balance in retained earnings is not affected by:

issuance of common stock

assets=

liabilities + stockholders' equity

dividends

payments of cash from a corporation to its stockholders

service revenue

received cash for services provided

monetary unit

reporting only those things that can be measured in dollars

common stock

term used to describe the total amount paid in by stock holders for the shares they purchased

expenses

the cost of assets consumed or services used in the process of generating revenues

liabilities

the debts and obligations of a business, represent the amounts owed to creditors

reliability

the desire to minimize errors and BIAS in financial statements

revenue

the increase in assets that result from the sale of a product or service in the normal course of the business

materiality

the judgment concerning whether an item is large enough to matter to decision makers

time period

the practice of preparing financial statements at regular intervals

relevance

the quality of information that indicates the information makes a difference in a decision

full disclosure

the reporting of all information that would make a difference to financial statement users

conservatism

the use of accounting methods that do not overstate assets or income

accumulated depreciation

total amount of depreciation expensed thus far in the asset's life

economic entity

tracing accounting events to particular companies

posting

transfers journal entries to ledger accounts

what is the primary criterion by which accounting information can be judged?

usefulness for decision making

liquidity-WORKING CAPITAL

working capital= current assets-current liabilities - if positive, there is a greater likelihood that the company will pay its liabilities

assets

resources owned by the business

stock holders' equity=

common stock + retained earnings

generally accepted accounting principles are:

a set of standards and rules that are recognized as a general guide for financial reporting

long-term investments

1) investments in stocks & bonds of other corporations that companies hold for more than one year 2) long term assets, such as land and buildings, not currently being used in the company's operations

for 2012 stoneland corporation reported net income $26,000; net sales $400,000; and average shares outstanding 6,000. There were preferred stock dividends of $2,000. What was the 2010 earnings per share?

26,000-2,000/ 6,000 = $4.00 REMEMBER: net income-preferred stock dividends/ average shares outstanding

which of the following is not a long-term liability? a) bonds payable b) current maturities of long-term obligations c) long-term notes payable d) mortgages payable

CURRENT MATURITIES OF LONG-TERM OBLIGATIONS

a trial balance will not balance if:

a $100 cash dividends is debited to the dividends account for $1,000 and credited to cash for $100

cost

a belief that items should be reported on the balance sheet at the price that was paid to acquire the item

consistency

a company's use of the same accounting principles and methods from year to year

balance sheet

a financial statement that reports the assets and claims to those assets @ a specific point

comparability

ability to easily evaluate one company's results relative to another's

depreciation

allocating the cost of assets to a number of years

accounts that normally have debit balances are:

assets, dividends, and expenses

retained earning

beginning period retained earning + net income - dividends

going concern

belief that a company will continue to operate for the foreseeable future

current assets

cash and other resources that companies reasonably expect to convert to cash or use up within one year or the operating cycle, whatever is longer

cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle are called:

current assets

liquidity- CURRENT RATIO

current ratio= current assets/current liabilities -measures short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash

solvency

debt to total asset ratio= total debt/total asset total debt---> SAME WORD FOR total liability measures the ability of the company to survive over a long period of time

dividends & expenses

decrease stockholder's equity (debit)

profitability

earning per share (EPS)= net income-preferred stock dividends/ average common shares outstanding

free cash flow equation

free cash flow= cash provided by operations- capital expenditures- cash dividends

revenue>expense =

net income

current liabilities

obligations that a company reasonably expects to pay within one year or operating cycle, whatever is longer