Financial Accounting Review Flashcards

Flashcards about financial accounting concepts.

Financial accounting addresses __.

Recording of financial transactions and the preparation of financial statements to communicate past financial performance to its users.

A complete set of financial statements includes __.

Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Accounts

__ are Financial Reporting Standards that determine the types and amounts of information for users.

Principles for preparing financial reports and determine the types and amounts of information that must be provided to users of financial statements.

The __ shows the financial position of a business; also known as the Balance Sheet.

Presents the assets owned by an entity, the liabilities owed to others, and the accumulated equity of its owners at a particular point in time.

Examples of __ include bank loans, notes payable and accounts payable.

Amount owed to outsiders such as bank loans, notes payable, accounts payable, bonds payable, mortgage payable, salaries payable, utilities payables etc.

The __ summarizes the profitability of operations; also known as Profit and Loss Statement or Income Statement.

Summarizes the profitability of operations over a period of time.

__ is the income from sales, services, interest, and dividends.

Income from the sales of products, merchandise, and services; other examples include earnings from interest income, dividends, rents, etc.

An __ is the cost of doing business, either in cash or liability.

A payment, either in cash or by assuming a liability, that are the costs of doing business.

The __ displays all changes in equity.

Shows all changes in equity i.e. share capital, reserves, retained earnings over a period of time.

The __ shows cash generation and usage.

Shows how cash has been generated and used by the business over a period of time and is an indication of liquidity.

__ provide additional information on the business, accounting policies, and financial statement items.

Notes attached to the financial statements which provide general information on the business, accounting policies, and details to certain items.

Users of financial statements include __.

Investors, Owners/Shareholders, Creditors, Government, Management, and Public interest groups.

Shareholders reviewing LTL’s equity position and EPS exemplify what type of __ users are interested in.

To learn about the company’s equity position and Earnings Per Share (EPS) to assess its performance and determine the value of ownership.

Relevance is presenting __ that can influence decision-making of users.

Presents material information that can influence decision-making of users.

Faithful representation means all information presented in the financial statements must be __, __, and __.

All information presented in the financial statements must be complete, neutral, and free from error.

Comparability allows easy __ over time due to consistent methods.

Allows easy comparison across businesses and over a period of time due to similar or consistent accounting methods.

Verifiability requires that information can be inspected by ___.

Information must be verified objectively by independent observers.

Timeliness requires that information is provided in __ for decision-making.

Information is available to decision-makers in time to help influence their decisions.

Understandability is information that is and for users.

Classifying and presenting information that is clear and easy for users to understand.

__ are economic resources owned by the business.

Economic resources owned by the business, resulted from past transactions and expected to provide future benefits.

__ is the amount a business owes to outsiders.

Amount the business owed to outsiders / obligations that result from past transactions / claims against the corporation.

__ is financing from the owners.

Amount of financing provided by owners of the business and earnings.

__ is the income generated by the main business.

Total amount of income generated by the sale of goods or services related to the company’s main business activities.

__ is the amount of costs incurred by a business for earning revenue.

Costs incurred by a business in the process of earning revenue.

The accounting equation can be written as __.

Assets = Liabilities + Equity

Limitations of financial statements include __.

Historical facts, omission of qualitative elements, influenced heavily by management decisions.