The Circle of (Financial Statement) Life
Publicly traded corporations are required by law to have a _____________, who are elected by the shareholders to represent their interests and oversee management.
What is a board of directors?
This is a list of the titles of all accounts for a company that does not contain any balances.
What is the chart of accounts?
These are the four types of adjustments.
What are deferred revenue, deferred expense, accrued revenue and accrued expense adjustments?
The ending cash balance on the cash flow statement can be found on this financial statement.
What is the balance sheet?
This is the set of authoritative standards and accepted practices that guide the preparation of financial statements in the United States.
What is GAAP (Generally Accepted Accounting Principles)?
This financial statement reports a company's financial position at a point in time.
What is the balance sheet?
The difference between revenues and cost of goods sold during the period.
What is gross profit?
What is an accrued expense adjustment?
Cash received from customers would be recorded in this section of the cash flow statement.
What is operating activities?
Currently codifies new accounting standards that guide financial reporting.
What is FASB (Financial Accounting Standards Board)?
These users of the financial statements utilize financial statements to assign a rating to a company's debt, which indicates the chance of default.
Who are financial analysts?
On December 1, 2025, a company signs a 12‑month lease beginning January 1, 2026. Monthly rent will be $1,000 and is due on the first of each month. A $2,000 security deposit is required at signing. This is the entry made in December 2025.
What is a debit to security deposit and a credit to cash?
This process takes the end-of-period balances in the temporary accounts and moves them to a permanent account.
What is the closing process?
Gains and losses from selling long‑term assets are removed from operating activities because the cash impact belongs here instead.
What are investing activities?
This refers to the original acquisition cost of an asset and what value physical (tangible) assets are reported on the balance sheet.
What is historical cost?
These two financial statements contain information that links them to the Statement of Stockholders' Equity.
What is the balance sheet AND the income statement?
On March 15, 2026, a company receives a $5,000 invoice for equipment repairs completed earlier in the month. The vendor notes that future maintenance packages are available at a discount, and the company is considering signing up later this year. This is the journal entry recorded in March 2026.
What is Debit Repairs Expense and Credit Accounts Payable?
On June 1, 2025, the Company had $10k in inventory on hand. During the month of June, the Company purchased $2k of inventory on account. On June 30, 2025, the Company had an the ending balance of inventory of $7k. This is the amount of cost of goods sold recorded for June 2025.
What is $5,000?
A company issues stock for cash and later uses part of that cash to purchase equipment. Although both transactions affect total cash, they belong in two different sections of the cash flow statement. Name both sections in the correct order of the transactions.
What are financing activities and investing activities?
This represents the amount paid for a company's own common stock that the company has reacquired, which reduces contributed capital.
What is treasury stock?
There are 4 assumptions that underlie the preparation of the financial statements. They include reporting entity, accounting period, monetary unit and ________, which means companies are assume to have continuity in that they can expect to continue in operation over time.
What is going concern?
These are the five steps in the accounting cycle.
What is analyze, record, adjust, report and close?
At November 30, 2025, the Company had issued $20,000 of common stock and had $30 in retained earnings to date. During December 2025, the Company recorded $750 of net income and paid $50 in cash dividends. This is the amount of earned capital at December 31, 2025.
What is $730?
Repaying principal on long‑term debt is shown as a(n) _________ activity, but interest paid is a(n) ________ activity.
What is financing and operating?
This ratio allows us to discern whether the company is likely to have difficulty meeting its short-term obligations.
What is the current ratio?