Summary: Financial Accounting, Custom Edition | 9781308572185

Read the summary and the most important questions on Financial Accounting, Custom Edition | 9781308572185

• 1 Financial Statements and Business Decisions

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• What are the GAAP? (Generally Accepted Accounting Principles)

  GAAP are the measurement and disclosure rules used to develop the information in financial statements.

• What is the purpose and structure of the Balance Sheet?

  The Balance Sheet reports the financial position (economic resources and sources of financing) of an accounting entity at a point in time. Structure is Assets = Liabilities + Stockholders' Equity
  
  
  Examples of Content are: cash, accounts receivable, plant and equipment, long-term dept, common stock

• What is the purpose and structure of the Income Statement?

  The Income Statement reports the accountant's primary measure of economic performance during the accounting period.
  Structure is Revenues - Expenses = Net Income
  
  Examples of Content are: sales revenue, cogs, selling expense, interest expense

• What is the purpose of the Statement of Stockholders' Equity?

  The Statement of Stockholders' Equity reports changes in the company's common stock and retained earnings during the accounting period.
  
  Examples of Content are: beginning and ending stockholders' equity balances, stock issuances, net income, dividends

• What is the purpose of the Statement of Cash Flows?

  The Statement of Cash Flows reports inflows (receipts) and outflows (payments) of cash during the accounting period in the categories operating, investing, and financing.
  
  Examples of Content are: cash collected from customers, cash paid to suppliers, cash paid to purchase equipment, cash borrowed from banks.

• 2 Investing and Financing Decisions and the Accounting System

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• What is the primary objective of financial reporting to external users?

  It is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity.

• What are concurrent liabilities?

  Those are obligations that will be settled by providing cash, goods, other current assets, or services within more than a year.

• What is stockholders equity?

  That is the residual interest in assets of the entity after subtracting liabilities.

• What are external events?

  These are exchanges of assets, goods, or services by one party for assets, services, or promises to pay (liabilities) from one or more other partner.

• What is statement of cash flows?

  It is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources.