Financial Accounting

The primary objective of financial accounting is to provide information about the __________ of an entity.

financial performance and financial position.

The __________ is a financial statement that summarizes the revenues and expenses over a specific period, showing the net profit or loss.

income statement.

The __________ represents the residual interest in the assets of the entity after deducting liabilities.

equity.

The financial statement that presents the entity's assets, liabilities, and equity at a given point in time is called the __________.

balance sheet.

__________ accounting focuses on the recording and reporting of financial transactions of a business.

Financial.

The __________ principle requires that revenues be recognized when earned, regardless of when cash is received.

revenue recognition.

Expenses related to the sale of goods or services are known as __________.

cost of goods sold.

The __________ method allows for the deduction of expenses as they are incurred, while revenue is recognized when received.

cash.

An increase in an asset account is recorded as a __________ entry.

debit.

The __________ assumes that the business will continue to operate indefinitely.

going concern.

__________ is the process of allocating the cost of a tangible asset over its useful life.

Depreciation.

All financial statements are prepared using the __________ accounting framework.

Generally Accepted Accounting Principles (GAAP).

A __________ is an economic event that affects the financial position of a business and can be measured in monetary terms.

transaction.

__________ are ongoing obligations to pay debts or deliver goods and services in the future.

Liabilities.

A __________ is a detailed record of all the financial transactions that occur in a company over a specific period.

journal.

The __________ is a summary of all the debits and credits recorded in the journals.

ledger.

__________ accounting focuses on providing information for internal management decisions.

Managerial.

The __________ is the excess of total revenue over total expenses for a specific period.

net income.

In financial accounting, the __________ basis recognizes income when it is earned and expenses when they are incurred.

accrual.

A __________ is a formal record of the goods and services a company offers and the revenues it generates.

sales invoice.

The __________ ratio measures a company's ability to cover its short-term obligations with its short-term assets.

current.

Under the __________ method, revenues and expenses are recorded when cash is received or paid.

cash.

The __________ displays cash inflows and outflows from operations, investing, and financing activities.

statement of cash flows.

__________ are expenses that do not change with the level of production or sales.

Fixed costs.

The __________ reflects the ownership interest in a company after all liabilities are deducted from total assets.

shareholders' equity.

__________ contains detailed explanations for each account balance displayed in the financial statements.

Notes to the financial statements.

A __________ is a group of accounts maintained by a company to organize its financial information.

chart of accounts.

The __________ provides a summary of the information included in the income statement and balance sheet.

statement of comprehensive income.

In financial accounting, __________ refers to the accuracy and reliability of financial information.

accounting quality.

An __________ is a legal entity that is separate and distinct from its owners, allowing it to own property and incur liabilities.

corporation.

The __________ method records revenue when it is realized regardless of when cash is exchanged.

revenue recognition.

____________ are the costs incurred to sell the product, excluding the cost of the product itself.

Operating expenses.

To maintain transparency, companies must disclose all __________ in their financial statements.

material facts.

The __________ statement shows the changes in equity from transactions with shareholders and the company.

statement of changes in equity.

Companies must assess the __________ of their assets to avoid overstating their value on the balance sheet.

impairment.

The __________ cost is the original cost paid for an asset before any depreciation is applied.

historical.

__________ refers to the cost associated with obtaining a loan or issuing debt.

Financing costs.

The __________ is the type of equity that is contributed by shareholders in exchange for ownership.

capital stock.

_______ accounting emphasizes preparing reports for external users such as investors and creditors.

Financial.

A __________ is an audit of the financial statements conducted by an independent third party to ensure accuracy.

financial audit.

The __________ principle dictates that expenses should be matched with revenues in the period in which they are incurred.

matching.

The __________ covers the cost of goods sold plus all other operating expenses incurred.

operating income.

Financial statements must be prepared at the end of each __________ to assess the company's financial position and performance.

reporting period.

The __________ labor cost is the cost related to the employees directly involved in the production process.

direct.

Comprehensive income includes all changes in equity from transactions and other events, excluding __________ transactions.

owner.

The gain or loss arising from the sale of an asset is calculated by comparing the asset's selling price to its __________.

book value.

The __________ established guidelines on accounting practices to ensure consistency and transparency.

Financial Accounting Standards Board (FASB).

A __________ is a document that reports a company’s expenses and revenues.

financial report.

The __________ defines the integration between financial accounting and managerial accounting practices.

accounting framework.