Exam (elaborations)
Accounting 2036 Exam 1 Mizzou (Prestigiacomo)
- Course
- Accountancy 2036
- Institution
- University Of Missouri
Accounting 2036 Exam 1 Mizzou (Prestigiacomo)
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Accounting 2036 Exam 1 Mizzou(Prestigiacomo)
Accounting System
What is the main goal of an accounting system?
To capture information about the operating, investing, and financing activities of a
company so that it can be reported to decision makers, both inside and outside the business
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Managerial accounting reports include detailed financial plans and continually updated reports about the operating performance of the company
-only available to employees of company (internal users)
Basic Accounting Equation
what a company owns must equal what a company owes to its creditors and stockholders
asset
an economic resource presently controlled by the company; it has measurable value and is expected to benefit the company by producing cash inflows or reducing cash out flows in the future.
(cash, supplies, equipment, software, inventory)
Liabilities
measurable accounts that the company owes to its creditors.
(Notes payable, accounts payable, salaries and wages payable, taxes payable)
Creditors
From a legal perspective, _________ have a legal priority over stockholders. Thus if a company goes out of business, liabilities must be paid before any amounts are paid to stockholders.
Stockholders Equity
represents the owners claim on the business. The claims arise for two reasons
1. the owners have a claim on amounts they contributed directly to the company in exchange for common stock 2. the owners have a claim on amounts the company has earned through profitable business operations (retained earnings)
revenues
earned by selling goods or services to customers
Expenses
all costs of doing business that are necessary to earn revenues.
By generating _______ ________ , a company increases it's stockholders equity
net income
A company's profits are accumulated in retained earnings until a decision is made to distribute them to stockholders is what is called a ___________.
dividends
________ are NOT an expense incurred to generate earnings, rather __________ are an optional distribution of earnings to stockholders, approved by the companys board of directors.
-Reported in retained earnings
dividends
4 main accounting reports
1. Income Statement
2. Statement of retained earnings
3. Balance Sheet
4. Statement of cash flows
Calendar year
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