Financial Accounting

• The cash flow statement reports the cash inflows and outflows of a business during a specific period of time, categorizing them into operating, investing, and financing activities.
• The balance sheet is prepared at the end of an accounting period.
• Depreciation is the allocation of the cost of an asset over its useful life.
• Expense accounts are used to record the costs incurred by a business in order to generate revenue.
• The accounting equation states that assets are equal to liabilities plus equity.
• Cash flows from operating activities are those directly related to the company's core operations, such as sales revenue, cost of goods sold (COGS), depreciation expense, interest income/expense, taxes paid, etc.
• Investing activities involve buying or selling long-term assets like property, plant, equipment, securities, patents, trademarks, copyrights, etc.
• Financing activities include raising capital through debt or equity issuance, repayment of loans, dividend payments, share buybacks, etc.
• A company's financial statements are used to determine its profitability or loss over a given period.
• Financial statements include the income statement (profit/loss account), balance sheet (statement of financial position), and cash flow statement.
• Accrual basis refers to recording transactions when they occur rather than waiting until payment or receipt occurs.
• Income Statement - Reports on revenues earned by a business during a specified period of time, as well as expenses incurred during that same period.
• Revenue accounts are used to record the income generated from sales or other sources.
• Assets are resources controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.
• A company's financial statements include the income statement (profit/loss), balance sheet (assets = liabilities + equity), and cash flow statement.
• Liabilities are present obligations of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity's resources.
• Income statements report revenues, expenses, gains, losses, net income or loss, and other comprehensive income.
• Accountants use double-entry bookkeeping to ensure accuracy and consistency in financial reporting.
• Financial statements include the balance sheet, income statement, and cash flow statement.
• Net cash flow = Cash inflows - Cash outflows
• Profit is calculated by subtracting expenses from revenues.
• Operating activities refer to the day-to-day transactions involved in running a business, including sales, purchases, expenses, and revenues.
• Net Income = Revenue - Expenses
• Revenue refers to the amount earned by a business during an accounting period.
• The income statement shows how much money was earned by the business during a specific time frame.
• The balance sheet is a snapshot of what the business owns and owes at a particular point in time.
• The accruals concept is important because it allows companies to record revenues and expenses at the time they occur, regardless of whether cash has been received or paid out yet.
• Assets represent resources owned or controlled by a business.
• Liability is an obligation arising from past events, the settlement of which is expected to result in an outflow from the entity's assets or services performed.
• Assets can be classified as current (short term) or noncurrent (long term).