Financial Accounting Basics
This is the group of people financial accounting is primarily designed to inform.
Who are investors and creditors
Buying equipment is an example of this type of business activity.
What is an investing activity
The accounting equation states: Assets = Liabilities + ________.
What is stockholders' equity
These are recognized when a company provides goods or services.
What are revenues
This statement reports revenues and expenses over a period of time
What is the income statement
These are the two core functions of financial accounting.
What are measuring business activities and communicating information
Paying salaries and utilities falls under this category of activities.
What are operating activities
These represent creditors’ claims to resources.
What are liabilities
These are the costs of providing products and services.
What are expenses
This statement shows changes in common stock and retained earnings
What is the statement of stockholders' equity
This term refers to accounting information provided to external users.
What is financial accounting
Issuing common stock and borrowing from a bank are examples of this activity type.
What are financing activities
These represent owners’ claims to resources.
What is stockholders' equity
This is the formula for net income
What is revenues minus expenses
This statement reports cash inflows and outflows from operating, investing, and financing activities
What is the statement of cash flows
This model shows how accountants measure activities and communicate them to decision‑makers.
What is the framework for financial accounting
This type of activity involves transactions expected to benefit the company for several years.
What are investing activities
This part of equity increases when a company earns net income.
What are retained earnings
This cash distribution to owners is not an expense
What are dividends
This number from the income statement flows into retained earnings on the statement of stockholders' equity
What is net income
This key point states that no single piece of information better explains stock price performance than this number.
What is net income
This activity category relates to the primary operations of the company.
What are operating activities
This financial statement presents the accounting equation at a point in time.
What is the balance sheet
This statement reports how dividends affect retained earnings
What is the statement of stockholders' equity
This ending number on the statement of cash flows reappears on the balance sheet
What is the ending cash