Card Set Information
Chapter 1 and 2 flashcards for Accounting 231
What are Dividends?
Payments made to shareholders. When company earns profit, either gets reinvested into company (retained earnings) or paid to shareholders as dividends.
What is Accounting?
A system that collects and processes financial information about an organization and reports that information to decision makers.
Financial Accounting involve?
Equations for Balance Sheet
Assets = Liabilities + Stockholder's Equity
owned by the company.
future economic value.
Acquired resources the entity can use to operate in th future.
: amounts owed or received from others.
Example of Assets
Inventory (to be sold)
These will be
used or turned into cash
is always under this regardless of time.
Item of future economic debt or
Result from an entities
to the business.
Examples of Liabilities
Amount of financing provided by owners of the business and earnings.
A residual amount
: what is left over after your assets cover your liabilities.
in the business by the
Common Stock, Preferred stock
Examples of Stockholder's Equity
Earnings that are
not distributed to owners
into the business by management.
from sales to customers are listed
along with the
expenses incurred to produce those revenues.
results of operations
over a period of time.
Equation of Income Statement
Revenues - Expenses = Net Income
Value of a
-Nothing to do with cash; It's the amount you will
technically have that get's recorded.
Examples of Revenue Accounts
generate current revenue
-Supplies needed to provide service etc..
Example of Expense Accounts
of Goods Sold
Income Tax Expense
total revenues over total expenses
Example of Income Statement
Statement of Retained earnings
of the firm
in the corporation.
Equation for Statement of Retained Earnings
Beginning Retained Earnings +
= Ending Retained Earnings
Either increases or decreases ending earnings
Decreases Retained earnings
Example of Statement of Retained Earnings
Statement of Cash Flows
of cash during the accounting period in the categories of
operating, investing and financing.
Operating Activities (CFO)
Directly related to earning income. What the company does on day to day basis.
Investing Activities (CFI)
Relates tot he acquisition or sale of the company's productive assets.
Bonds, investments, stock, expansion of company.
These are generally Long term assets.
Financing Activities (CFF)
Directly related to financing of enterprise itself.
Activities that involve borrowing.
These are long term liabilities.
Example of Cash Flow Statement
Relationships among Net Income and Retained Earnings
Net income from the income statement results in an increase in ending retained earnings on the
statement of retained earnings.
Ending Retained earning and SE
Ending retained earnings from the statement of retained earnings is one of the two components
of stockholders’ equity on the balance sheet.
Cash flow and Balance Sheet
The change in cash on the statement of cash flows is added to the beginning-of-year balance in cash
to arrive at end-of-year cash on the balance sheet.