Accounting Quiz 1 |2024-2025
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Terms in this set (113)
The communication of information about a business
or other type of organization (such as a charity or
government) so that individuals can assess its
financial health and prospects.
- sets the standards so that 'information' can be
easily explained and transferred
- people are trying to
o (1) estimate the price of the cororation's stock in
Financial Accounting the future with financial accounting
o (2) estimate the amount of cash dividends that will
be paid over time with financial accounting
o (3) estimate future ability to generate suffiecient
cash to meet debts as they mature with financial
accounting
Organization-> reports information based on the
principles of financial
Accounting-> individual assesses finanical health
Objectives: to provide information:
- Useful in investment & credit decisions,
- Useful in assessing future cash flows, and
- About a company's resources (assets), claims to
resources (liabilities), and changes in them
Forms of Financial Reporting:
Statements/ Annual Reports
Financial Reporting
Statements:
- Income Statement (Rev., Gains, Exp., Losses)
- Statement of Owners' Equity
- Balance Sheet (Assets, Liabilities, Owners' Equity)
- Statement of Cash Flow
Annual Reports:
- * includes what is in the "statements" and more
Financial Accounting vs. ...
Reporting
people are trying to
o (1) estimate the price of the cororation's stock in
the future with financial accounting
Financial Accounting o (2) estimate the amount of cash dividends that will
Objectives be paid over time with financial accounting
o (3) estimate future ability to generate suffiecient
cash to meet debts as they mature with financial
accounting
3 types of Business Sole Proprietorship, Partnership, and Corporation
Organizations
provides authoritative guidance and standardization
for financial accounting. Most laws and regulations it
has create are relatively new within the last 30 yrs.
FASB controls these rules.
What is the purpose of
GAAP (Generally
Accepted Accounting Accounting Standards Codification- In 2009, FASB
Principles) and IFRS combined all authoritative accounting literature into
(International Financial a single source for U.S. GAAP (the A.S.C.). By
Reporting Standards) bringing together hundreds of official documents,
FASB has made U.S. GAAP both more
understandable and easier to access. Multiple
sources have been woven together in a logical
fashion so that all rules on each topic are in one
• Income statement (also called a statement of
operations or a statement or earnings) [3]
• Statement of retained earnings (or the more
Types of Financial
inclusive statement of stockholders' equity)
Statements:
• Balance sheet (also called a statement of financial
position)
• Statement of cash flows
Why are dividends not NOT reported
considered an expense? on the income statement.
* Retained earnings: All the net income earned by
the organization over its life less amounts
distributed as dividends to owners.
Companies that seek to grow must be able to
generate resources from owners, operations, or
both.
- Retained Earnings is increased by Net Income and
decreased by Net Loss.
- Retained Earnings is decreased by dividends.
- These changes to Retained Earnings are only
reflected in the accounting system by recording and
posting the closing entries.
What are retained
earnings and on what
financial sheet are they
found? Statement of Retained Earnings:
- The total amount of net income reported by a
company since it first began operations, less all
dividends paid to stockholders during that same
period.
• Thus, the figure provides a measure of the profits
left in a business throughout its history to create
growth.
• Total net income since 1st operations- all dividends
paid during the same time period =
• Retained Earnings
- The retained earnings figure informs decision
makers of the amount of that internally generated
expansion. The reported balance answers the
question: How much of the company's net assets
have been derived from operations during its life?
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