Financial Statements and Budgeting

These flashcards cover key concepts related to financial statements, their components, and the budget preparation process.

What is the governing equation of the Statement of Financial Position?

Asset = Liabilities + Owner’s Equity.

What does the Statement of Financial Position provide readers?

Information about the company’s financial position as of a specified date.

What is the normal balance type of liabilities and equity?

Credit.

What are the four primary types of financial statements?

1. Statement of Financial Position 2. Statement of Comprehensive Income 3. Statement of Changes in Owners Equity 4. Statement of Cashflows.

Why are financial statements important?

They summarize a company's financial performance and position, providing essential information to stakeholders.

What is the purpose of the Statement of Financial Position?

To determine the financial condition of a business and assess its ability to pay debts.

What is the primary difference between the account format and the report format of the Statement of Financial Position?

The account format presents assets on the left and liabilities and equity on the right, while the report format is a single-column, vertical presentation.

What does a budget estimate?

Costs, revenues, and resources over a specified period.

What factors influence the Sales Budget?

Gross Domestic Product growth rate, income tax rates, inflation, interest rates, pricing, promotional activities, and production capacity.

What is the formula for Sales Revenue?

Sales Revenue = Units to be sold x Unit Selling Price.