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ACCT 2401 T1 Ch1

Information from Chapter 1 on Test 1 Review Sheet

QuestionAnswer
assets L + OE. The resources owned by a business. have future economic value benefit (e.g., cash, A/R, inventory, equipment) - can be current or long term (will exist for greater than 1 year)
liabilities L. The rights of creditors that represent debts of the business. Economic obligations , or IOUs (e.g., payables, debts) - can be current (due within 1 year) or long term (due after 1 year)
O/E The owner’s right to the assets of the business. claims of the business owners, or the net worth of the company (Assets – Liabilities = OE) Owners Equity is made up of Retained Earnings and Capital Stock accounts
revenues Increases in owner’s equity as a result of selling services or products to customers. gross income from delivering goods or services (recognized at time of sale) (increase RE)
expenses Assets used up or services consumed in the process of generating revenues. costs of doing business- or “used up” assets to generate revenue (decrease RE)
dividends Distributions to the owners (stockholders) of a corporation. giving to or rewarding owners; (decrease RE)
retained earnings Made up of Revenues – Expenses - Dividends. profit reinvested, cumulative NI or NL (not cash)
GAAP Generally Accepted Accounting Principles - private, diff components
FASB Financial Accounting Standards Board- set the GAAP
Financial Statements Income Statement, Retained earnings statement, balance sheet, statement of cash flows
Income Statement A summary of the revenue and expenses for a specific period of time, such as a month or a year. Measures the performance of the company over a period of time Revenues – Expenses = Net income (net loss)
Retained Earnings Statement A summary of the changes in the retained earnings in a corporation for a specific period of time, such as a month or a year. all the earnings of the company since inception, less any distributions to owners; covers a period of time
Balance Sheet A list of the assets, liabilities, and owner’s equity as of a specific date, usually at the close of the last day of a month or a year. Represents (A=L+OE); is the financial position for a point in time (e.g. as of Dec. 31)
Statement of Cash Flows A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. what is happening to the company’s cash (in/out) – important to lenders because they want to know if you have the cash to pay them back;
3 Components of Statement of Cash Flows 1. operating activities (how much cash is generated in the “normal” course of business”) 2. investing activities (deals with long-term assets, such as land, equipment) 3. financing activities (long-term L & OE, such as loans and stock transactions)
Net Income or Net Profit The amount by which revenues exceed expenses.
Net Loss The amount by which expenses exceed revenues.
Created by: chellejenkins
 

 



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