CH1 - Intro to Accounting and Business

Question 0

What makes accounting information reliable?

Answer 0

If it is dependable and free from error or bias.

Question 1

Three Objectives of Accounting

Answer 1

1. Help users make investment and credit decisions 2. Helps users determine risk 3. Informs users about the economic resources of and claims against the enterprise

Question 2

Difference between financial accounting and managerial accounting?

Answer 2

Financial accounting primarily serves the needs of investors and creditors. Managerial accounting serves the needs of internal constituents -managers and staff- and helps support their decision making

Question 3

Four primary financial statements?

Answer 3

Balance sheet, income statement, statement of changes in equity, and statement of cash flow

Question 4

The Accounting Equation

Answer 4

Assets = Liabilities + Owner’s Equity

Question 5

Assets

Answer 5

A company’s resources - things the company owns

Question 6

Examples of Assets

Answer 6

Cash, accounts receivable, inventory, land, investments, equipment, buildings

Question 7

Liabilities

Answer 7

A company’s obligations - amounts the company owes

Question 9

The Balance Sheet is also known as?

Answer 9

Statement of financial position

Question 10

GAAP

Answer 10

Generally Accepted Accounting Principals

Question 11

GAAS

Answer 11

Generally Accepted Auditing Standards

Question 12

The Accounting Cycle - Step 1

Answer 12

1. Identify and gather transaction information

Question 13

The Accounting Cycle - Step 2

Answer 13

Analyze and Journalize Transactions

Question 14

The Accounting Cycle - Step 3

Answer 14

Post to ledgers

Question 15

The Accounting Cycle - Step 4

Answer 15

Prepare unadjusted trial balance

Question 16

The Accounting Cycle - Step 5

Answer 16

Make adjustments

Question 17

The Accounting Cycle - Step 6

Answer 17

Prepare financial statements

Question 18

The Accounting Cycle - Step 7

Answer 18

Close the books

Question 19

A snapshot of a company’s financial position at a particular point in time

Answer 19

The Balance Sheet

Question 20

Examples of liabilities

Answer 20

Accounts payable, salaries and wages payable, interest payable, income taxes payable

Question 21

Account Form

Answer 21

The form of balance sheet that resembles the basic format of the accounting equation

Question 22

Account Payable

Answer 22

The liability created by a purchase on account

Question 23

Account Receivable

Answer 23

A claim against the customer created by selling merchandise or services on credit

Question 24

Accounting

Answer 24

An information system that provides reports to stakeholders about the economic activities and condition of a business

Question 25

Balance Sheet

Answer 25

A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or a year

Question 26

Business

Answer 26

An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers

Question 27

Business Entity Concept

Answer 27

A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business

Question 28

Certified Public Accountant (CPA)

Answer 28

Public accountants who have met a stat'es education, experience, and examination requirements

Question 29

Corporation

Answer 29

A business organized under state or federal statutes as a separate legal entity

Question 30

Cost Concept

Answer 30

A concept of accounting that determines the amount initially entered into the accounting records for purchases

Question 31

Earnings

Answer 31

The amount by which revenues exceed expenses

Question 32

Expenses

Answer 32

Assets used up or services consumed in the process of generating revenues

Question 33

Fees Earned

Answer 33

Revenue from providing services

Question 34

Financial Accounting

Answer 34

The branch of accounting that is concerned with recording transactions using GAAP for a business or other economic unit and with a periodic preparation of various statements from such records

Question 35

Financial Accounting Standards Board (FASB)

Answer 35

The authoritative body that has the primary responsibility for developing accounting principles

Question 36

Generally Accepted Accounting Principals (GAAP)

Answer 36

Generally accepted guidelines for the preparation of financial statements

Question 37

General-purpose Financial Statements

Answer 37

A type of financial accounting report that is distributed to external users.

Question 38

Interest Revenue

Answer 38

Money received for interest

Question 39

International Accounting Standards Board (IASB)

Answer 39

An organization that issues International Financial Reporting Standards for many countries outside the United States

Question 40

Limited Liability Company (LLC)

Answer 40

A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners, yet treated as a partnership for tax purposes

Question 41

Managerial Accounting

Answer 41

The branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies

Question 42

Matching Concept

Answer 42

A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses

Question 43

Net Income (Net Profit)

Answer 43

The amount by which revenues exceed expenses

Question 44

Objectivity Concept

Answer 44

A concept of accounting that requires accounting records and the data reported in financial statements to be based on objective evidence

Question 45

Partnership

Answer 45

An unincorporated business form consisting of two or more persons conducting business as co-owners for profit

Question 46

Private Accounting

Answer 46

The field of accounting whereby accountants are employed by a business firm or a not-for-profit organization

Question 47

Profit

Answer 47

The difference between amount received from customers and amount paid to provide services to customers

Question 48

Proprietorship

Answer 48

A business owned by one individual

Question 49

Public Accounting

Answer 49

The field of accounting where accountants and their staff provide services on a fee basis

Question 50

Public Company Accounting Oversight Board (PCAOB)

Answer 50

A new oversight body for the accounting profession that was established by the Sarbanes-Oxley Act

Question 51

Ratio of Liabilities to Owner's Equity

Answer 51

A comprehensive leverage ratio that measures the relationship of the claims of creditors to stockholders' equity

Question 52

Revenue

Answer 52

Increase in owner's equity as a result of selling services or products to customers

Question 53

Sales

Answer 53

The total amount charged customers for merchandise sold, including cash sales and sales on account

Question 54

Sarbanes-Oxley Act (SOX)

Answer 54

An act passed by Congress to restore public confidence and trust in the financial statements of companies

Question 55

Securities and Exchange Commission (SEC)

Answer 55

An agency of the U.S. Government that has authority and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public

Question 56

Unit of Measure Concept

Answer 56

A concept of accounting requiring that economic data be recorded in dollars