Chapter 1

Question 1

Resources a company owns or controls

Answer 1

Assets

Question 2

An asset that promises a future inflow of resources

Answer 2

A receivable

Question 3

Examples of (blank) are cash, supplies, equipment, land & accounts receivable..

Answer 3

Assets

Question 4

Creditors’ claims on assets

Answer 4

Liabilities

Question 5

A (blank) is a liability that promises a future outflow of resources.

Answer 5

payable

Question 6

The owner’s claim on assets & is equal to assets minus liabilities.

Answer 6

Equity

Question 7

(Blank) is also called net assets or residual (blank).

Answer 7

Equity

Question 8

Accounting equation formula

Answer 8

Assets = Liabilities + Equity

Question 9

Expanded accounting equation

Answer 9

Assets = Liabilities + Owner, Capital - Owner, Withdrawals + Revenues - Expenses

Question 10

The (blank) applies to all transactions & events, to all companies & organizations & to all points in time.

Answer 10

Accounting equation

Question 11

(Blank) are inflows of cash & other net assets from owner contributions, which increase equity.

Answer 11

Owner investments

Question 12

(Blank) are outflows of cash & other assets to owners for personal use, which reduce equity.

Answer 12

Owner withdrawals

Question 13

(Blank) increase equity (via net income) from sales of products & services to customers; ex: sales of products or consulting services provided

Answer 13

Revenues

Question 14

(Blank) decrease equity (via net income) from costs of providing products & services to customers; ex: advertising, utilities & insurance fees.

Answer 14

Expenses

Question 15

(Blank) increases from owner investments & revenues.

Answer 15

Equity

Question 16

Withdrawals & expenses decrease (blank)

Answer 16

Equity

Question 17

Equity consists of 4 parts. What are they?

Answer 17

Owner, Capital; Owner, Withdrawals; Revenues; Expenses

Question 18

Shareholders, boards of directors, nonmanagerial employees, regulators & voters are (blank).

Answer 18

External users

Question 19

Purchasing managers are (blank).

Answer 19

Internal users

Question 20

The fraud triangle shows 3 factors that push a person to commit fraud. What are those factors?

Answer 20

Opportunity, pressure or incentive & rationalization

Question 21

What act requires documentation & verification of internal controls & emphasizes effective internal controls?

Answer 21

Sarbanes-Oxley Act (SOX)

Question 22

Clawback Mandates recovery (clawback) of excessive pay & Whistleblower SEC pays whistleblowers 10% to 30% of sanctions exceeding $1M are 2 provisions for what act?

Answer 22

Dodd-Frank Wall Street Reform & Consumer Protection Act or Dodd-Frank

Question 23

GAAP

Answer 23

Generally accepted accounting principles

Question 24

Financial accounting is governed by concepts & rules known as (blank).

Answer 24

GAAP

Question 25

FASB

Answer 25

Financial accounting standards board

Question 26

Sets GAAP from the SEC

Answer 26

FASB

Question 27

US government agency that oversees proper use of GAAP by companies that sell stock & debt to the public

Answer 27

Securities & Exchange Commission (SEC)

Question 28

FASB conceptual framework

Answer 28

Objectives, qualitative characteristics, elements & recognition & measurement

Question 29

IASB

Answer 29

International Accounting Standards Board (IASB)

Question 30

Who issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices?

Answer 30

IASB

Question 31

The assumptions, concepts & guidelines for preparing financial statements

Answer 31

General principles

Question 32

Detailed rules used in reporting business transactions & events; they're described as we encounter them

Answer 32

Specific principles

Question 33

Accounting principle that accounting information is based on actual cost

Answer 33

Measurement principle (cost principle)

Question 34

Accounting principle where revenue is recorded 1. when goods or services are provided to customers & 2. at the amount expected to be received from the customer

Answer 34

Revenue recognition principle

Question 35

Accounting principle that a company records the expenses it incurred to generate the revenue reported. Ex: rent for office space

Answer 35

Expense recognition principle (matching principle)

Question 36

Accounting principle that a company reports the details behind financial statements that would impact users' decisions; often in the footnotes of statements

Answer 36

Full disclosure principle

Question 37

Accounting assumption that accounting information presumes that the business will continue operating instead of being closed or sold. Ex: property is reported at cost instead of liquidation value

Answer 37

Going-concern assumption

Question 38

Accounting assumption that transactions & events are expressed in money units. Ex: US dollar or Mexican peso

Answer 38

Monetary unit assumption

Question 39

Accounting assumption that the life of a company can be divided in units of time like months or years & useful reports can be prepared for those units.

Answer 39

Time period assumption

Question 40

Accounting assumption that a business is accounted for separately from other business entities & its owner

Answer 40

Business entity assumption