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account test 1 Flashcards

1
Q

the language of business

A

accounting

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2
Q

the building block of any business is

A

transactions

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3
Q

the classification, grouping, and summarization of these business transactions in a generally accepted manner is

A

accounting (systematic)

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4
Q

collects and processes financial information about an organization and reports that information to decision makers

A

Accounting system

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5
Q

accounting for internal decision makers

A

managerial

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6
Q

accounting for external decision makers

A

financial

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7
Q

two main decision makers

A

creditors and shareholders

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8
Q

owners of the company

A

shareholders

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9
Q

lenders to the company

A

creditors

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10
Q

the four basic financial statements

A

balance sheet, income statement, statement of retained earnings, statement of cash flows

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11
Q

reports the amount of assets, liabilities, and stockholders equity of an accounting entity of a point in time

A

balance sheet

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12
Q

organization for which financial data are to be collected; must be precisely defined

A

accounting entity

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13
Q

basic accounting equation

A

assets= liabilities stockholders equity

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14
Q

represents the economic resources of a business

A

assets

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15
Q

_____represents the sources of financing for economic resources from creditors

A

liabilites

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16
Q

______represents the sources of financing for economic resources from stockholders

A

stockholder’s equity

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17
Q

the investment of cash and other assets in the business by the owners

A

contributed capital

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18
Q

the amount of earnings reinvested in the business (not distrubted to stockholders in the form of dividends)

A

retained earnings

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19
Q

reports the revenues and the expenses of the accounting period

A

income statement

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20
Q

income statement formula

A

revenues- expenses = net income

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21
Q

what are the elements of an income statement

A

revenues, earnings, net income

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22
Q

earned from sale of goods or services to customers

A

revenues

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23
Q

dollar amount of resources the entity used to earn revenues during the period

A

expenses

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24
Q

excess of total revenues over total expenses

A

net income

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25
Q

when is net loss reported

A

if total expenses exceed total revenues

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26
Q

reports the way that net income and distribution of dividends affected the financial position of the company during the accounting period

A

statement of retained earnings

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27
Q

statement of retained earnings

A

beginning retained earnings + net income - dividends = retained earnings

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28
Q

what does the statement of retained earnings begin with?

A

the beginning of the year retained earnings

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29
Q

what is added on the statement of retained earnings?

A

current year net income

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30
Q

what is subtracted on the statement of retained earnings

A

current year dividends

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31
Q

what is the ending retained earnings the same as?

A

its the same as reported on balance sheet

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32
Q

reports the inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing

A

statement of cash flows

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33
Q

cash flows that are directly related to earning income

A

operating activities

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34
Q

cash flows related to the acquisition or sale of the company’s productive assets

A

investing activities

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35
Q

cash flows directly related to the receipt or payment of money to investors and creditors

A

financing activites

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36
Q

what does net income from the incomes statement result in

A

an increase in ending retained earnings on the statement of retained earnings

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37
Q

what is one of the components of stockholders equity on the balance sheet

A

ending retained earnings

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38
Q

provide supplemental information about the financial condition of a company, without which the financial statements cannot be fully understood

A

notes

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39
Q

measurement rules used to develop the information in financial statements

A

generally accepted accounting principles

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40
Q

how are GAAP determined

A

FASB develops gaap, SEC oversees implementation of gaap

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41
Q

what is FASB

A

financial accounting standards board

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42
Q

the private sector body given the primary responsibility to work out the detailed rules that become gaap

A

financial accounting standards board

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43
Q

what is SEC

A

securities and exchange comission

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44
Q

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

A

securities and exchange commission

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45
Q

What is IFRS

A

international financing reporting standards

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46
Q

who develops international financing reporting standards

A

IASB, international accounting standards board

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47
Q

primary responsibility for the information in the financial statements lies with management (prepare the financial statements

A

management responsibility

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48
Q

some responsibility for the information in the financial statements( verify the financial statements)

A

auditor responsibility

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49
Q

what are the three important steps to assure investors that the company’s records are accurate?

A

a system of controls, outside independent auditors, audit committee

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50
Q

a system of _______ is maintained over both the records and the assets within the company

A

controls

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51
Q

outside independent _____ are hired to verify the fairness of the financial statements

A

auditors

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52
Q

examination of the financial reports to ensure that they represent what they claim and conform with GAAP

A

audit

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53
Q

the private sector body given the primary responsibility to work out detailed auditing standards

A

public company accounting oversight board

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54
Q

a committee of the board of directors is formed to oversee the integrity of these other two safeguards

A

audit committee

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55
Q

if financial statements are to be of any value……..

A

users must have confidence in the fairness of the information presented

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56
Q

users will have a greater confidence if they know the auditors were….

A

required to meet professional standards of ethics and competence

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57
Q

requires all members to adhere to a professional code of ethics and professional auditing standards

A

american institute of certified public accountants (APICPA)

58
Q

types of business entities

A

sole proprietorship, partnership, corporation

59
Q

the primary objective of external financial reporting is to provide useful economic information about a business to help external parties make sound financial decisions

A

objective of financial reporting

60
Q

traits of useful accounting information

A

relevance and faith representation

61
Q

influence decisions making= providers

A

relevance

62
Q

requires that information to be complete, neutral, and free from error

A

faithful representation

63
Q

qualitative characteristics that influence the usefulness of information

A

comparability, verifiability, timeliness, understandibility

64
Q

accounting information should be measured and reported in the national monetary unit without any adjustment for changes in purchasing power

A

monetary unit assumption

65
Q

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

A

separate entity assumption

66
Q

assumes busines will be in existence in the foreseeable future

A

continuity assumption

67
Q

requires assets to be recorded at the cash-equivalent value on the date of the transaction(original acquisition

A

historical cost

68
Q

two constraints in accounting

A

materiality and conservatism

69
Q

economic resources with probable future benefits owned by the entity as a result of past transactions

A

assets

70
Q

to be reported, assets must have a _____,______, usually based on the purchase price

A

measurable, verifiable value

71
Q

assets are measured initially under the

A

historical cost

72
Q

assets are listed in _____

A

order of liquidity

73
Q

order of liquidity

A

how soon an asset is expected by management to be turned into cash or used

74
Q

will be used or turned into cash within 1 year

A

current assets

75
Q

will be used or turned into cash greater than 1 year

A

long-term assets

76
Q

probable debts or obligations of the entity that result from past transactions, which will be paid with assets or services

A

liabilities

77
Q

entities that a company owers money

A

creditors

78
Q

liabilities are usually listed on the balance sheet in ____

A

order of maturity

79
Q

obligations that will be settled by providing cash, goods, or services 1 year

A

current liabilities

80
Q

obligations will be settled greater than 1 year

A

long term liabilities

81
Q

the financing provided by the owners and business operations

A

stockholders equity

82
Q

results from owners providing cash to the business

A

contributed capital

83
Q

owners invest in the business and _______ as a evidence of ownership

A

receive shares of stock

84
Q

owners who invest in a company hope to benefit in two ways:

A

receipt of dividends and gains from selling the stock

85
Q

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

A

retained earnings

86
Q

two principles underlying analysis:

A
  1. every transaction affects at least 2 accounts
  2. accounting equation must remain balanced
87
Q

an exchange of assets or services for assets, services, or promise to pay to between and one or more external parties to a business

A

transaction

88
Q

not reflected in the financial statements

A

not a transaction

89
Q

identify the accounts, start by thinking of

A

what was given and what was recieved

90
Q

a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item

A

account

91
Q

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)

A

chart of accounts

92
Q

every transaction affects what

A

at least two accounts

93
Q

a tool for summarizing effects for each account, determining balances, and drawing inferences about a company’s activities

A

T-account

94
Q

as a group, the accounts are called a

A

general ledger

95
Q

_____ is a listing of all accounts in the general ledger

A

trial balance

96
Q

what is the purpose of a trial balance

A

to ensure the debits and credits are equal before we prepare the balance sheet

97
Q

the time it takes a company to go from cash to cash

A

the operating cycle

98
Q

what occurs when a purchase was made on credit

A

pay supplies

99
Q

sell product or provide service to customers

A

for cash or on credit

100
Q

if sale was made on credit

A

receive payment from customers

101
Q

at the end of the accounting period net income gets _____ to _____

A

booked, retained earnings

102
Q

records revenues when earned,

A

regardless of timing of cash receipts

103
Q

specifies both the timing and amount of revenue to be recognized during an accounting period

A

revenue recognition principle

104
Q

when are revenues recognized?

A
  • when the company transfers promised goods or services to customers
  • in the amount it expects to receive
105
Q

expenses are recorded when cash is paid

A

cash accounting

106
Q

expenses are recorded when incurred, regardless of the timing of cash payments

A

accrual accounting

107
Q

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

A

this is when expenses are incurred

108
Q

list of all accounts with their ending debits or credit balances indicated in the appropriate column

A

trial balance

109
Q

when are revenues recorded

A

when they are earned

110
Q

when are expenses recorded

A

when they are incurred to generate revenue

111
Q

when are assets recorded

A

amounts that represent the probable future benefits remaining at the end of the period

112
Q

when are liabilities reported

A

when they represented the probable future sacrifices of assets or services owed at the end of the period

113
Q

why do companies wait until the end of the accounting period to do this?

A
  • 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
Q

unearned rent revenue, unearned franchise fees

A

deferred(unearned) revenues

115
Q

interest receivable, rent receivable, royalties receivable, franchise fee receivable

A

accrued revenues

116
Q

prepaid expenses, such as prepaid supplies, prepaid rent, prepaid insurance, prepaid advertising

A

deferred prepaid expense

117
Q

wage payable, interst payable, income tax payable, rent payable

A

accrued expenses

118
Q

accumulated depreciation

A

depreciation expense

119
Q

either- revenue earned/ expense incurred, or cash paid/received

A

inception

120
Q

compute the amount of revenue earned or expense incurred for the period and prepare the adjusting entry

A

adjusting entry

121
Q

account for the transaction (opposite to “inception”) either- revenue earned/expense incurred,or cash paid/recieved

A

conclusion

122
Q

accumulated depreciation is a ____

A

contra account

123
Q

all long-term assets incur a cost of use except for this

A

land

124
Q

two categories of assets found on the balance sheet

A

current assets and noncurrent assets

125
Q

collecting 30,000$ in cash from customers for service performed in a prior period changes assets by this much

A

$0

126
Q

according the recognition principle, revenues arises (is earned) when this happens

A

when the company transfers promised goods or services to customers

127
Q

the characteristic that means that the numbers and descriptions match what really existed or happened

A

faithful representation

128
Q

in a purchase of supplies on account

A

supplies payable

129
Q

because of the matching principle, when a company records a sale of a product, it must also record this type of journal entry

A

entry recording the associated expense

130
Q

when receiving cash for service not yet performed

A

unearned revenue

131
Q

in a closing entry….

A

expense and potentially retained earnings

132
Q

in a t-account

A

right side

133
Q

what is the contributed capital formula?

A

contributed capital= common stock + additional paid-in capital

134
Q

lending money to another company creates this

A

a note receivable

135
Q

when at the end of a period: beginning supples= $100, purchases during the year =$50, end supplies = $125

A

supplies is $25

136
Q

when cash will not be paid until after a cost is incurred to generate revenue, initially this type of account must be recorded

A

payable account

137
Q

unlike revenues or expenses which are closed out at the end of the period, assets accounts are this

A

permanent accounts

138
Q

primary purpose of financial reporting is to provide information to these parties

A

investors and creditors

139
Q

assets are listed on the balance sheet in this order

A

liquidity

140
Q

According to the revenue recognition principle, revenue arises when this happens

A

when the company transfers promised goods or services to the customer

acct test 1 (1 decks)

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