Financial Accounting

Flashcards covering key concepts and definitions in financial accounting.

Financial Accounting

The language of business that provides accounting information to external users.

Operating Activities

Transactions related to the primary operations of the company, including providing products and services to customers.

Assets

Total resources of a company, such as cash, supplies, equipment, buildings, vehicles, and inventory.

Liabilities

Amounts owed to creditors, suppliers, employees, and others, including accounts payable and notes payable.

Stockholders’ Equity

The owners' claims to resources, arising mainly from contributions made by owners and resources generated by company operations.

Revenues

Amounts recognized when the company sells products or provides services to customers.

Expenses

Costs incurred by a company to provide products and services during a specific period.

Net Income (NI)

The positive difference when revenues exceed expenses.

Dividends (Div)

Cash payments made to stockholders.

Accounting Equation

The formula Assets = Liabilities + Stockholders’ Equity that expresses the relationship between a company's resources and claims against those resources.

Income Statement

A financial statement that reports a company's revenues and expenses over a specific period.

Statement of Stockholders’ Equity

A financial statement that summarizes the changes in stockholders’ equity over a specified interval of time.

Balance Sheet

A financial statement that presents the financial position of a company at a specific date.

Statement of Cash Flows

A financial statement that measures cash receipts and cash payments over a specific period.

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting.

Auditors

Independent individuals hired to assess the extent to which financial statements comply with GAAP.

FASB

Financial Accounting Standards Board, the organization responsible for establishing accounting standards.

Qualitative Characteristics of Useful Financial Information

Framework that ensures the information provided in financial reports meets the needs of users.