Financial Accounting "Terms To Know"

This word is defined by the “basics of business”

Identify, measure, and communicate business transactions is accomplished in this field of business

This is for outside users

1. Invest 2. Finance 3. Operate these three things are what

Liabilities and Equity are what

things that a company owns or controls that provide future economic benefit

Debt/credit/loan, obligations from transactions that have taken place that result in a future economic sacrifice

Shareholder/Investor, funds generated from the sale of shares of stocks as well as income generated from the business

Balance Sheet Equation

Assets, Liabilities, and Equities are included on what

Revenues and Expenses results in Net Income is on what

The definition for what statement is “includes changes in our equity over a period of time”
Investor Equity + Income Generated Equity = Total Equity

Sources of uses of cash over a period of time is projected on what statement

Statement of Cash Flows includes what three cash flow sections

This group oversees the stock market

This board controls and oversees the rules of accounting

The accounting rules are called

A type of financial statement analysis where it is used to put different companies on the same level for analytical purposes

Return on Equity = Net Income / Avg. Stockholder’s Equity (is what ratio)

Debt to Equity = Total Liabilities / Total Equity

2 types of Assets

Assets used and consumed or provide benefit within one year

Assets used or provide benefit for more than one year

Cash
Accounts Receivable
Marketable Securities
Inventory
Prepaid Expenses

Property, Plant, and Equipment (land, buildings, equipment utilized)
Long term investments
Intangible Assets

This current asset is generated from sales and represents money that our costumer owe us from purchases on account

This current asset is a short term investments in stocks, bonds, that they do not plan on holding for more than a year

This current asset is stuff the company sells

This current asset is expense paid for in advance ex: insurance, advertising, travel, etc.

This non current asset is a patent or a copyright

What cost are assets valued at?

basically what value the company paid for it, but its not very relevant, but it is reliable

Assets are listed in order of what?

How fast something can be turned into cash

probable future economic sacrifice resulting from an event or transaction that has taken place

2 types of Liabilities

LIabilities payed or satisfied within one year

Liabilities not payed or satisfied within one year

Accounts Payable
Accrued Expenses or Liabilities
Short term loans or current maturities of long term loans
Unearned Revenue

Long term borrowings, loans, credits, debts, etc.

This current liability is money owed to venders for purchases on account or on credit

This current liability is expenses or costs from past transactions place that we haven’t paid for yet ex: utility bill and you have 30 days to pay for it

This current Liability is ex: bank loan, 20-year mortgage

This current liabilty is defined as: I have collected money from a transaction that I haven’t earned yet ex: the insurance company on Jan 1, 2016 collected a whole year’s worth of premiums for the insurance and owe the company the insurance that was paid for

Liabilities are valued at the price of what?

Liabilities are listed in order of what?

This type of Equity is Money received from investors from the sale of the company’s stock

This type of equity is Income Equity retained to finance the business

Equity Equation

This contributed capital is the par value of shares of stock sold

This contributed capital is the value received in excess or above and beyond the par value for shares sold

This contributed capital is defined as shares of its own stock that a company has purchased from the market

3 types of expenses

This type of accounting is defined as Record transactions as they take place, not necessarily when cash changes hands

Accounting Cycle Steps

Analyzing Transactions
Record Transactions
Adjust Balances
Report Financial Statements
Close Temporary Accounts

Accounting Year, non-calendar year

Meant to fix balances that are incorrect or to add accounts/balances that are missing (4 types of adjustments)

Unearned Revenue
Accrued Revenues
Prepaid Expenses
Accrued Expenses

This type of adjusting balance is defined as Recording revenue that was earned but not recorded yet for whatever reason

This type of adjusting balance is defined as Expenses incurred during the period but not recorded or paid

This type of adjusting balance is defined as to expense assets that were used during the period

Current Assets / Current Liabilities

Cash + Marketable Securities + Accounts Receivable / Current Liabilities