acct 2810 Exam 1 Cornett

Common-sized financial statements

prepared by expressing financial statement amounts as a percent of a base amount

Common-sized balance sheet

expresses each asset as a percent of total assets

Common-sized income statement

expresses income statement amounts as a percent of sales

transaction

A________________ is an economic event that under GAAP affects the financial statements. (one, two or more items within a financial statement)

financing

Any cash receipts from issuing debt or stock are reported in this section; Cash payments on debt and dividends are also reported in this section

Stockholders Equity

Assets - Liabilities

Liabilities

Assets - Stockholders Equity

Statement of Cash Flows

Cash Flows from operating, investing, financing, and net increase

investing activities

Cash receipts from selling property, plant, and equipment are reported in this section

D

Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

stockholders equity

Common Stock and Retained Earnings

Assets

Liabilities + Stockholder's Equity

GAAP

Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities.

C

Land worth $800,000 is reported at its original purchase price of $220,000. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

Service Company

Make money by providing services Delta Airlines, Hairmasters, Tailgate Guys

Merchandisers

Make money by selling products Wrapsody, AU Bookstore, Auburn Art

Manufacturers

Make products and sell them Baxter International, Hyundai

D

Material litigation involving the corporation is described in a note. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

M

Monthly utilities costs are reported as expenses along with the monthly revenues. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

operating

On statement of cash flows _____________ activities are reported first

Sole Proprietorship

One person doing business (ALL LIABLITY) The business and business owner are viewed as ONE Positive: The best tax rate possible Negative: Bad thing is that anything your business does, you are responsible (Legal Liability for anything that happens when conducting your business) If you have a more dangerous business (ex. Fireworks) you should avoid

B

Personal transactions of owners are kept separate from the business. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

Partnership

Positive: 2 people with different skill sets working towards the same thing Negative: your partner can screw you over Joint inseverable Liability- when you're a partner with someone's you are altogether are responsible for the obligations, but you are also 100% responsible for what happens- any debts they can come after you 100%

accrual basis

Recognizes Revenue and Expenses based on rules (GAAP- generally accepted accounting principles). Revenue is recognized when it is EARNED (aka performance obligation has been satisfied). Goods are delivered (merchandiser); OR Service is performed Expenses are recognized or "matched" with the revenues they helped produce. Expenses "follow" revenues Expenses are matched in the same period of time as revenues

depreciation

Reduction in the ability of a fixed asset to provide service over time Estimated based on the asset's useful life

statement of stockholders' equity

Reports changes in financial condition due to changes in retained earnings during a period Retained earnings is the portion of net income retained by the business Balances Net Income Dividends Other

asset

Resources or things of value that will benefit you in the future

Income Statement

Summary of revenue and expenses for a specific period of time (e.g., month, quarter, or year). Expenses for the period are matched against revenues for the same period. Reports the change in financial condition due to the operations of a business Revenue - Expenses = Net Income

P

The changes in financial condition are reported at the end of the month. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

net income

The money you bring in minus the expenses (represents your takeaway)

Accruals

These record expenses or revenues that have not been previously recognized in the accounting records Revenues and Accrued Cash has not been received/paid, but the earnings process is complete or the expense relates to the current period.

cash basis

Transactions are recognized as cash is exchanged Revenues are only accounted for when we receive $$ Expenses are only accounted for when we pay $$

Operating

activities that represent the MAIN purpose of that company; want to bring in more than what it costs to bring revenue in

Balance Sheet

descriptive summaries of assets, liabilities, and stockholders equity

gross

money you bring in

leveraged

someone that has what they have because they borrowed for it

G

Assume that a business will continue forever. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

O

If this concept was ignored, the confidence of users in the financial statements could not be maintained. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

financing

Net cash flows from ___________ activities is reported third

Investing

Net cash flows from ____________ activities is reported second

Corporation

Positive: If I own part of a ____________, you are protected from what bad decisions the _____________ makes; they cannot sue stock owners Negative: Highest tax rate Give earnings back to stock owners; but stockowners also have to get taxed from their earnings (Double taxation)

Deferrals

These adjust accounts that are already part of a company's accounting records Expenses & Revenues Cash is received before earnings process is complete Cash is paid for something that the company will benefit from in the future

U

This concept justifies recording only transactions that are expressed in dollars. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

O

This concept supports relying on an independent actuary (statistician), rather than the chief operating officer of the corporation, to estimate a pension liability. Accounting period concept P Adequate disclosure concept D Business entity concept B Cost concept C Going concern concept G Matching concept M Objectivity concept O Unit of measure concept U

Rules, framework, controls

What are the 3 elements of financial accounting system

financing

__________ Activities an enterprise go through to secure the money that it needs (Borrowing money)

Accrual

____________ Concepts: Services are provided to patients Insurance is filed, payment to be received in the future Revenue is earned when the service is provided to the patient Expenses are incurred for items such as supplies where payment may be made in the future Expenses are recorded as they are incurred, not as they are paid

liabilities

obligations- things you owe

Equity

worth