D102 Financial Accounting Final OA Review Module 1

D102 Financial Accounting Final OA Review Module 1 Leave the first rating Students also studied Terms in this set (50) Western Governors UniversityD 102 Save wgu d102 pre assesment 64 terms Keto_BobPreview D102 Financial Accounting WGU 52 terms Amy_WGUPreview D102 Financial Accounting - Unit 5 21 terms kaylalala143Preview Financi 286 term paig Balance Sheeta listing of an organization's assets and of its liabilities at a certain time or date.Equitycan be thought of as the amount of the assets that the owners of the organization can really call their own, the amount that would be left if all the liabilities were paid off.Balance Sheetcan be used to evaluate a company's financial position by comparing the company's resources with its obligations.Basic Accounting EquationAssets = Liabilities + Owners Equity.Assetseconomic resources that are owned or controlled by a company that will provide a probable economic future benefit.Liquiditythe ease with which the item can be turned into cash.Cash- Coins, currency, checks Accounts Receivable - Amounts owed to a company that sold goods or services to a customer on credit Inventory- Items that are purchased or manufactured by a company and are resold Buildings- Structures used in the operations of a business What are some common assets?Liabilitiesthe economic obligations of a company and include primarily the money or services that the company owes its creditors.

Accounts Payable- Amount owed as a result of the purchase of goods and services on credit Taxes Payable- Amount owed to federal and state governments resulting from the application of tax laws Mortgage Payable- Amount owed relating to the purchase of property Unearned Revenue- Amount owed in services or product (not money) to a customer who paid in advance.

Ex: Magazines a company owes a customer who bought a

12-month magazine subscription What are some common Liabilities?Owner's Equity (Net Assets)The residual interest in the assets that remain of an entity after its liabilities have been deducted. Creditors legally have first claim on the assets of a business.Capital Stock Retained Earnings What are some common sources of owners equity?Capital Stock (Paid in Capital or Capital Contributions) The amount given by shareholders to purchase shares of stock from a company.Retained EarningsEarnings that are retained in the business.Decrease in Owners EquityOwners withdraw assets or company suffers a loss?Increase in Owners EquityOwners invest assets or company generates a profit?stockholders or shareholdersThe owners of a corporation by owning shares of stock.balance sheetthe fundamental financial statement, listing three categories of a company's

resources and claims against those resources: assets, liabilities, and owners'

equity.Assets, Liabilities & Owner EquityWhat are the three items that make up the basic elements of the balance sheet in order.Coins and Currency Checking and Savings Accounts Cash Equivalents (mature in <3 Months) CD, US Treasury Securities, other short term interest bearing securities What is cash?current itemsassets expected to be used and liabilities expected to be paid or otherwise satisfied within a year are considered cash, accounts receivable, and inventory.The most common current assets are Accounts receivableamounts owed to a business by its credit customers and are usually collected in cash within 10 to 60 days.Inventorythe name given to goods held for sale in the normal course of business.

raw materials partially-completed items (called work in process).For a manufacturing business, inventory also includes Prepaid ExpensesExpenses paid in advance but that are actually assets Investment securitiesare usually composed of publicly traded stocks and bonds. If a company intends to sell these within a year, they are classified as current assets.Expected to be still here in one year when you make the next balance sheet. Property, Plant & Equipment, Intangibles What are long term assets?To make money and to exert influence on how the company is run. (getting a seat on the board of directors) Why do company's make long term investments in other companies?Accumulated Depreciationreflects the wear and tear (depreciation) of these items since they were originally purchased.Intangible assetsassets that have no physical or tangible characteristics. They are agreements, contracts, or rights that provide economic benefits to a company by permitting the use of a certain production process, trade name, or similar item.Trademarks Brand Names Copyrights Franchises Goodwill (Relationships) What are examples of Intangible assets?Deferred Income Tax Asset (future tax benefits from events that have already occurred) Net Pension Asset (overfunded pension) What are examples of other les common Long Term assets?Current Liabilitiesobligations expected to be paid within one year.Accounts payablethe opposite of accounts receivable. When one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit unearned revenueis not revenue at all but a liability to be reported in the balance sheet.Wages Payable Taxes Payable Utilities Payable Interest Payable What are some examples of Accrued Liabilities?Short-term loans payable Short-term notes payable formal, interest-bearing loans that are expected to be paid back within one year.A company with seasonal cash needs, such as a retailer that needs to borrow to finance inventory and staff buildup around the Christmas buying season, would probably satisfy those needs with these.

Both (the principal to be repaid within 12 months is current) Is a 30 year mortgage with payments due each month a current or long term liability?Unearned Revenue (liability)Obligation to deliver services for which customers have already paid me but that I have not yet delivered?long-term liabilities.Obligations that are not expected to be paid or otherwise satisfied within one year are classified as These liabilities include traditional loans, bonds, loans structured as leases, deferred income taxes, and other obligations such as employee pensions.Stockholder's EquityAmount invested in the company by the owners either directly or by retaining in the business.Common StockholdersConsidered the true owners of a company right to vote preemptive right to purchase additional shares Dividends if they are paid Ownership to corp assets once legal claims have been met What are the rights of common stockholders?stockholders' equityIn a corporation, the difference between assets and liabilities is most often referred to as additional paid-in capitalsimply reflects the total amount invested by stockholders that exceeds the par value of the issued shares.Retained earningsis increased by net income and decreased by both net losses and the payment of dividends.Treasury Stockshares of a companies own stock that they bought back To show confidence in the value of the shares and try to convince stock market participants that the company's shares are currently undervalued.Another reason is that a stock repurchase is a way to distribute to stockholders any excess cash not needed for operations or for business expansion.Why would a company buy back its own stock (treasury stock)?A balance sheet that distinguishes between current and long-term assets What is a classified balance sheet?The difference between total assets and total liabilities What does owners' equity represent?