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).