Chapter 1: Accounting and the Business Environment

Question 1

the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

Answer 1

Accounting

Question 2

Name the 2 major fields of accounting

Answer 2

Financial Accounting & Managerial Accounting

Question 3

The field of accounting that focuses on providing information for external decision makers

Answer 3

Financial Accounting

Question 4

Focuses on information for internal decision makers, such as the company’s managers and employees

Answer 4

Managerial Accounting

Question 5

IFRS stands for:

Answer 5

International Financial Reporting Standards

Question 6

Any person or business to whom a business owes money

Answer 6

Creditor

Question 7

CPA stands for

Answer 7

Certified Public Accountants

Question 8

Licensed professional accountants who serve the general public

Answer 8

CPA(Certified Public Accountants)

Question 9

CMA stands for:

Answer 9

Certified Management Accountants

Question 10

certified professional who specialize in accounting and financial management knowledge. They typically work for a single company

Answer 10

CMA (Certified Management Accountants)

Question 11

Certified accountants general make how much more than their non-certified colleagues?

Answer 11

10 - 15%

Question 12

FASB stands for:

Answer 12

Financial Accounting Standards Board

Question 13

Privately funded organization, who oversees the creation and governance of accounting standards

Answer 13

FASB (Financial Accounting Standards Board)

Question 14

The FASB works with which governmental regulatory agency

Answer 14

Securities and Exchange Commission (SEC)

Question 15

US government agency that oversees the US financial markets

Answer 15

Securities and Exchange Commission (SEC)

Question 16

Accounting guidelines, currently formulated by the Financial Accounting Standards Board, the main U.S. accounting rule book

Answer 16

Generally Accepted Accounting Principles (GAAP)

Question 17

An organization that stands apart as a separate economic unit

Answer 17

Economic Entity Assumption

Question 18

A business can be organized as a:

Answer 18

Sole Proprietorship, Partnership, Corporation, or Limited Liability Company (LLC)

Question 19

A business with a single owner

Answer 19

Sole Proprietorship

Question 20

A business with two or more owners and not organized as a corporation

Answer 20

Partnership

Question 21

A business organized under state law that is a separate legal entity

Answer 21

Corporation

Question 22

A company in which each member is only liable for his or her own actions

Answer 22

Limited Liability Company

Question 23

A principle that states that acquired assets and services should be recorded at their actual cost

Answer 23

Cost Principle (Historical cost)

Question 24

Assumes that the entity will remain in operation for the foreseeable future

Answer 24

Going Concern Assumption

Question 25

Rise in the price level

Answer 25

Inflation

Question 26

The assumption that requires the items on the financial statements to be measured in terms of a monetary unit

Answer 26

Monetary Unit Assumption

Question 27

IFRS stands for:

Answer 27

International Financial Reporting Standards

Question 28

A set of global accounting guidelines, formulated by the International Accounting Standards Board (IASB)

Answer 28

International Financial Reporting Standards (IFRS)

Question 29

The IFRS is a set of global accounting standards that are used/required in how many nations?

Answer 29

120 nations

Question 30

IASB stands for:

Answer 30

International Accounting Standards Board

Question 31

The current timeline shows that reporting under IFRS could start as early as:

Answer 31

2015 or 2016

Question 32

an examination of a company's financial statements and records

Answer 32

Audit

Question 33

Requires companies to review interna control and take responsibility for the accuracy and completeness of their financial reports

Answer 33

Sarbanes-Oxley Act (SOX)

Question 34

The Sarbanes-Oxley At created which new watchdog agency to monitor the work of independent accountants who audit public companies?

Answer 34

Public Company Accounting Oversight Board (PCAOB)

Question 35

The basic tool of accounting, measuring the resources of the business (what the business owns or has control of) and the claims to those resources (what the business owes to creditors and to the owner). Assets=Liabilities + Equity

Answer 35

Accounting Equation

Question 36

What is the accounting equation?

Answer 36

Assets=Liabilities + Equity

Question 37

Economic resources that are expected to benefit the business in the future. Something the business owns or has control of

Answer 37

Assets

Question 38

Example of an asset:

Answer 38

Cash, land, merchandise, furniture, inventory, etc.

Question 39

Debts that are owed to creditors

Answer 39

Liabilities

Question 40

The owner's claim to the assets of the business

Answer 40

Equity

Question 41

Owner contributions to a business

Answer 41

Owner's Capital

Question 42

Amounts earned from delivering goods or services to customers

Answer 42

Revenues

Question 43

The cost of selling goods or services

Answer 43

Expenses

Question 44

Payments of equity to the owner

Answer 44

Owner's Withdrawals

Question 45

The result of operations that occurs when total revenues are greater than total expenses

Answer 45

Net Income

Question 46

The result of operations that occurs when total expenses are greater than total revenues

Answer 46

Net Loss

Question 47

An event that affects the financial position of the business and can be measured reliably in dollar amounts

Answer 47

Transaction

Question 48

A short-term liability that will be paid in the future

Answer 48

Accounts Payable

Question 49

The right to receive cash in the future from customers for goods sold or for services performed

Answer 49

Accounts Receivable

Question 50

Business documents that are used to communicate information needed to make business decisions

Answer 50

Financial Statements

Question 51

Reports the net income or net loss of the business for a specific period

Answer 51

Income Statement

Question 52

Shows the changes in the owner's capital account for a specific period

Answer 52

Statement of Owner's Equity

Question 53

Reports on the assets, liabilities, and owner's equity of the business as of a specific date

Answer 53

Balance Sheet

Question 54

Reports on a business's cash receipts and cash payments for a specific period Answers the question of whether the business generates enough cash to pay its bills

Answer 54

Statement of Cash Flows

Question 55

Presents a summary of business entity's revenues and expenses for a period of time (month, quarter, year)

Answer 55

Statement of Earnings

Question 56

Which two types of accounts are reported on the income statement?

Answer 56

Revenues and Expenses

Question 57

Shows the changes in capital for a business entity during a time period (month, quarter, year)

Answer 57

Owner's Equity Statement

Question 58

Lists a business entity's assets, liabilities, and owers equity as of a specific date, usually the end of a month, quarter, or yar

Answer 58

Balance Sheet (Statement of financial positions)

Question 59

Reports the cash coming in (positive amounts) and the cash going out (negative amounts) during a period

Answer 59

Statement of Cash Flow

Question 60

Which 3 sections is the cash flows divides into?

Answer 60

Operating, Investing, and Financing

Question 61

Involve cash receipts for services provided and cash payments for expenses paid

Answer 61

Operating Activities

Question 62

the purchase and sale of land and equipment for cash

Answer 62

Investing Activities

Question 63

Cash contributions by the owner and withdrawals of cash by the owner

Answer 63

Financing Activities