Financial Accounting and Business Organizations

These flashcards cover key concepts, definitions, and principles related to financial accounting and business organizations presented in the lecture.

What are operating activities in a company?

Transactions that relate to the primary operations of the company.

What is financial accounting?

Accounting information provided to external users.

What are assets?

Resources that a company uses to make money, including long-term assets like equipment and buildings.

Who are the main targets when creating financial statements?

Investors and creditors.

What is a corporation?

A company that is legally separate from its owners.

What is the significance of limited liability for stockholders?

Stockholders have limited liability, meaning they are only financially responsible for the debts of the corporation up to the amount they invested.

What is net income?

The difference between revenues and expenses, also known as earnings or profit.

What does the accounting equation state?

Assets = Liabilities + Stockholders' Equity.

What are dividends?

Cash payments to stockholders, not considered expenses.

What is the purpose of financial statements?

To provide information to external users on business activities.

What does GAAP stand for?

Generally Accepted Accounting Principles.

What is the role of auditors?

Trained individuals hired to express a professional opinion on the accuracy of financial statements.

What is the Sarbanes-Oxley Act (SOX)?

Legislation that provides for the regulation of auditors and addresses conflicts of interest for securities analysts.

What is the difference between qualified and unqualified audit reports?

Unqualified reports indicate financial statements are generally free from material misstatement, while qualified reports indicate potential issues.

What defines a sole proprietorship?

A business owned by one person.

What defines a partnership?

A business owned by two or more persons.

What is included in Stockholders' Equity?

Common Stock and Retained Earnings.

What are financial activities?

Transactions the company has with investors and creditors.

What do operating cash flows consist of?

Cash transactions involving revenue and expenses.