Financial Accounting - Chapter 1: The Financial Statements
Information system. Measures business activities, processes that information into reports and financial statements. Communicates results to decision makers.
Assets = Liabilities + Owners Equity ... Must be equal
Economic resource expected to be of value in the future
List of an entity's assets, liabilities and owner's equity. Also called the statement of financial position
Most basic form of capital stock
An asset expected to be liquidated to cash, or a debt due to be paid within one year.
Decrease in retained earnings that result from operations; the cost of doing business
The amount that a business could sell an asset for or the amount that a business could pay to settle a liability.
The branch of Accounting that provides information to people outside of the firm
Generally Accepted Accounting Principles
Accounting guidelines, formulated by the Financial Accounting Standards Board, that govern how accounting is practiced
Going-Concern (Continuity) Assumption
Holds that the entity will remain in operation for the foreseeable future
A financial statement listing an entity's revenues, expenses, and net income or net loss for the period: Net Income(Loss) = Revenues - Expenses
An economic obligation payable to an individual or an organization outside of the business
The claim of the owner's of a business to the assets of the business, also called capital, stockholder's equity, or net assets
The amount of stockholders' equity that stockholders have contributed to the corporation. Also called contributed capital
A business with a single owner
The amount of a stockholders' equity that a corporation has earned through profitable operation and has not given back to stockholders.
Increase in Retained Earnings from delivering goods or services to customers or clients
The reason for ignoring the effect of inflation in the accounting records, based on the assumption that the dollar's purchasing power is relatively stable.
Statement of Cash Flows
Reports cash receipts and cash payments classified according to the entity's major activities: operating, investing, and financing
Activities that create revenue or expense in the entity's major line of business; a section of the statement of cash flows. These activities affect the income statement.
Activities that increase or decrease the long-term assets available to the business; a section of the statement of cash flows.
Activities that obtain from investors and creditors the cash needed to launch and sustain the business; a section of the statement of cash flows.