Chapter 1+2

Question 1

Who is financial accounting made to report to?

Answer 1

external users (investors, creditors, suppliers, customers, etc.)

Question 2

Who is managerial accounting made to report to?

Answer 2

Management

Question 3

Who is tax accounting made to report to?

Answer 3

tax authorities, IRS

Question 4

What does FASB stand for?

Answer 4

Financial accounting standards board

Question 5

The typical annual report consists of what

Answer 5

four basic financial statements + Notes + Audit opinion

Question 6

what are the four basic financial statements in an annual report

Answer 6

balance sheet, income statement, statement of cash flow, statement of shareholders equity.

Question 7

What does the balance sheet communicate?

Answer 7

reports the entity’s assets, liabilities, and stockholder’/s equity at a point in time (snapshot)

Question 8

What does the income statement communicate

Answer 8

reports the revenues less the expenses of the accounting period (flow concept)

Question 9

What does the statement of Cash flow communicate

Answer 9

reports inflows and outflows of cash during the accounting period

Question 10

what does the statement of shareholders’ equity communicate

Answer 10

reports changes in stockholders’ equity accounts during the accounting period

Question 11

what is cash base accounting based on?

Answer 11

revenue or expense is recognized based on cash flow

Question 12

what is accrual accounting based on?

Answer 12

revenue or expense is recognized based on whether its earned or incurred

Question 13

T or F? Over the long term, cash based accounting = accrual based accounting?

Answer 13

T

Question 14

What are the 4 types of audit opinion?

Answer 14

unqualified opinion, qualified opinion, adverse opinion, disclaimer of opinion

Question 15

What is the accounting equation used for the balance sheet?

Answer 15

assets = liabilities + shareholders’ equity

Question 16

What does assets represent in how management treated the source?

Answer 16

assets represent investments that management has made

Question 17

what does liabilities and shareholders’ equity represent in how management is treating that source?

Answer 17

liabilities and equity inform us how management paid for those assets

Question 18

What is the definition of an asset?

Answer 18

resources that have probable future economic benefits

Question 19

what is the definition of a liability?

Answer 19

probable future sacrifices for economic benefit

Question 20

what is the definition of a shareholders’ equity?

Answer 20

stockholders residual interest in the firm

Question 21

what are the two sources of financial resources to a business (from liabilities and equity side of things)

Answer 21

creditors, and stockholders

Question 22

what is the potential return for creditors when they invest?

Answer 22

interest

Question 23

what is the potential return for stockholders when they invest?

Answer 23

dividends and higher returned stock prices

Question 24

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. Cash

Answer 24

asset

Question 25

Balance sheet elements, is it Asset, liability, or a stockholders' equity. short-term investments

Answer 25

asset

Question 26

Balance sheet elements, is it Asset, liability, or a stockholders' equity. accounts receivable

Answer 26

asset

Question 27

Balance sheet elements, is it Asset, liability, or a stockholders' equity. notes receivable

Answer 27

asset

Question 28

Balance sheet elements, is it Asset, liability, or a stockholders' equity. inventory

Answer 28

asset

Question 29

Balance sheet elements, is it Asset, liability, or a stockholders' equity. supplies

Answer 29

assets

Question 30

Balance sheet elements, is it Asset, liability, or a stockholders' equity. prepaid expenses

Answer 30

assets

Question 31

Balance sheet elements, is it Asset, liability, or a stockholders' equity. long term investments

Answer 31

assets

Question 32

Balance sheet elements, is it Asset, liability, or a stockholders' equity. equiptment

Answer 32

assets

Question 33

Balance sheet elements, is it Asset, liability, or a stockholders' equity. buildings

Answer 33

asset

Question 34

Balance sheet elements, is it Asset, liability, or a stockholders' equity. land

Answer 34

asset

Question 35

Balance sheet elements, is it Asset, liability, or a stockholders' equity. intangables (faculty members)

Answer 35

asset

Question 36

Balance sheet elements, is it Asset, liability, or a stockholders' equity. accounts payable

Answer 36

liabilities

Question 37

Balance sheet elements, is it Asset, liability, or a stockholders' equity. accrued expenses

Answer 37

liabilities

Question 38

Balance sheet elements, is it Asset, liability, or a stockholders' equity. notes payable

Answer 38

liabilities

Question 39

Balance sheet elements, is it Asset, liability, or a stockholders' equity. taxes payable

Answer 39

liabilities

Question 40

Balance sheet elements, is it Asset, liability, or a stockholders' equity. unearned revenue

Answer 40

liabilities

Question 41

Balance sheet elements, is it Asset, liability, or a stockholders' equity. bonds payable

Answer 41

liabilities

Question 42

Balance sheet elements, is it Asset, liability, or a stockholders' equity. common stock

Answer 42

stockholders' equity

Question 43

Balance sheet elements, is it Asset, liability, or a stockholders' equity. retained earnings

Answer 43

stockholders equity

Question 44

Balance sheet elements, is it Asset, liability, or a stockholders' equity. additional paid-in capital

Answer 44

stockholders' equity

Question 45

What is the equation for the income statement

Answer 45

revenue - expenses = net income

Question 46

what does the income statement show?

Answer 46

what value company operations have generated over the year

Question 47

what is revenue

Answer 47

inflow of assets

Question 48

what is expenses?

Answer 48

outflow of assets

Question 49

income statement elements, is it a revenue or an expense? sales revenue

Answer 49

revenue

Question 50

income statement elements, is it a revenue or an expense? fee revenue

Answer 50

revenue

Question 51

income statement elements, is it a revenue or an expense? interest revenue

Answer 51

revenue

Question 52

income statement elements, is it a revenue or an expense? rent revenue

Answer 52

revenue

Question 53

income statement elements, is it a revenue or an expense? cost of goods sold

Answer 53

expenses

Question 54

income statement elements, is it a revenue or an expense? wages expense

Answer 54

expense

Question 55

income statement elements, is it a revenue or an expense? rent expense

Answer 55

expense

Question 56

income statement elements, is it a revenue or an expense? depreciation expense

Answer 56

expense

Question 57

what is revenue in an income statement

Answer 57

cash and promises from delivery of goods and services

Question 58

what is expenses in an income statement

Answer 58

resources used to earn periods revenue

Question 59

what does the statement of cash flow tell?

Answer 59

shows what cash operations the company has generated or used over the year

Question 60

what is the equation for the statement of cash flow

Answer 60

operating CF + investing CF + financing CF

Question 61

what does GAAP stand for?

Answer 61

generally accepted accounting principles

Question 62

what is the GAAP

Answer 62

a set of rules that guides how companies should present financial information to external users in the US

Question 63

What does IFRS stand for?

Answer 63

international financial reporting standards

Question 64

what does the IFRS do

Answer 64

used by numerous countries abroad to do what the GAAP does

Question 65

what are the 4 assumptions of the reporting model

Answer 65

separate entity, periodicity, going concern, and monetary assumption

Question 66

what does the separate entity assumption talk about

Answer 66

assuming that the company is only reporting on their finances, and not a partners.

Question 67

what does the periodicity assumption talk about

Answer 67

there is a constant time period that they are measuring throughout the report

Question 68

what does the going concern assumption talk about

Answer 68

that business will continue in the foreseeable future

Question 69

what does the monetary unit assumption talk about

Answer 69

that the financial numbers are reported in a singular unit.