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Manager Accounting
C202 chapt 2
| Question | Answer |
|---|---|
| by increasing information available about a company | financial statements make it easier for a company to attract investors, lenders, and other parties interested in the company's financial statements |
| a potential investor or lender can use a company's financial information | to make more informed projections of how the company will perform in the future |
| the balance sheet reports | a company's financial position at a specified point in time and lists the company's resources (assets), obligations (liabilities), and net ownership interest (owners equity) |
| assets are | probable future economic benefits obtained or controlled by a company as a result of past transactions or events |
| liabilities are | probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future as a result of past transactions or events |
| owners equity is | the residential interest in the assets of a company that remains after deducting its liabilities |
| the accounting equation is | assets= liabilities + owners equity |
| for a corporation owners equity is called | stockholder equity |
| stock holders can invest in a corporation in two ways | by directly investing cash or keeping a portion of the profits as retained earnings |
| assets are usually listed in the balance sheet in order of liquidity | as in cash--to intangible assets |
| the entity concept states that the | financial result of an economic entity should be reported separately from the financial results of other entities |
| the income statement describes | a company's financial performance for a period of time |
| revenues are | the amount of assets generated in the normal course of business |
| expenses are | the amount of assets consumed in doing business |
| an income statement reports | gains and losses that result from activities outside a company's normal business operations |
| the statement of cash flows details | how a company obtained and spent cash during a certain period of time |
| operating activities are | those activities that comprise the day to day operations of a business |
| the notes to financial statements provide | information on the accounting assumptions used in preparing the statements and info not included in the statements themselves |
| financial statement notes are four general types; | summary of accounting policies, additional information about summary totals in the statements, disclosure of important information not in the statements, and supplemental disclosure required by the FASB or SEC |
| an audit performed by accountants from outside a company | increases the reliance that users can place on the information in the company's financial statements |
| the external audit | assures financial statement users that the financial statements fairly reflect the financial status f the company that issued them |
| a key trade off in the preparation of useful accounting information is | between relevance and reliability |
| relevant means | information that is provided on a timely basis and can be used to assess the past and to project the future for decision making |
| reliable means | information actually represents what it is supposed to represent |
| comparability means | making financial statement information more useful because it allows company's financial statements to be analyze in light of the companys own performance |
| conservatism means | the practice of recognizing gains until they are certain |
| materiality refers to | weighing whether a certain dollar amount is large enough to make a difference to anyone |
Created by:
nashanta
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