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Accounting Terms
Review of Book Chapters Terms
Term | Definition |
---|---|
Stakeholders | The users of accounting information |
Net Earnings/Net Profit/Net Income | Residuals when revenues exceed expenses. |
Distributions/Withdrawals/Dividends | The transfer of assets from a business to it's owners |
Common Stock | Common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. |
Equity/Stockholders Equity/Owners Capital/Partners Equity | Stockholders' equity represents the equity stake currently held on the books by a firm's equity investors |
Where does a stock issue transaction affect the accounting equation? | Affects in 2 places under cash and common stock. |
Asset Exchange (AE) | Trading one asset for another. Cash --> Land |
Asset Source (AE) | A transaction that increases the business's assets and it's stockholders equity (claims) |
Revenue | an economic benefit a company obtains by providing customers with goods and services. Revenue affects retained earnings. |
Retained Earnings | the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt. |
Asset Use (AU) | Decrease the total amount of assets and the total amount of claims. |
How does revenue affect retained earnings? | Revenue goes up, retained earnings go up. |
General Ledger | The complete collection of a company's accounts. |
What are the 4 financial statements? | Income Statement, Statement of Changes in Stockholders Equity, Balance Sheet, Statement of Cash Flows |
Income Statement | Matches the expenses with the revenues that occur when operating a business. |
Net Loss | When expenses are greater than revenues |
Statement of changes in stockholder's equity | explains the effects of transactions on equity during the accounting period |
Balance Sheet | Total assets balancing with total claims. |
Statement of Cash Flows | Explains how a company obtained and used cash during the accounting period |
Financing Activity (FA) | any activity that finances your business |
Investing Activity (IA) | Involve paying cash to obtain assets for the business |
Operating Activity (OA) | Receiving cash from revenue and paying cash for expenses |