Podcast
Questions and Answers
What is accounting?
What is accounting?
- A method for selling products.
- A system that collects and processes financial information about an organization's business activities. (correct)
- A way to manage human resources.
- A plan for organizational growth.
What are financing activities?
What are financing activities?
Borrowing or paying back money to lenders and receiving additional funds from stockholders or paying them dividends.
What are investing activities?
What are investing activities?
Buying or selling items such as plant and equipment used in the production of beverages.
What are operating activities?
What are operating activities?
What is management accounting?
What is management accounting?
What do supply chain managers analyze?
What do supply chain managers analyze?
What is financial accounting?
What is financial accounting?
How do human resource managers use financial statements?
How do human resource managers use financial statements?
What does a balance sheet report?
What does a balance sheet report?
What contains the heading of a balance sheet?
What contains the heading of a balance sheet?
What is the Basic Accounting Equation?
What is the Basic Accounting Equation?
What is an accounting entity?
What is an accounting entity?
What does financial position refer to?
What does financial position refer to?
What are assets?
What are assets?
What are Accounts Receivable?
What are Accounts Receivable?
How are assets on balance sheets measured?
How are assets on balance sheets measured?
What are liabilities?
What are liabilities?
What are accounts payable?
What are accounts payable?
What are notes payable to banks?
What are notes payable to banks?
What is stockholders' equity?
What is stockholders' equity?
What is common stock?
What is common stock?
What are retained earnings?
What are retained earnings?
What is total stockholder's equity?
What is total stockholder's equity?
What is the importance of assets?
What is the importance of assets?
Who receives money first if a company goes out of business and assets are sold?
Who receives money first if a company goes out of business and assets are sold?
What does an income statement report?
What does an income statement report?
What is included in the heading of an income statement?
What is included in the heading of an income statement?
What is an accounting period?
What is an accounting period?
What is the income statement equation?
What is the income statement equation?
What are revenues?
What are revenues?
What are expenses?
What are expenses?
What is net income?
What is net income?
Does net income equal the net cash generated by operations?
Does net income equal the net cash generated by operations?
What is the statement of stockholders' equity?
What is the statement of stockholders' equity?
What is included in the heading of the statement of stockholders' equity?
What is included in the heading of the statement of stockholders' equity?
What does retained earnings report?
What does retained earnings report?
How to calculate retained earnings in the statement of stockholders' equity?
How to calculate retained earnings in the statement of stockholders' equity?
What does the retained earnings portion of the statement of stockholders' equity indicate?
What does the retained earnings portion of the statement of stockholders' equity indicate?
Why do investors examine retained earnings?
Why do investors examine retained earnings?
What does the statement of cash flows report?
What does the statement of cash flows report?
What is included in the heading of the statement of cash flows?
What is included in the heading of the statement of cash flows?
What does CFO stand for?
What does CFO stand for?
What does CFI stand for?
What does CFI stand for?
What does CFF stand for?
What does CFF stand for?
What is the cash flow statement equation?
What is the cash flow statement equation?
Flashcards
Accounting
Accounting
A system for collecting and reporting financial information to aid decision-making.
Financial Accounting
Financial Accounting
Focuses on providing information for external decision makers.
Management Accounting
Management Accounting
Aims at developing information for internal decision makers within the organization.
Financing Activities
Financing Activities
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Investing Activities
Investing Activities
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Operating Activities
Operating Activities
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Balance Sheet
Balance Sheet
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Basic Accounting Equation
Basic Accounting Equation
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Assets
Assets
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Liabilities
Liabilities
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Stockholders' Equity
Stockholders' Equity
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Income Statement
Income Statement
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Net Income
Net Income
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Period of Income Statement
Period of Income Statement
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Statement of Stockholders' Equity
Statement of Stockholders' Equity
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Retained Earnings
Retained Earnings
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Statement of Cash Flows
Statement of Cash Flows
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CFO
CFO
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CFI
CFI
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CFF
CFF
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Financial Analysis
Financial Analysis
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Stakeholders
Stakeholders
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Creditors' Priority
Creditors' Priority
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Resource Allocation
Resource Allocation
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Operational Efficiency
Operational Efficiency
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Financial Statements
Financial Statements
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Economic Resources
Economic Resources
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Dividends
Dividends
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Acquisition Cost
Acquisition Cost
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Study Notes
Accounting Concepts
- Accounting is a system that collects, processes, and reports financial information regarding an organization's business activities to aid decision-making.
- Financial accounting primarily focuses on providing information for external decision makers.
- Management accounting is aimed at developing information for internal decision makers.
Activities in Accounting
- Financing activities involve borrowing or repaying loans and managing stockholder funds, including dividends.
- Investing activities entail the buying/selling of long-term assets like plant and equipment.
- Operating activities represent the day-to-day operations, including purchasing, manufacturing, delivering products, and managing cash flow.
Financial Statements Overview
- A balance sheet displays the financial position of an entity at a specific time, detailing assets, liabilities, and stockholders' equity.
- The basic accounting equation is: Assets = Liabilities + Stockholders' Equity.
- Key components of a balance sheet include the entity's name, title, date, and unit of measure.
Assets and Liabilities
- Assets represent economic resources owned by the entity, measured at total acquisition cost.
- Liabilities indicate the company's obligations to creditors and can include accounts payable (short-term debts) and notes payable (formal debts to banks).
- Stockholders' equity includes funds from owners and retained earnings reinvested in the business.
Income Statement
- The income statement reports a company’s performance, calculated as Revenues - Expenses = Net Income.
- It covers a specific accounting period and highlights resources used to generate revenues.
- Net income represents the excess of revenues over expenses; however, it does not equate to cash generated from operations.
Statement of Stockholders' Equity
- Reflects how net income and dividends distributed impact the company’s financial position through the accounting period.
- The calculation includes beginning retained earnings plus net income minus dividends to reach end-of-year retained earnings.
- Investors often analyze retained earnings to determine reinvestment levels for future growth.
Statement of Cash Flows
- This statement shows cash inflows and outflows categorized into operating, investing, and financing activities.
- The cash flow statement equation is: +/- CFO (cash flows from operating activities) +/- CFI (from investing activities) +/- CFF (from financing activities) = change in cash, plus beginning cash balance equals ending cash balance.
- Categories include:
- CFO: Cash flows directly related to income generation from operations.
- CFI: Cash flows from purchasing or selling long-term investments and assets.
- CFF: Cash flows from dealings with investors and creditors.
Importance of Financial Analysis
- Assessing financial position helps stakeholders understand a company's resource adequacy and potential future performance.
- Creditors reclaim their investments before stockholders in the event of liquidation.
- Financial managers and analysts utilize these statements to make informed decisions on resource allocation and operational efficiency.
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Description
Test your knowledge with these flashcards based on Chapter 1 of McGraw-Hill's Financial Accounting. These cards cover key terms and definitions essential for understanding the foundations of accounting, financing, and investing activities. Perfect for students looking to reinforce their comprehension of financial principles.