Chapter One

Question 1

Accounting

Answer 1

Is the “language of business”. And used to communicate financial info to users through reports.

Question 2

GAAP

Answer 2

US Generally accepted accounting principles

Acct Standards: rules
Acct Principles: framework

Question 3

FASB

Answer 3

Financial Accounting Standards Board.

Develops accounting standards in the US and maintains an electronic database called the Accounting Standards Codification

Question 4

SEC

Answer 4

Securities and Exchange Commission.

Has authority over accounting and financial disclosures for companies whose stock shares are traded publicly.

Question 5

IASB

Answer 5

International Accounting Standards Board.
Most countries use these accounting standards.

More “principles-based”

They set IFRS international Financial Reporting Standards

Question 6

AICPA

Answer 6

American institute of certified public accountants

Question 7

Data Analytics

Answer 7

Analyzing raw data to find patterns, anomalies, and insight.

Question 8

Relevant

Answer 8

Info w potential to impact decisions

Question 9

2 characteristics
Financial Reports

Answer 9

RELEVANT/ impact on decisions

FAITHFUL Representation / accurately reflecting entity’s condition
.

Question 10

4 Characteristics
of
Relevant & Faithful Representation

Answer 10

Comparability -accurate
Verifiability - 3ed party
Timeliness - distributed info
Understandably - clear

Accurately reflects entity’s economic activity or condition.

Question 11

Measurement Principle

Answer 11

OBJECTIVE & VERIFIABLE

based upon unbiased evidence & 3ed party confirmation

Question 12

Historical Cost
or
Cost Principle

Answer 12

Recorded an item at its initial transaction price.

Question 13

Revenue Recognition Principle

Answer 13

Revenue recorded when earned.

When services or goods are delivers to customer.

Question 14

Expense Recognition
Or
Matching Principle

Answer 14

Recorded in same period as it is incurred.

Question 15

Expenses

Answer 15

Cash used to generate revenue.

Question 16

Arm’s Length Transaction

Answer 16

Transaction between two INDEPENDENT parties.

Question 17

4 Principals of Financial Accounting

Answer 17

Measurement Principle

Historical Cost

Revenue Recognition

Expense Recognition

Question 18

Assets

Answer 18

resources owned by a business

Question 19

Liabilities

Answer 19

Debts owed and “payable” to outside creditors.

Accounts Payable
Notes Payable
Wages Payable
Unearned Revenue - cash/ payment before services are provided.

Question 20

Equity

Answer 20

Owners Rights

Question 21

Accounting Equation

Answer 21

ALOE
(A) = (L) + (OE)
+CS+RE-Divd+R-E

ASSETS=LIABILITIES + OWNERS EQUITY…includes
+ common stock
+ Retained Earnings
- Divideds
+ Recenue
- Expenses

Question 22

Common Stock

Answer 22

Shares issued to investors as proof of ownership.

Question 23

Net Income
Net Profit
Earnings

Answer 23

Revenues > expenses

Question 24

Net Loss

Answer 24

Expenses > Revenue

Question 25

Balance Sheet

Answer 25

Assets Liabilities Stockholders equity

Question 26

Statement of stock holders equity

Answer 26

Common Stock and Retained Earnings reflects changes

Question 27

Business

Answer 27

Uses resources materials and labor are assembled and processed to sell goods or labor to customers for a profit.

Question 28

Financial Accounting

Answer 28

Provides info to external users like, investors, creditors, customers, govt.

Question 29

Managerial Accounting

Answer 29

Provides internal users with info to run the biz. managers, CEO, CFO, HR, and employees

Question 30

Ethics

Answer 30

Moral principles that guide conduct

Question 31

SOX

Answer 31

- Sarbanes-Oxley Act - Congress passed laws to monitor biz and accounting. - new oversight body called (Public Company Accounting Oversight Board) (PCAOB)

Question 32

Accounts Recivable

Answer 32

Amounts customers owe us

Question 33

Dividends

Answer 33

Earnings distributed to owners. Decreases stockholders equity. Do NOT effect net income or loss

Question 34

Retained Earnings

Answer 34

Revenue - Expenses = net income

Question 35

Biz Transactions

Answer 35

Changes an entity’s financial condition

Question 36

4 Financial Statments

Answer 36

INCOME STATEMENT STOCKHOLDERS EQUITY BALANCE SHEET STATEMENT CASH FLOW

Question 37

Income Statement

Answer 37

REVENUES and EXPENSES for a time range. Does not include investments or dividends

Question 38

Statement of stockholders equity

Answer 38

Changes in retained earnings Beginning retained earnings + net income - dividends = ending retained balance.

Question 39

Statement of Cash Flows

Answer 39

Cash receipts and Cash payments

Question 40

Ratio of liabilities to Stockholders equity

Answer 40

Total liabilities / total stockholders equity

Question 41

Paying an amount on account reduces

Answer 41

Liabilities

Question 42

4 Assumptions of GAAP

Answer 42

MONETARY UNIT / a single TIME PERIOD / US yearly with quarterly Biz Entity / separate from owners Going Concern / future operations, reporting assets at their initial or historical value.

Question 43

Fiscal Year

Answer 43

Accounting period used by a company

Question 44

Accounting Standards Codification

Answer 44

Electronic data-base run by the FASB

Question 45

Business Entity Principle

Answer 45

Maintain separate records from their owners and other businesses