Financial Accounting: Tools for Business Decision Making

These flashcards cover key concepts from the lecture on financial accounting and financial statements, focusing on definitions and characteristics critical for understanding financial reporting.

Classified Balance Sheet

A financial statement that presents a snapshot of a company’s financial position, grouping similar assets and liabilities based on economic characteristics.

Current Assets

Assets a company expects to convert to cash or use up within one year or the operating cycle.

Long-Term Investments

Assets that can be realized in cash but are not expected to be converted within one year, such as stock investments and long-term notes.

Property, Plant, and Equipment

Tangible long-lived assets used in operations, which include land, buildings, and machinery.

Intangible Assets

Assets that do not have physical substance, such as patents, trademarks, and goodwill.

Current Liabilities

Obligations that a company is required to settle within one year or the operating cycle.

Long-Term Liabilities

Obligations that are due after one year, including bonds payable and long-term notes.

Stockholders’ Equity

The owners' residual interest in the assets of a corporation after deducting liabilities.

Generally Accepted Accounting Principles (GAAP)

A set of standards and practices recognized as a general guide for financial reporting.

Relevance

A qualitative characteristic of useful information that makes a difference in a business decision.

Faithful Representation

The quality of information that accurately depicts what really existed or happened.

Comparability

The ability to evaluate the results of one company relative to another.

Consistency

The use of the same accounting principles and methods over time by a company.

Monetary Unit Assumption

Assumption that only transactions measurable in monetary terms are included in accounting records.

Economic Entity Assumption

Assumption that personal and business transactions are kept separate.

Full Disclosure Principle

The requirement to disclose all information that may influence financial statement users.

Cost Constraint

The consideration of whether the benefits of providing certain information outweigh the costs of providing it.