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Flashcards in Chapter 1 - Basic Concepts Deck (70):
0

Report giving accounting information.

Financial Statements

1

Any organization for which financial statements are prepared

Entity

2

Valuable resources owned by an entity

Assets

3

Types of assets

Cash, equipment, other resources

4

The entity's obligations to outside parties who have furnished resources

Liabilities

5

Outside parties who have furnished resources to an entity

Creditor

6

Indicates how much credit had been extended to the entity

I

7

Indicated how much credit has been extended to the entity

Accounts Payable

8

Creditors have a _______ against an entity for the value of a loan given

Claim

9

Claims against _______

Assets

10

The total amount amount supplied by equity investors

Total paid-in capital

11

Profits generated by the entity

Earnings

12

The amount of earnings not paid to investors in the form of dividends

Retained earnings

13

The type of investor who receive common stock for the funds they provide

Equity investors

14

The type of claim equity investors have

Residual claim

15

What is a residual claim?

If the entity is dissolved, equity investors get whatever is left after the liabilities have been paid off.

16

Which is a stronger claim: liabilities or equity?

Liabilities

17

Assets will always be equal to:

Liabilities + Equity

18

Any assets not claimed by creditors will be claimed by:

Equity Investors

19

Why is it called a balance statement?

Because assets must always balance (equal) equity
+ liability

20

Dual-aspect Concept

States that assets must always dual equity + liability

21

Accounting concept # 1

Assets = Liabilities + Equity

22

Net Assets

Equity

23

Equity is always the difference between...

Assets and liabilities

24

Money-measurement concept

Convert different facts to monetary amounts to make them uniform.

25

Money measurement concept stares that accounting reports only measure those facts than can be stated as:

Monetary amounts

26

The fact that accounts are kept for entities as distinguished from the persons associated with those entires is called the:

Entity Concept

27

The assumption that an entity will keep on going from one year to the next is called:

Going-Concern Concept

28

A "Concern" is another name for?

An Entity

29

States that "accounting assumes that an entity will continue to operate indefinitely unless there is evidence to the contrary"

Going-Concern Concept

30

If the entity is not a going-concern, do special accounting rules apply?

Yes

31

Because of the going-concern concept, accounting [does / does not] report what the assets could be sold for if the entity ceases to exist

Does not

32

The name of what an asset is "worth"

Fair Value or Market Value

33

If reliable information is available, an asset is measured at it's....

Fair Value

34

If a fair value isn't able to be known, what asset value is reported?

Cost at time of purchase

35

In general, can land, buildings, equipment and inventories fair value be reliably measured?

No

36

How are land, buildings, equipment and inventory assets values typically reported?

Cost (or a number based on cost)

37

The Asset-Measurement concept states what about reporting values if different types of assets?

If reliable information is available, the amount of an asset is measured at its Fair Value. Otherwise, the measurement is based on its Cost.

38

2 reasons why an asset would be measured at cost:

1. Estimating the fair value of the item may be expensive and unreliable
2. The entity may be using the item for the foreseeable future and thus does not need to know the fair value.

39

When is the decision usually made as to whether an asset will be measured at Fair Value or at Cost?

When the asset is acquired.

40

Monetary assets

Assets that have a claim on a specified amount of money.

41

Are securities and bonds monetary or non-monetary assets?

Monetary

42

Are buildings, land, equipment and inventory monetary or non-monetary assets?

Non-monetary

43

Monetary assets are reported at:

Fair value

44

Non-monetary assets are reported at?

Cost (or an amount based on cost)

45

Balance sheet reports the amounts of what 3 things?

1. Assets
2. Liabilities
3. Equity
Assets = liability + equity

46

Valuable resources

Assets

47

The three test an item must pass in order to be considered an Asset?

1. Item must be controlled by the entity (usually means "owned"
2. Item must be valuable to entity
3. Item must have been acquired at a measurable cost

48

Assets and liabilities are each divided into these two categories:

1. Current
2. Noncurrent

49

Cash and other assets that are expected to be converted into cash or used up in the near future (within 1 year) are called:

Current assets

50

Groceries on a shelf are current or non current assets?

Current

51

Liabilities

Claims from outside parties

52

Current Ratio

Current Assets
------------------
Current Liabilities

53

Current assets - $80
Current liabilities - $60

What is current ratio?

1.3 to 1

54

Equity consists of capital obtained from sources that are not:

Liabilities

55

Amount of capital supplied by equity investors:

Paid-in capital

56

Two types of paid-in capital

1. Common stock
2. Additional paid-in capital

57

Do transactions between individual shareholders affect the entity?

No

58

Amount of equity earned and retained by the entity:

Retained earnings

59

Retained earnings = ___ - dividends

Earnings (profits)

60

Do retained earnings reflect only the previous year of retained earnings?

No, shows all equity that has accumulated since the entity began

61

Are retained earning cash!

No

62

The right hand side of a balance sheet shows the ______ of capital

Sources

63

Sources of funds used to acquire assets:

1. Liabilities
2. Equity

64

Equity consists of the following 2 things:

1. Funds obtained from equity investors
2. Retained earnings resulting from the entity's profitable operation

65

Who has stronger claim on assets - creditors or equity investors?

Creditors (they can sue)

66

What kind of claim do equity investors have on creditors?

A residual claim

67

Is goodwill an asset?

No, not unless it was purchased.

68

Current assets to current liabilities is called the:

Current ratio

69

Is retained earnings the same as cash?

No, it is part of the owner's claim on the assets