Introduction to Financial Accounting

These flashcards cover foundational concepts of financial accounting as introduced in the first chapter, focusing on financial statements and the accounting process.

What is the primary focus of financial accounting?

The primary focus of financial accounting is on financial statements for external users to make decisions.

What are the four main financial statements?

The four main financial statements are the income statement, the statement of stockholders' equity, the balance sheet, and the statement of cash flows.

What is the accounting equation represented by the balance sheet?

The accounting equation is Assets = Liabilities + Stockholders' Equity.

What is the formula for an income statement?

The formula for an income statement is Revenues - Expenses = Net Income.

What are retained earnings?

Retained earnings are the portion of net income retained by the corporation instead of being paid out as dividends.

What is the purpose of the statement of stockholders' equity?

The statement of stockholders' equity shows the changes in the equity of the corporation over a period.

How do you calculate the ending balance in common stock?

Ending Common Stock = Beginning Balance + Issued Stock.

What does it mean for information to be relevant in accounting?

Relevant information is information that matters for decision-making.

What is a key difference between financial accounting and managerial accounting?

Financial accounting focuses on external users, while managerial accounting focuses on internal users.

What are revenues in the context of financial accounting?

Revenues are the amounts recorded based on products or services sold.