intro

Question 1

provides financial information about current operations and financial condition of a business to individuals, agencies, and organizations

Answer 1

purpose of accounting

Question 2

users of accounting information

Answer 2

owners, managers, creditors, government agencies

Question 3

system of gathering financial information about a business and reporting this information to users

Answer 3

accounting process

Question 4

6 major steps of process

Answer 4

1. analyzing
2. recording
3. classifying
4. summarizing
5. reporting
6. interpreting

Question 5

looking at events that have taken place; thinking about how these events have effected business

Answer 5

analyzing

Question 6

entering financial information about events into an accounting system; information can be entered manually; most use computer

Answer 6

recording

Question 7

sorting and grouping similar items together

Answer 7

classifying

Question 8

bringing various items of information together; determines a result

Answer 8

summarizing

Question 9

communicating results; communication in form of financial statements

Answer 9

reporting

Question 10

deciding meaningful and importance of reported information; uses ratios and percentage analysis to explain how pieces of information relate to one another

Answer 10

interpreting

Question 11

developed by financial account standards board, private standard setting body; provides concepts and guidelines to be followed during accounting process

Answer 11

generally accepted accounting principles

Question 12

5 steps for adopting a standard

Answer 12

1. issue is placed on FASBs agenda
2. discussion memoradum is issued
3. public hearings are held around country
4. exposure draft issued
5. final statement of finacnial accouting standard is issued

Question 13

owned by one person; assumes all risks for business personally; owner makes all business decisions

Answer 13

sole proprietorship

Question 14

owned by more than one person; parterners assume all risks for business personally; share risks and decision making; partners may disagree about way business should run

Answer 14

partnership

Question 15

owned by stockholders; usually employ professional managers; owners risks limited to their initial investment; publicly owned corps, shareholders often have very litte influence on business decisions

Answer 15

corporations

Question 16

record, sort, and file accounting information; specialize in various areas of accounting; require at least 1 year of accounting education

Answer 16

accounting clerks

Question 17

supervise work of accounting clerks, perform daily accounting work, and summarize account information; small-med sized business may help interpret accounting information; requires 1-2 years of accounting education and some experience as accounting clerk

Answer 17

book keepers

Question 18

provide accounting, auditing/tax services under direct supervision of accountant; requires 2 year degree/significant accounting/book keeping experience

Answer 18

paraaccountants

Question 19

design accounting information system and focus on analyzing and interpreting information; enterfield with college degree in accounting. many states require 150 credit hours to sit for CPA exam, many also earning masters degree; can achieve professional status as certified public accountant and work for major accounting firms

Answer 19

accountants

Question 20

accountants employed in:

Answer 20

public accounting, private managerial, governmental, and not for profit

Question 21

servies offered to other business by public accountants

Answer 21

auditing, taxation, managment advisory services

Question 22

reviewing company books to ensure correct policies and practices have been followed

Answer 22

auditing

Question 23

tax specialists offer advice on tax planning, prepare tax returns and represents clients before governmental agencies

Answer 23

taxation

Question 24

offer advice to other business on a wide variety of managerial issues

Answer 24

management advisory services

Question 25

individual, association/organization that engages in economic activities and control specific economic resources

Answer 25

business entity

Question 26

itmes owned by business that will provide future benefits

Answer 26

assets

Question 27

amount of money owed to business by customers as result of making sales "on account" "on credit"

Answer 27

accounts receivable

Question 28

itmes owed, probable future outflow of assets as result of past transactions/events; debts/obligations of business that can be paid with cash,goods/services

Answer 28

liabilities

Question 29

unwritten promise to pay supplier for assets purchased/services rendered; referred to making a purchase "on account"

Answer 29

accounts payable

Question 30

written promises to pay suppliers/lenders specified sums of money at definite future time

Answer 30

notes payable

Question 31

amount by which business assets exceed liabilities; net worth; capital

Answer 31

owners equity

Question 32

economic event that has a direct impact on business; usually requires exchange with an outside entity; measured in dollars; affect the accounting equation through specific accounts

Answer 32

business transactions

Question 33

separate record used to summarize changes in each asset, liability and owners equity of a business

Answer 33

account

Question 34

provide a description of each type of account

Answer 34

account title

Question 35

3 questions

Answer 35

1. what happened 2. which accounts are affected 3. how is accounting equation affected

Question 36

increase in asset is offeset by an increase in owners equity

Answer 36

investment by owner

Question 37

increase in asset is offset by decrease in another asset

Answer 37

purchase of asset for cash

Question 38

increase in asset is offset by increase in liability

Answer 38

purchase of asset on account

Question 39

decrease in asset is offset by decrease in a liability

Answer 39

payment on loan

Question 40

decrease owners equity

Answer 40

expenses; drawing

Question 41

increase owners equity

Answer 41

revenues; investments

Question 42

amount business charges customers for products sold/services performed; increases both assets and owners equity

Answer 42

revenues

Question 43

represents decrease in assets/increase in liabilities as result of efforts made to produce revenue; always decreases owners equity

Answer 43

expenses

Question 44

revenue greater than expenses

Answer 44

net income

Question 45

expenses greater than revenue

Answer 45

net loss

Question 46

concept that income determination can be made on a periodic basis

Answer 46

accounting period concept

Question 47

accounting period of 12 months

Answer 47

fiscal year

Question 48

owner taking cash/other assets from business for personal use; reduces owners equity and assets

Answer 48

withdrawals

Question 49

reports profitability of business operations for specific period of time; revenues and expenses; profit and loss statement, operating statement

Answer 49

income statement

Question 50

beginning capital, net income/loss, withdrawals, ending capital; reports activity that affected owners equity for specific period of time; uses net income from income statement

Answer 50

statement of owners equity

Question 51

confimrs accounting equation remained in balance; statement of financial position; statement of financial condition; reports assets, liabilities, and owners equity on specific date, not period of time

Answer 51

balance sheet

Question 52

identify accounts,classifying accounts, determine increase/decrease, enter transaction and verify balance

Answer 52

processing

Question 53

rev.-expense=net income

Answer 53

income statement

Question 54

beg. cap.+investments+net income-withdrawals=ending cap.

Answer 54

statement of owners equity

Question 55

assets=liabilities+owners equity

Answer 55

balance sheet