ACCT 217 > Chapter 1 > Flashcards

Chapter 1 Flashcards

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1
Q

What is accounting

A

a record of all economic events of an organization

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2
Q

What should accounting be

A

Transparent, reliable, and accurate financial reporting

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3
Q

Internal users

A

Manage organizatinos (profit.non profit/governmental orgs_

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4
Q

Examples of internal users

A

managers
directors in finance mktg hr

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5
Q

What info is more detailed, info for internal users or external users?

A

internal users! the info is used to make decisions requried to run the compan

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6
Q

what makes internal users special

A

they are able to access accounting information readily, external users only recieve info when ever it is made publically avialable PERIODICALLY

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7
Q

External users

A

Users of accounting information that are not involved in managing the organization and do not have access to accounting information other than that which is publicly available, including investors, lenders, and other creditors.

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8
Q

MAIN EX of external users+what they do with accounting info

A

investors (owners)= choose to buy hold or sell ownership interest

Creditors (lenders)= use accoutning info to evaluate risk of lending money or selling on creedit

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9
Q

INVESTORS ARE ALSO KNOWN AS

A

SHAREHOLDORS

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10
Q

CREDITORS ARE OFTEN KNOWN AS

A

LENDERS OR DEBTHOLDERS

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11
Q

Other examples of external users

A

1) non management employees (any union that represents them)
2) potentnail employees (looking for job prospects)
3) taxing orgs (cra)
4) regulatory orgs (checking if ocmpany is up to standard)
5) customers

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12
Q

Ethics

A
  • Accounting info should be up to standards, legal, responsible, and you must consider the organizations’ interests, they should protect users
  • “Accounting Code of Ethical Conduct”- every large org will have this code of conduct
  • Unethical Conduct: Management portrays a better performance on the financial statement to get more stakeholders or the managers want higher bonuses, maybe they can portray worse financial performance to reduce the leverage of labour unions or maybe to reduce tax payments]
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13
Q

4 types of data analytics

EIES

A

Descriptive
Diagnostic
Predictive
Prescriptive

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14
Q

Descriptive Data Analytics

A

What happened?

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15
Q

Diagnostic Data Analytics

A

Why did it happen

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16
Q

Prescsriptive

A

What should we do to fix this

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17
Q

Predictive

A

What is likely to happen

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18
Q

Proprietorships

A

business owned by one person, known as a proprietor

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19
Q

pros of proprietorship

A

simple to set up, total control, small amount of money to start business

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20
Q

cons of propreitorship

A

UNLIMITED LIABILITY, owner bears all loss,

no legal disctinction betwen business and owner, so life of proprietorship is limited to the life of owner

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21
Q

how is a proprietorship business income reported?

A

on the owners personal income tax return

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22
Q

Reporting Entity Concept

A

economic activity of a specific company must be kept separate and distinct from all owners other economic activities

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23
Q

basic example of reporting entity concept

A

keeping the records of a proprietorship separate!

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24
Q

why should we have reporting entity concept

A

because of ethics and representing ONLY businesses’ activities- easier to judge

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25
What is a partnership
business with 1+ person; like proprietorship but not rlly
26
Why are partnerships formed?
because one person does not have enough money/ different skills/resources
27
Why are partnerships more complex than proprietorships
need to make agreement that lays out the rules
28
who has liability in partnerships
ALL partners have unlimited liability for all debts of the partnership (Even if they did not create the debts themselves)
29
Where is the business income reported from a partnership
on each partners' personal income tax return
30
examples of partnerships
lawyers doctors architects practices
31
what is corporation
SEPARATE LEGAL ENTITY owned by shareholders, most costly and most complex business entity
32
synonym of stock
shares
33
Characteristics of a Corporation
1) indefinite life (exists regardless who owns its shares) 2)easy to sell shares and transfer 3) shareholders have limited liability (less risk)
34
When can shareholders have unlimited liability
IF THEY provided personal guarantees to lenders for the debts of a corporation, which would mean their liability would extend beyond the amount of their investment
35
Why do corporations raise money easier
1) indefinitie life 2) easy to transfer ownership via shares 3) limited liability
36
Who is treated better with income taxation
CORPORTATIONS
37
existing wise Proprietorships + partnerships > Corporations but
money wise Proprietorships + partnerships < Corporations
38
When is a corporation public
-Shares are publically traded on stock excange - required to make financial statements avaiable to the public quarterly and annually (ON SEDAR)
39
Private corporation
-issue shares but are not traded publically - EX: MCCAIN FOODS, JIM PATTISON GROUP - CANT RAISE MONEY AS EASILY -dont need to publish their papers
40
Verb: to create a corporation
Incorporate
41
GAAP (Generally Accepted Accounting Principiles)
broad policies and practices as well as rules and procedures about how to record and report economic events.
42
GAAP- Public corps must use ----
IFRS Standards (International Financial Reporting Standard)
43
GAAP- Private corps can choose between --- ---
IFRS (intl financial reporting standards) or ASPE (Acct standards for private enterprise)
44
Why do PRIVATE companies CHOOSE IFRS
1) want to access public debt or equity markets in the future 2) wants to be able to compare fiancial resutls w/ compeititon who use IFRS 3) has foreign subsidiaries & wants common standard
45
PUBLIC EQUITY MARKETS???
THESE ARE STOCKS
46
privately owned but not private corproations
Propreitorships and Partnerships
47
What gaap principles do proprietroships and partnerships use
ASPE when need be
48
Fo rinternal accounting standards, do private/public corps stick to any standards
DONT HAVE TO
49
3 types of economic activity
1) financing 2) investing 3) operating
50
What do the 3 economic activites result in
Cash inflow Cash Outflow
51
Financing Activities
ALL ACTIVITES RELATED TO: DEBT financing [LOANS] or EQUITY Financing [Selling/buying stock] ex: -borrowing or repaying cash from (to) lenders, -and issuing or reacquiring shares or paying dividends to investors.
52
Investing Activites
purchasing long lived assets (land building equipment) ourchasing or selling shares or debt OF OTHER COMPANIES
53
Operating Activities
day to day operations, including cash flows erlated to revenue and expenses
54
What are shareholders called
Investors
55
Types of Share capital
common share= reprenting shareholders ownership of a company
56
If funds are borrowed, how much claim do shareholders have on the assets of a corp?
ONly residual claim! means that if a company stops operating, all the debt needs to be repaid before shareholders get any returns on their capital
57
Dividends
payments distributing a protion of company income to shareholders
58
Fiscal year
accounting time period tha tis one year in length
59
Fiscal year ending in Jan 31 2022 is called
2021
60
When you repurchase company shares is it inflow or outflow?
outflow of cash
61
What are the people that a company borrows money from called
CREDITORS/LENDERS
62
Liabilities
Amounts OWED to creditors, must be repaid with interest
63
Types of liabilities
1) Operating lne of credit: pre arranged bank loan for a max amount allowing company to withdraw more money then it has 2) Bank loan payable (note payable) [SHORT TERM LOAN] 3) Long term debt ( mortgages payable, bonds payable, finance lease obligations)
64
When a company draws on operating line of credit it is caleld
BANK INDEBTEDNESS
65
--- payable?
LIABILTIY!! YOU OWE THIS
66
Long term debt synonym
NON CURRENT DEBT OR NON CURREN TLIABILITIES
67
Paying interest on borrowed funds and paying dividens to shareholders is what activity
EITHER FINANCING OR OPERATING but interest will be used as operating activity, dividens as financing activity
68
investing activities
purchasing/selling long lived assets a company needs buying furniture equipment computers vehicles OR ourchasing or selling shares or debt OF OTHER COMPANIES
69
asset
resources a company owns or controls; asset provides future economic benefits that can be short- or long-lived
70
What is the general name of assets
propert, plant, equipment; capital assets; fixed assets
71
intangible assets
goodwill and intandible assets goodwill (when a company buys another company when paying a price that is higher than the value of the purchased company's net identifiable assets)
72
Goodwill menaing
BRAND VALUE that people respect
73
Intangible assets
dont have physical substance COPYRIGHT TRADEMARK PATENTS
74
what sort of cash flow is investing
OUTFLOW
75
TWO TYPES OF INVESTMENT ACTIVITIES
relating to long term assets ; ORRRR in other compaies debt and shares
76
income
either an increase in asset or decrease in liability from sale of aproduct or service
77
gains comes from
interest and dividendsr (things that are not a commanies principal operation)
78
revenue comes from
sales of goods or services
79
Account recievable
ASSET! this is the right to recieve money in the furtre (owed money)
80
short term assets generally come from --- activity
operating
81
ex of short term assett
supplies (short term asset used in day to day operations lIKE CLEANING SUPPLIES ->> THESE ARE NOTTTT SOLD TO CUSTOMERS)
82
What are short terms assets that are stored to sell to customers called
Inventori
83
inventory vs supplies
inventory= for sale to customers supplies= for day to day use
84
cost of inventory sold is
COST OF GOODS SOLD
85
expenses
decrease economic resouces
86
interest expense synonnym
finance cost (Cost of using debt)
87
accounts payable
the money you have to pay
88
interest payable
unpaid liability amount owed to crediots
89
salaries payable
unpaid salary owed t oemployees
90
Deferred tax liabilities are another example of a liability. They result from differences in how items are recorded for accounting and tax purposes.
Deferred tax liabilities are another example of a liability. They result from differences in how items are recorded for accounting and tax purposes.
91
When revenue - expenses = +#
Net income or net earning or profit
92
Revenue - expenses = -#
net loss
93
what is th eflow of business activiites
financing, investing, operating
94
Issuing a share is cash inflow
WORD
95
SUPPLIES ARE AN
ASSET NOT EXPENSE
ACCT 217
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