Financial Accounting Midterm review

Financial Accounting Midterm review - Cody Brouwers 1...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Cody Brouwers 1 October 28, 2009 Financial Accounting M id-Term Review Chapter 1 Learning Objectives 1. Distinguish among the forms of organizations (p. 6) a. Corporations An entity organized under the laws of a government. Ownership is evidenced by shares. b. Proprietorships Business with a single owner. c. Partnerships Business owned by two or more individuals and with the characteristic of unlimited liability. d. Non-business Organization operating for another purpose other than profit. 2. Describe the various types of business activities (p. 8) a. Financing Sources of cash i. Capital stock Owners contributions to a corporation. b. Investing Uses of cash to procure future benefits (assets) c. Operating Cash flows from operating activities 3. Identify the users of accounting information and their needs (p. 11) a. The primary users of financial statements are those who depend upon the economic information conveyed in those statements to make decisions. Primary users may be broadly classified as internal users and those external to the company. i. Internal users are usually managers of companies. Cody Brouwers 2 October 28, 2009 ii. External users include shareholders, investors, creditors, and government agencies. b. Financial accounting is the branch of accounting used to communicate with outsiders through financial statements. i. Shareholders and potential shareholders ii. Bondholders, bankers, and other creditors iii. Government agencies iv. Other external users such as other companies that wish to sell their product. 4. Explain the purpose of each of the financial statements and relationships among them. (p. 13) a. The three major financial statements i. The balance sheet is a snapshot of a companys financial position at the end of the period. It reflects the assets, liabilities, and shareholders equity. 1. Retained earnings the part of owners equity that represents income less dividends paid over the life of an entity. ii. The income statement summarizes the financial activity for a period of time. I tems of revenue, expense, gains, and losses are reflected in the income statement. 1. Summarizes revenues and expenses. iii. Ultimately, all net income (loss) and dividends are reflected in retained earnings on the balance sheet. The statement of retained earnings links the income statement to the balance sheet by showing how net income (loss) and dividends affect the retained earnings account. Cody Brouwers 3 October 28, 2009 1. Links balance sheet and income statement by showing the how net income becomes retained earnings after dividends have all been paid. 2. Dividends are not an expense, and so they do not appear on the income statement. Instead they are a distribution of the income of the business to the shareholders....
View Full Document

{[ snackBarMessage ]}

Page1 / 11

Financial Accounting Midterm review - Cody Brouwers 1...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online