AFM 101 Final
Four financial statements in order - ANSWERincome statement, retained earnings
statement, balance sheet, statement of cash flows
Financial Accounting - ANSWERFor internal and external use
Management Accounting - ANSWEROnly used internally
General Accepted Accounting Principles (GAAP) - ANSWERthe common set of
standards and procedures by which audited financial statements are prepared
International Financial Reporting Standards (IFRS) - ANSWERUsed by public
enterprise
Proprietorship - ANSWERA business owned by one person
Partnership - ANSWERA business in which two or more persons combine their assets
and skills
Corporation - ANSWERA business that is owned by many shareholders, shareholders
are not responsible for business
Elements of the Balance Sheet - ANSWERassets, liabilities, stockholders equity
purpose of balance sheet - ANSWERto report a company's financial position on a
particular date
Elements of the Income Statement - ANSWERTotal income, total expense
Purpose of Income Statement - ANSWERShow how the company performed during the
year
Purpose of statement of retained earnings - ANSWERTo explain changes in retained
earnings over the year
Accounting Equation - ANSWERAssets = Liabilities + Stockholders' Equity
Assets - ANSWERresources owned by a business
current assets - ANSWERcash and other assets expected to be exchanged for cash or
consumed within a year
, Non-current assets - ANSWERItems owned by the business for more than one year ex.
land, building
Liabilities - ANSWERfinancing provided by creditors
Current Liabilities - ANSWERliabilities due within a short time, usually within a year
Non-current liabilities - ANSWERvalue of debts of the business that will be payable after
more than one year
Shareholders' Equity - ANSWERFinancing provided by shareholders
- Share capital/ common shares
- Retained earnings
Operating Activities - ANSWERMain revenue producing activities of the company
- interest and dividends received
Investing Activities - ANSWERPurchase and sale of long term assets sed to generate
future income and cash
- CF related to advances and loans made to other entities
Financing Activities - ANSWERResulting in changes in size and composition of a
company's equity and borrowing
Notes to the financial statements - ANSWERNotes clarify information presented in the
financial statements and provide additional detail.
Fundamental Qualitative Characteristics - ANSWER1. Relevance
2. Faithful Representation
Enhancing Qualitative Characteristics - ANSWER1. Comparability
2. Verifiability
3. Timeliness
4. Understandability
Going Concern Assumption - ANSWERThe assumption that the company will continue
in operation for the foreseeable future.
Separate Entity Assumption - ANSWERstates that business transactions are separate
from the transactions of the owners
Historical cost assumption - ANSWERAssets recorded at purchase price
stable monetary unit assumption - ANSWERDollar's purchasing power is stable over
time
Four financial statements in order - ANSWERincome statement, retained earnings
statement, balance sheet, statement of cash flows
Financial Accounting - ANSWERFor internal and external use
Management Accounting - ANSWEROnly used internally
General Accepted Accounting Principles (GAAP) - ANSWERthe common set of
standards and procedures by which audited financial statements are prepared
International Financial Reporting Standards (IFRS) - ANSWERUsed by public
enterprise
Proprietorship - ANSWERA business owned by one person
Partnership - ANSWERA business in which two or more persons combine their assets
and skills
Corporation - ANSWERA business that is owned by many shareholders, shareholders
are not responsible for business
Elements of the Balance Sheet - ANSWERassets, liabilities, stockholders equity
purpose of balance sheet - ANSWERto report a company's financial position on a
particular date
Elements of the Income Statement - ANSWERTotal income, total expense
Purpose of Income Statement - ANSWERShow how the company performed during the
year
Purpose of statement of retained earnings - ANSWERTo explain changes in retained
earnings over the year
Accounting Equation - ANSWERAssets = Liabilities + Stockholders' Equity
Assets - ANSWERresources owned by a business
current assets - ANSWERcash and other assets expected to be exchanged for cash or
consumed within a year
, Non-current assets - ANSWERItems owned by the business for more than one year ex.
land, building
Liabilities - ANSWERfinancing provided by creditors
Current Liabilities - ANSWERliabilities due within a short time, usually within a year
Non-current liabilities - ANSWERvalue of debts of the business that will be payable after
more than one year
Shareholders' Equity - ANSWERFinancing provided by shareholders
- Share capital/ common shares
- Retained earnings
Operating Activities - ANSWERMain revenue producing activities of the company
- interest and dividends received
Investing Activities - ANSWERPurchase and sale of long term assets sed to generate
future income and cash
- CF related to advances and loans made to other entities
Financing Activities - ANSWERResulting in changes in size and composition of a
company's equity and borrowing
Notes to the financial statements - ANSWERNotes clarify information presented in the
financial statements and provide additional detail.
Fundamental Qualitative Characteristics - ANSWER1. Relevance
2. Faithful Representation
Enhancing Qualitative Characteristics - ANSWER1. Comparability
2. Verifiability
3. Timeliness
4. Understandability
Going Concern Assumption - ANSWERThe assumption that the company will continue
in operation for the foreseeable future.
Separate Entity Assumption - ANSWERstates that business transactions are separate
from the transactions of the owners
Historical cost assumption - ANSWERAssets recorded at purchase price
stable monetary unit assumption - ANSWERDollar's purchasing power is stable over
time
