Terms #1 (Qualitative Characteristics)
helps predict future cash flows
What is predictive value
Economic resources owned or controlled by a particular entity that are expected to provide future benefits. For example cash, accounts receivable, inventory, etc.
What are assets
Firm pays for $5,000 of inventory on account
Increase of $5,000 of assets, and increase of $5,000 of liabilities
This financial statement presents the profit-generating activities of the company over a period of time?
What is the income statement
The purpose of financial accounting is to provide ______ information to external users
What is the word useful
Free from bias
What is neutrality
Residual interest after liabilities have been deducted from assets
What is equity
Firm provides $10,000 of services on account
Increases $10,000 of assets and $10,000 of equity
The accounting equation
What is Assets=Liabilities+Equity
This account is also known as distribution to owners
What are dividends
This qualitative characteristic of financial reporting must have predictive and/or confirmatory value and materiality
what is relevance
An expense is a decrease in assets or an increase in liabilities that reduces equity, recognized when goods or services are consumed in the process of generating revenue.
What are expenses
Firm collected $1,000 cash from customer on account
Increase $1,000 assets and decrease $1,000 of assets (no change)
This financial statement presents the financial position of a company at a point and time?
What is the balance sheet
Rules accountants in the U.S need to follow?
What are Generally Accepted Accounting Principles (GAAP)?
Use of the same accounting principles and methods from year to year within a company
Consistency
An increase in equity from peripheral or incidental transactions of an entity
What are gains
Paid $600 in cash dividends to shareholders
Decrease in assets and decrease in equity
Revenues minus expenses
What is net income or net profit
This underlying assumption states that the economic activities of a business can be divided into artificial time periods
What is the periodicity assumption
Considers if different knowledgeable and independent measures would reach consensus about whether information is representationally faithful
What is verifiability
The change in equity from nonowner transactions
What is comprehensive income
Its December 31st, and the firm owes its workers $2,500 in wages. The employees are not paid until January 31st.
Increased liabilities by $2,500, and decreased equity by $2,500
Name one of the three different types of activities from the statement of cash flows
What is Operating, Investing, and Financing?
This underlying assumption states that the business is separate and distinct from its owners or other businesses
What is the economic entity assumption