Video Notes Flashcards: Financing, Accounting Equation, Revenues/Expenses/Dividends, and Business Structures

Vocabulary flashcards covering financing, investing/operating activities, accounting equation, revenues/expenses/dividends, asset/liability/equity concepts, corporate vs. other business structures, and the primary financial statements.

Financing activities

Transactions the company has with investors and creditors.

Investing activities

Transactions involving the purchase and sale of resources that are expected to benefit the company for several years.

Operating activities

Transactions that relate to the primary operations of the company.

Accounting equation

Assets = Liabilities + Stockholders' Equity.

Revenues

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

Expenses

Costs of providing products or services.

Net income

Revenues minus Expenses; also known as earnings or profit.

Dividends

Cash payments to stockholders; not an expense; reduce retained earnings.

Assets

Resources with future benefit; examples include accounts receivable and equipment.

Liabilities

Amounts owed to creditors; examples include accounts payable and notes payable.

Stockholders' equity

Owners' claims to the resources; includes retained earnings.

Retained earnings

Cumulative net income not distributed as dividends; an equity account.

Receivable

An asset representing money owed to the company (e.g., accounts receivable).

Payable

A liability representing money the company owes (e.g., accounts payable, notes payable).

Corporation

A company legally separate from its owners; advantage: limited liability for stockholders.

Sole proprietorship

A business owned by one person.

Partnership

A business owned by two or more people.

Double taxation

A corporation pays tax on its income and dividends paid to shareholders are taxed again.

Income statement

Primary financial statement that reports revenues and expenses to determine net income.

Balance sheet

Financial statement that reports assets, liabilities, and stockholders' equity; follows the equation assets = liabilities + stockholders' equity.

Statement of stockholders' equity

Financial statement showing changes in equity accounts (e.g., common stock, retained earnings) over a period.

Statement of cash flows

Financial statement that reports cash inflows and outflows from operating, investing, and financing activities.

Statement of comprehensive income

Financial statement that reports comprehensive income when necessary.