Good UTA set

If net income after tax is $42,000, the tax rate is 30%, and total expenses not including tax expense are $126,000, revenues must be:

$186,000

Find what the net income was before taxes and add it to expenses to get the total revenue.

The financial statement that reports what the company owns and what the company owes is the

balance sheet

The balance sheet shows assets, liabilities, and equity which show what is owned and what is owed.

What is supposed to "balance" on the balance sheet?

assets = liabilities + owner's equity

The purpose of financial accounting is to provide

financial information to external users

The accounting equation is

assets = liabilities + equity

Which financial statement provides information related to the financial performance of a company during a specific period?

income statement

The income statement reports earning for a company during a specific time period.

A company reports net income when

services provided are greater than the cost to provide the services

Which of the following is considered and expense?

prepaid expense

cost of goods sold

sales

building

cost of goods sold

The government agency with legal authority over financial reporting of U.S. public companies is called

securities exchange commission (SEC)

FASB has no legal authority

Which financial statement reports dividends paid to shareholders?

statement of owners equity

Dividends are not reported on the income statement, it is not an expense. They are netted into retained earnings on the balance sheet.

assets typically include

accounts receivable and equipment

What financial document is for the specific purpose of reporting cash flows?

cash flow statement

Which statement provides information on goods and services provided to customers?

income statement

Providing goods and services to customers is revenues which is only on the income statement.

Liabilities are

obligations resulting from past transactions

Prepaid expenses is an asset because

the company owns it

the company has paid ahead and therefore has future benefit

a past transaction has occurred

Economic resources is the technical term for

assets

An examination of accounting records to determine if the records and reports are in accordance with generally accepted accounting standards is called

an audit

What increases retained earnings?

revenues

retained earnings is increased by net income.

Which financial statement reports what the company owes suppliers?

balance sheet

Which of the following is not a liability?

unearned revenues

accounts payable

taxes payable

sales

sales

The purpose of Financial Accounting is to: (3)

record, summarize, and report transactions of the company

4 primary financial statements

balance sheet, income statement, statement of stockholder's equity, and statement of cash flows

Balance Sheet

States what your business owns (assets) and owes (liabilities) on a specific date. Assets minus liabilities is the amount owed.

Income Statement

Shows how much the business earned during a period of time. this is what you have earned from providing goods and services less what it costs.

Statements of Owner's Equity

shows the activity of shareholder's (owners) during a period of time. Shows receipt of funds from shareholders and payments back to shareholders in the form of dividends. shows the earnings of the business that go to the shareholders

Cash Flow Statement

Shows the source of cash and what the cash was used for during a period of time (cash and income are not the same)

Retained Earnings

the amount of cumulative profits and losses kept by the company since the first day of operations.

Beginning Retained Earnings

+Net Income or -Net Loss

-Dividends paid

=Ending Retained Earnings

Cash flow statement sections

operating activities, investing activities, financing activities.

Operating Activities (statement of cash flows)

directly related earnings from day to day business operations. Net income, current assets and current liabilities (less than 1 year)

Investing Activities (statement of cash flows)

directly related to buying and selling assets used long term in the business (use more than 1 year)

Financing Activities (statement of cash flows)

directly related to borrowing and repaying debt and receipts and payments from/to owners (pay later than 1 year)

Elements of Financial Statements

assets, liabilities, stockholders equity, revenues, expenses

Asset

The company's economic resources to operate business.

probable future economic benefit

owned or controlled by the company

resulting from a past transaction, something that has already occurred

Liability

The company's debts and obligations

probable use of a future economic benefit (a asset)

owed

resulting from a past transaction

Stockholder's Equity

Earnings kept in the company / financing provided by the owners

owners contributions to the company

less dividends paid to owners

plus profits and less losses (net income)

also equal to total assets less total liabilities

Revenues

Earned from providing goods or services in exchange for an asset

This is the amount the customer is expected to pay for the goods or services they received

A revenue occurs when the good/service is provided to the customer regardless of whether the customer has paid or not.

Expenses

Using an asset of the company to provide goods or services

What it costs the company to provide the goods or services to

the customer

A service or good is provided to the company that the company

will have to pay for.

The expense occurs when the company

receives the service or the asset is used up, not when the

company pays for it.

The Accounting Equation

Assets = Liabilities + Stockholders' Equity

FASB

Financial Accounting Standards Board, is the primary accounting standards setting authority in the US

IASB

International Accounting Standards Board, is the primary accounting standards setting authority for several countries outside of the US

SEC

Securities and Exchange Commission, the government agency that oversees US financial markets and accounting standards for public companies

3 types of footnotes

provides a description of the accounting rules followed

provides more details for the items listed on the financial statements

provides information on things not listed on the financial statements

Auditor's Report

A professional accountant examines the company's financial statements and gives a report that determines if the statements are fairly stated in accordance with GAAP.

Accrued Expenses

is an account representing all unpaid financial obligations incurred by the organization, liability

Trademarks (A, L, O, R, or E)

Asset

Investments (A, L, O, R, or E)

Asset

Dividends paid (A, L, O, R, or E)

Owner's Equity

Proceeds from selling Equipment (O, I, or F)

Investment