account test 1 Flashcards
1
Q
the language of business
A
accounting
2
Q
the building block of any business is
A
transactions
3
Q
the classification, grouping, and summarization of these business transactions in a generally accepted manner is
A
accounting (systematic)
4
Q
collects and processes financial information about an organization and reports that information to decision makers
A
Accounting system
5
Q
accounting for internal decision makers
A
managerial
6
Q
accounting for external decision makers
A
financial
7
Q
two main decision makers
A
creditors and shareholders
8
Q
owners of the company
A
shareholders
9
Q
lenders to the company
A
creditors
10
Q
the four basic financial statements
A
balance sheet, income statement, statement of retained earnings, statement of cash flows
11
Q
reports the amount of assets, liabilities, and stockholders equity of an accounting entity of a point in time
A
balance sheet
12
Q
organization for which financial data are to be collected; must be precisely defined
A
accounting entity
13
Q
basic accounting equation
A
assets= liabilities stockholders equity
14
Q
represents the economic resources of a business
A
assets
15
Q
_____represents the sources of financing for economic resources from creditors
A
liabilites
16
Q
______represents the sources of financing for economic resources from stockholders
A
stockholder’s equity
17
Q
the investment of cash and other assets in the business by the owners
A
contributed capital
18
Q
the amount of earnings reinvested in the business (not distrubted to stockholders in the form of dividends)
A
retained earnings
19
Q
reports the revenues and the expenses of the accounting period
A
income statement
20
Q
income statement formula
A
revenues- expenses = net income
21
Q
what are the elements of an income statement
A
revenues, earnings, net income
22
Q
earned from sale of goods or services to customers
A
revenues
23
Q
dollar amount of resources the entity used to earn revenues during the period
A
expenses
24
Q
excess of total revenues over total expenses
A
net income
25
when is net loss reported
if total expenses exceed total revenues
26
reports the way that net income and distribution of dividends affected the financial position of the company during the accounting period
statement of retained earnings
27
statement of retained earnings
beginning retained earnings + net income - dividends = retained earnings
28
what does the statement of retained earnings begin with?
the beginning of the year retained earnings
29
what is added on the statement of retained earnings?
current year net income
30
what is subtracted on the statement of retained earnings
current year dividends
31
what is the ending retained earnings the same as?
its the same as reported on balance sheet
32
reports the inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing
statement of cash flows
33
cash flows that are directly related to earning income
operating activities
34
cash flows related to the acquisition or sale of the company's productive assets
investing activities
35
cash flows directly related to the receipt or payment of money to investors and creditors
financing activites
36
what does net income from the incomes statement result in
an increase in ending retained earnings on the statement of retained earnings
37
what is one of the components of stockholders equity on the balance sheet
ending retained earnings
38
provide supplemental information about the financial condition of a company, without which the financial statements cannot be fully understood
notes
39
measurement rules used to develop the information in financial statements
generally accepted accounting principles
40
how are GAAP determined
FASB develops gaap, SEC oversees implementation of gaap
41
what is FASB
financial accounting standards board
42
the private sector body given the primary responsibility to work out the detailed rules that become gaap
financial accounting standards board
43
what is SEC
securities and exchange comission
44
us government agency that determines the financial statements that public companies must provide to stockholders and measurement rule that they must use in producing those statements
securities and exchange commission
45
What is IFRS
international financing reporting standards
46
who develops international financing reporting standards
IASB, international accounting standards board
47
primary responsibility for the information in the financial statements lies with management (prepare the financial statements
management responsibility
48
some responsibility for the information in the financial statements( verify the financial statements)
auditor responsibility
49
what are the three important steps to assure investors that the company's records are accurate?
a system of controls, outside independent auditors, audit committee
50
a system of _______ is maintained over both the records and the assets within the company
controls
51
outside independent _____ are hired to verify the fairness of the financial statements
auditors
52
examination of the financial reports to ensure that they represent what they claim and conform with GAAP
audit
53
the private sector body given the primary responsibility to work out detailed auditing standards
public company accounting oversight board
54
a committee of the board of directors is formed to oversee the integrity of these other two safeguards
audit committee
55
if financial statements are to be of any value........
users must have confidence in the fairness of the information presented
56
users will have a greater confidence if they know the auditors were....
required to meet professional standards of ethics and competence
57
requires all members to adhere to a professional code of ethics and professional auditing standards
american institute of certified public accountants (APICPA)
58
types of business entities
sole proprietorship, partnership, corporation
59
the primary objective of external financial reporting is to provide useful economic information about a business to help external parties make sound financial decisions
objective of financial reporting
60
traits of useful accounting information
relevance and faith representation
61
influence decisions making= providers
relevance
62
requires that information to be complete, neutral, and free from error
faithful representation
63
qualitative characteristics that influence the usefulness of information
comparability, verifiability, timeliness, understandibility
64
accounting information should be measured and reported in the national monetary unit without any adjustment for changes in purchasing power
monetary unit assumption
65
assumes economic events can be identified with a particular unit of accountability. requires economic activities of an entity be kept separate from those of owner and separate from all other economic entries
separate entity assumption
66
assumes busines will be in existence in the foreseeable future
continuity assumption
67
requires assets to be recorded at the cash-equivalent value on the date of the transaction(original acquisition
historical cost
68
two constraints in accounting
materiality and conservatism
69
economic resources with probable future benefits owned by the entity as a result of past transactions
assets
70
to be reported, assets must have a _____,______, usually based on the purchase price
measurable, verifiable value
71
assets are measured initially under the
historical cost
72
assets are listed in _____
order of liquidity
73
order of liquidity
how soon an asset is expected by management to be turned into cash or used
74
will be used or turned into cash within 1 year
current assets
75
will be used or turned into cash greater than 1 year
long-term assets
76
probable debts or obligations of the entity that result from past transactions, which will be paid with assets or services
liabilities
77
entities that a company owers money
creditors
78
liabilities are usually listed on the balance sheet in ____
order of maturity
79
obligations that will be settled by providing cash, goods, or services 1 year
current liabilities
80
obligations will be settled greater than 1 year
long term liabilities
81
the financing provided by the owners and business operations
stockholders equity
82
results from owners providing cash to the business
contributed capital
83
owners invest in the business and _______ as a evidence of ownership
receive shares of stock
84
owners who invest in a company hope to benefit in two ways:
receipt of dividends and gains from selling the stock
85
this is earned capital. refers to the cumulative earnings of a company that are not distributed to the owners and are reinvested in the business
retained earnings
86
two principles underlying analysis:
1. every transaction affects at least 2 accounts
2. accounting equation must remain balanced
87
an exchange of assets or services for assets, services, or promise to pay to between and one or more external parties to a business
transaction
88
not reflected in the financial statements
not a transaction
89
identify the accounts, start by thinking of
what was given and what was recieved
90
a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item
account
91
a list of all account titles and their unique numbers; are usually organized by financial statement element(asset accounts first, followed by liability, stockholders equity, revenue, and expense accounts in order)
chart of accounts
92
every transaction affects what
at least two accounts
93
a tool for summarizing effects for each account, determining balances, and drawing inferences about a company's activities
T-account
94
as a group, the accounts are called a
general ledger
95
_____ is a listing of all accounts in the general ledger
trial balance
96
what is the purpose of a trial balance
to ensure the debits and credits are equal before we prepare the balance sheet
97
the time it takes a company to go from cash to cash
the operating cycle
98
what occurs when a purchase was made on credit
pay supplies
99
sell product or provide service to customers
for cash or on credit
100
if sale was made on credit
receive payment from customers
101
at the end of the accounting period net income gets _____ to _____
booked, retained earnings
102
records revenues when earned,
regardless of timing of cash receipts
103
specifies both the timing and amount of revenue to be recognized during an accounting period
revenue recognition principle
104
when are revenues recognized?
- when the company transfers promised goods or services to customers
- in the amount it expects to receive
105
expenses are recorded when cash is paid
cash accounting
106
expenses are recorded when incurred, regardless of the timing of cash payments
accrual accounting
107
in the period in which the good or service is received. requires that costs incurred to generate revenues be recognized in the same period (matching of costs with benefits
this is when expenses are incurred
108
list of all accounts with their ending debits or credit balances indicated in the appropriate column
trial balance
109
when are revenues recorded
when they are earned
110
when are expenses recorded
when they are incurred to generate revenue
111
when are assets recorded
amounts that represent the probable future benefits remaining at the end of the period
112
when are liabilities reported
when they represented the probable future sacrifices of assets or services owed at the end of the period
113
why do companies wait until the end of the accounting period to do this?
- adjusting the records daily would be time-consuming and expensive
-the company does the adj entries when a company wants to prepare financial statements for external users
114
unearned rent revenue, unearned franchise fees
deferred(unearned) revenues
115
interest receivable, rent receivable, royalties receivable, franchise fee receivable
accrued revenues
116
prepaid expenses, such as prepaid supplies, prepaid rent, prepaid insurance, prepaid advertising
deferred prepaid expense
117
wage payable, interst payable, income tax payable, rent payable
accrued expenses
118
accumulated depreciation
depreciation expense
119
either- revenue earned/ expense incurred, or cash paid/received
inception
120
compute the amount of revenue earned or expense incurred for the period and prepare the adjusting entry
adjusting entry
121
account for the transaction (opposite to "inception") either- revenue earned/expense incurred,or cash paid/recieved
conclusion
122
accumulated depreciation is a ____
contra account
123
all long-term assets incur a cost of use except for this
land
124
two categories of assets found on the balance sheet
current assets and noncurrent assets
125
collecting 30,000$ in cash from customers for service performed in a prior period changes assets by this much
$0
126
according the recognition principle, revenues arises (is earned) when this happens
when the company transfers promised goods or services to customers
127
the characteristic that means that the numbers and descriptions match what really existed or happened
faithful representation
128
in a purchase of supplies on account
supplies payable
129
because of the matching principle, when a company records a sale of a product, it must also record this type of journal entry
entry recording the associated expense
130
when receiving cash for service not yet performed
unearned revenue
131
in a closing entry....
expense and potentially retained earnings
132
in a t-account
right side
133
what is the contributed capital formula?
contributed capital= common stock + additional paid-in capital
134
lending money to another company creates this
a note receivable
135
when at the end of a period: beginning supples= $100, purchases during the year =$50, end supplies = $125
supplies is $25
136
when cash will not be paid until after a cost is incurred to generate revenue, initially this type of account must be recorded
payable account
137
unlike revenues or expenses which are closed out at the end of the period, assets accounts are this
permanent accounts
138
primary purpose of financial reporting is to provide information to these parties
investors and creditors
139
assets are listed on the balance sheet in this order
liquidity
140
According to the revenue recognition principle, revenue arises when this happens
when the company transfers promised goods or services to the customer
