Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Financial Accounting > Ch 1 > Flashcards

Ch 1 Flashcards

(54 cards)

Start Studying
0
Q

Business entity

A

Organization operated to earn a profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

Business

A

All activities necessary to provide members of economic system
With goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sole proprietorship

A

Form of organization with single owner

Note: business’s profits are taxed on individual’s returns

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Economic entity concept

A

Assumption that a single identifiable unit must be
accounted for in all situations
Ex. Owner must separate personal costs with costs associated with business
- financial statements must not overlap personal affairs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Partnership

A

Business owned by two or more individuals
Organization form often used by accounting and law firms

Note: individual partners pay taxes on their proportionate shares of business’s profits as partnership is not a taxable entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Corporation

A

Form of entity organized under laws of particular state

Ownership evidenced by shares of stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Share of stock

A

Certificate that acts as evidence of ownership of corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Primary advantage of running organization as corporation?

A

Ability to raise large amounts of money in relatively brief periods of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Bonds

A

Certificate that represents corporations promise to repay certain amount of money with interest in future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Describe ease in transfer of ownership In corporation

A

Another advantage, where a stockholder can sell shares through his brokerage instantly

Stockholders face limited liability and
can only lose amount invested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Non business entity

A

Organization operated for some purpose other than to earn profits
Ex. Hospitals, municipal government, local school districts

Note: none of these entities have an identifiable owner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Businesses engage in which three types of activities?

A

Financing, investing and operating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Financing

A

Necessary to start a business

Funds are obtained from stockholders and creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Investment

A

Used for various assets needed to run a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Business operations

A

May consist of providing goods or services or both

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Liability

A

Obligation of a business
Ex. Notes payable, bonds payable, taxes payable

Liabilities are satisfied by transferring assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Capital stock

A

Indicates owner’s contributions to a corporation

Someone who buys stock isn’t lending money to a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Stockholder/shareholder

A

One of the owners of the corporation

Provides permanent form of financing to business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Creditor/Lender

A

Someone to whom a company or person has a debt

Doesn’t provide a permanent form of financing to the business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Asset

A

Future economic benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Revenue

A

Inflow of assets resulting from sale of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Expense

Study These Flashcards
A

Outflow of assets resulting from sale if goods and services

22
Q

Accounting

Study These Flashcards
A

Process of identifying, measuring and communicating economic info to various users

23
Q

List four examples of product companies

Study These Flashcards
A

Suppliers, manufacturers, wholesalers, retailers

24
Management accounting
Branch of accounting used to provide internal users (management) with info to facilitate Planning and control
25
Financial accounting
Branch of accounting used for communication with outsiders/external users through financial statements
26
Who are internal users of financial statements?
Managers of company
27
External users of financial statements?
Stockholders, investors, creditors and government agencies
28
Accounting equation
Assets = liabilities + owner's equity
29
Owners' equity
Owner's claims on assets of an entity
30
Stockholders' equity
Owners' equity of corporation
31
2 ways stockholders' equity arises.
1 when company issues shares to investors 2 through retained earnings of a company
32
Retained earnings
The part of owners equity that represents The income earned less dividends paid Over life of an entity
33
Balance sheet (sometimes called the statement of financial position)
Financial statement that summarizes assets, liabilities and owners equity of company at specific point in time Assets need to equal liabilities + owners equity
34
Income Statement AKA statement of income
Statement that summarizes revenues and expenses
35
Net income
Excess of revenues over expenses
36
Dividends
Distribution of net income of a business to its owners
37
Statement of retained earnings
Statement that summarizes income earned and dividends Paid over the life of the business Beginning balance. Xxx Add net income for period. Xxx Deduct dividends for period. Xxx Ending balance. Xxx
38
Statement of cashflow
Financial statement that summarizes company's cash receipts And cash payments during period from operating, investing And financing activities Shows reader where company got cash during year and how it used that cash
39
Economic entity concept
Requires that an identifiable, specific entity be the subject Of a set of financial statements Ex. Keep business separate from personal affairs
40
Cost Principle AKA Original cost/historical cost
Assets are recorded at cost to acquire them
41
Going concern
Assumption that entity is not in process of liquidation | And that it will continue indefinitely
42
Monetary unit
Yardstick used to measure amounts in financial statements The dollar in the US Note: financial statements are prepared under the assumption that monetary unit is relatively stable
43
Time period
Artificial segment on calendar used as basis for preparing financial statements
44
Generally Accepted Accounting Principles (GAAP)
Various methods, rules, practices and other procedures That have evolved over time in response to need to regulate Preparation of financial statements
45
Securities and Exchange Commission (SEC)
Federal agency with ultimate authority To determine rules for preparing statements for Publicly sold companies
46
Financial Accounting Standards Board (FASB)
Group in private sector with | Authority to set accounting standards
47
American Institute of Certified Public Accountants (AICPA)
Professional organization of certified public accountants
48
Certified Public Accountant (CPA)
Designation for an individual who has passed a uniform exam Administered by the AICPA and has met other requirements Determined in individual states
49
Public Company Accounting Oversight Board (PCAOB)
Five member body created by congress in 2002 | Sets auditing standards
50
International Accounting Standards Board (IASB)
Organization formed to develop worldwide accounting standards
51
Auditing
Process of examining financial statements and underlying records of company to See if statements are fairly presented
52
Sarbanes Oxley Act passed by congress 2002
Brought reform to corporate accountability in face of Many corporate scandles 1 established Public Company Accounting Oversight Board 2 requires external auditors to report directly to audit committee 3 prohibits other services from external auditors that create conflict of interest
53
Explain the critical role that ethics plays in providing useful financial info
All decision makers must consider moral and social implications of their decisions Professional judgement is need when there are conflicts To arrive at appropriate decisions In application of GAAP

Financial Accounting (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions