Business Decisions and Financial Accounting

Vocabulary flashcards covering key concepts from the lecture on Business Decisions and Financial Accounting, including organizational forms, accounting principles, the accounting equation, and financial statements.

Sole Proprietorships

An organizational form representing 72% of businesses in the U.S.

Corporations

An organizational form representing 18% of businesses in the U.S.

Partnerships

An organizational form representing 4% of businesses in the U.S.

Limited Liability Companies

An organizational form representing 6% of businesses in the U.S.

Accounting

A system of analyzing, recording, summarizing, and reporting the results of a business’s activities.

External Users

Creditors, investors, and other parties who use financial accounting reports to evaluate a company.

Internal Users

Managers, supervisors, and other parties who use managerial accounting reports to run a company.

Financial Accounting Reports

Reports designed to provide useful financial information to external users for decision making.

Relevant (Financial Information)

A characteristic of useful financial information for decision making.

Faithful Representation (Financial Information)

A characteristic of useful financial information that accurately reflects economic phenomena.

Timely (Financial Information)

A characteristic of useful financial information that is available in time to influence decisions.

Verifiable (Financial Information)

A characteristic of useful financial information that confirms the truthfulness of info.

Comparable (Financial Information)

A characteristic of useful financial information across different companies and periods.

Understandable (Financial Information)

A characteristic of useful financial information that is clearly and concisely presented.

Basic Accounting Equation

Assets = Liabilities + Stockholders' Equity.

Assets

Resources owned by the company.

Liabilities

Resources owed to creditors.

Stockholders' Equity

Resources owed to stockholders (owners of the company).

Revenues

Incomes from goods or services provided by a company.

Expenses

Costs incurred in generating revenues.

Net Income

The result when revenues exceed expenses (Revenues - Expenses).

Dividends

Distributions of a company's earnings to its stockholders as a return on their investment.

Income Statement

A financial statement that reports a company's revenues, expenses, and net income over a period of time.

Statement of Retained Earnings

A financial statement that shows how retained earnings changed over a period of time.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and stockholders' equity at a specific point in time.

Statement of Cash Flows

A financial statement that reports cash inflows and outflows from operating, investing, and financing activities over a period of time.