chapter 1

  1. Net loss
    The amount by which expenses exceed revenues.
  2. Balance Sheet
    A financial statement that reports the assets and claims to those assets at a specific point in time.
  3. Revenue
    The increase in assets that result from the sale of a product or service in the normal course of business.
  4. Liabilities
    The debts and obligations of a business. Liabilities represent the amounts owed to creditors.
  5. Income Statement
    A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time.
  6. Sarbanes-Oxley Act
    Regulations passes by Congress in 2002 to try to reduce unethical corporate behavior.
  7. Sole proprietorship
    A business owned by one person.
  8. Partnership
    A business owned by two or more persons associated as partners.
  9. Common Stock
    Term used to describe the total amount paid in by stockholders for the shares they purchase.
  10. Net Income
    The amount by which revenues exceed expenses.
  11. Basic Accounting Equation
    Assets=Liabilites + Stockholder's Equity
  12. Annual Report
    A report prepared by corporate management that presents financial information inncludind financial statements, notes, a management discussion and analysis section, and an independent auditor's report.
  13. Auditor's Report
    A report prepared by an independent outside auditor stating the auditor's opinion as to the fairness of the presentation of the financial position and results of operations and their conformance with generally accepted accounting standards.
  14. Statement of Cash Flows
    A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.
  15. Assets
    Resources owned by a business.
  16. Corporation
    A business organized as a separate legal entity having ownership divided into transferable shares of stock.
  17. Accounting
    The information system that identifies, records, and communicates the economic events of an organization to interested users.
  18. Comparative Statements
    A presentation of the financial statements of a company for more than one year.
  19. Stockholder's Equity
    The owner's claim on total assets.
  20. Management discussion and analysis (MD&A)
    A section of the annual report that presents management's views on the company's ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations.
  21. Certified Public Accountant (CPA)
    An individual who has met certain criteria and is thus allowed to perform audits of corporations.
  22. Retained Earnings Statement
    A financial statement that summarizes the amounts and causes of changes in retainned earnings for a specific period of time.
  23. Dividends
    Payments of cash from a corporation to its stockholders.
  24. Notes to the Financial Statements
    Notes that clarify information presented in the financial statements, as well as expand upon it where additional detail is needed.
  25. Expenses
    The cost of assets consumed or services used in the process of generating revenues.
  26. Retained Earnings
    The amount of net income retained in the corporation.
Card Set
chapter 1
Introduction to Financial Statements