Mod1 Flashcards
(170 cards)
1
Q
Business organization
A
Accounting Entity or Business Entity
2
Q
the activities of each business should be kept separate from the activities of other businesses and from the personal financial activities of the owner(s).
A
Business Entity Concept
3
Q
unincorporated business owned by an individual and often managed by that same person
A
single proprietorship
4
Q
the inflows of assets (such as cash) resulting from the sale of products or the rendering of services to customers.
A
Revenues
5
Q
measure revenues by the prices agreed on in the exchanges in which a business delivers goods or renders services
A
Revenues
6
Q
the costs incurred to produce revenues
A
Expenses
7
Q
measured by the assets surrendered or consumed in serving customers
A
Expenses
8
Q
Service companies; Merchandising companies; Manufacturing companies
A
3 companies in Acct
9
Q
services for a fee
A
Service companies
10
Q
purchase goods that are ready for sale and then sell them to customers
A
Merchandising companies
11
Q
include auto dealerships, clothing stores, and supermarkets
A
Merchandising companies
12
Q
buy materials, convert them into products, and then sell the products to other companies or to the final consumers
A
Manufacturing companies
13
Q
steel mills, auto manufacturers, and clothing manufacturers.
A
Manufacturing companies
14
Q
the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows.
A
four common financial statements
15
Q
two primary objectives of every business
A
profitability and solvency
16
Q
ability to generate income
A
Profitability
17
Q
ability to pay debts as they become due
A
Solvency
18
Q
present the profitability and strength of a company
A
the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows.
19
Q
financial statement that reflects a company?s profitability
A
income statement
20
Q
shows the change in retained earnings between the beginning and end of a period
A
statement of retained earnings
21
Q
shows the cash inflows and outflows for a company over a period of time
A
balance sheet
22
Q
The headings and elements of each statement are similar from company to company.
A
TRUE
23
Q
shows the cash inflows and outflows for a company over a period of time
A
statement of cash flows
24
Q
sometimes called an earnings statement, reports the profitability of a business organization for a stated period of time
A
income statement
25
In accounting
measure profitability for a period
26
are the inflows of assets (such as cash) resulting from the sale of products or the rendering of services to customers
Revenues
27
measure revenues by the prices agreed on in the exchanges in which a business delivers goods or renders services.
Revenues
28
are the costs incurred to produce revenues
Expenses
29
measured by the assets surrendered or consumed in serving customers
Expenses
30
the result If the revenues of a period exceed the expenses of the same period
net income
31
net income equation
Net income = Revenues ? Expenses
32
often called the earnings of the company
Net income
33
When expenses exceed revenues
net loss
34
means by which a corporation rewards its stockholders (owners) for providing it with investment funds.
dividend
35
is a payment (usually of cash) to the owners of the business; it is a distribution of income to owners rather than an expense of doing business
dividend
36
Corporations are not required to pay dividends because dividends are not an expense
TRUE
37
effect of a dividend
reduce cash and retained earnings by the amount paid out
38
company no longer retains a portion of the income earned but passes it on to the
stockholders
39
sometimes called the statement of financial position, lists the company?s assets, liabilities, and stockholders? equity (including dollar amounts) as of a specific moment in time
balance sheet
40
for a period of time.
Income Statement(A) and Statement of Retained Earnings(B)
41
like a photograph; it captures the financial position of a company at a particular point in time
Balance Sheet ?
42
financial statement provides information about the solvency of the business.
balance sheet
43
debts owed by a business
Liabilities
44
liabilities by purchasing items on credit
Liabilities
45
amounts owed to suppliers for previous purchases
accounts payable
46
written promises to pay a specific sum of money
notes payable
47
1ÿ an amount paid by the borrower to the lender (in addition to the amount of the loan) for use of the money over time.
Interest
48
owners? interest in a corporation
stockholders? equity
49
shows the amount of the owners? investment in the corporation
Capital stock
50
generally consists of the accumulated net income of the corporation minus dividends distributed to stockholders
Retained earnings
51
shows the cash inflows and cash outflows from operating, investing, and financing activities
statement of cash flows
52
generally include the cash effects of transactions and other events that enter into the determination of net income
Operating activities
53
generally include business transactions involving the acquisition or disposal of long-term assets such as land, buildings, and equipment.
Investing activities
54
generally include the cash effects of transactions and other events involving creditors and owners (stockholders)
Financing activities
55
show the results of management?s past decisions
The income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows
56
the first to know the financial results; then, it publishes the financial statements to inform other users
Management
57
The most recent financial statements for most companies can be found on their websites under
Investor Relations
58
Assets = Equities
Assets
59
things of value owned by the business, or the economic resources of the business
Assets
60
all claims to, or interests in, assets
Equities
61
Assets A Equation
Assets A = Liabilities L + Stockholders? Equity SE/ A = L + SE
62
TRUE
liabilities are not only claims against assets but also sources of assets. right side of this equation
63
provide all the assets in a corporation
creditors and owners
64
a business activity or event that causes a measurable change in the accounting equation, Assets = Liabilities + Stockholders? equity
accounting transaction
65
An exchange of cash for merchandise
transaction
66
usually supports the evidence of the transaction
source document
67
any written or printed evidence of a business transaction that describes the essential facts of that transaction
source document
68
Examples of source documents
receipts for cash paid or received, checks written or received, bills sent to customers for services performed or bills received from suppliers for items purchased, cash register tapes, sales tickets, and notes given or received
69
Both preparers and users of financial statements must understand these assumptions
Business entity concept (or accounting entity concept). Money measurement concept. Exchange-price (or cost) concept (principle). Going-concern (continuity) concept. Periodicity (time periods) concept
70
concept assumes that each business has an existence separate from its owners, creditors, employees, customers, other interested parties, and other businesses.
Business entity concept (or accounting entity concept).
71
Economic activity is initially recorded and reported in a common monetary unit of measure?the dollar in the United States. This form of measurement is known as money measurement.
Money measurement concept
72
Most of the amounts in an accounting system are the objective money prices determined in the exchange process. As a result, we record most assets at their acquisition cost.
Exchange-price (or cost) concept (principle).
73
is the sacrifice made or the resources given up, measured in money terms, to acquire some desired thing, such as a new truck (asset).
Cost
74
Unless strong evidence exists to the contrary, accountants assume that the business entity will continue operations into the indefinite future. Accountants call this assumption the going-concern or continuity concept
Going-concern (continuity) concept
75
an entity?s life can be meaningfully subdivided into time periods (such as months or years) to report the results of its economic activities.
Periodicity (time periods) concept
76
ÿShareholders want the company?s executives to carry out activities that have a positive effect on stock prices and the value of dividends distributed to shareholders. Also, shareholders would want the company to focus on expansion, acquisitions, mergers and other activities that increase the company?s profitability and overall financial health.
Shareholders
77
On the other hand, stakeholders focus on longevity and better quality of service. For example, the company?s employees may be interested in better salaries and wages, rather than on higher profitability. The suppliers may be interested in timely payments for goods delivered to the company, as well as better rates for their products and services. The customers will be interested in receiving better customer service as well as buying high-quality products.
Stakeholders/Stockholders
78
provide information that can be used in making economic decisions
accounting
79
to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions?in making reasoned choices among alternative courses of action
function of acct
80
a feature of acct helps in making decisions in what
allocate scarce resources
81
are all parties interested in the financial health of a company
Stakeholders
82
are stakeholders who make decisions that directly affect the internal operations of the enterprise.
Internal users
83
are stakeholders who make decisions concerning their relationship to the enterprise.
External users
84
is concerned primarily with financial reporting for internal users, especially management.
Management accounting
85
focuses on the development and communication of financial information for external users
Financial accounting
86
External and Internal
Financial Accounting
87
US GAAP or IFRS
Financial Accounting
88
General, overall health of the company
Financial Accounting
89
Annual and quarterly
Financial Accounting
90
Internal
Managerial Accounting
91
Flexible
Managerial Accounting
92
Product costing, project management, decision making
Managerial Accounting
93
As needed
Managerial Accounting
94
Stockholders and potential investors need info concerning safelt and profitability of their investiments
Investors
95
Creditors, Stockholders, Investors
External investors
96
need information about the profitability and stability of the company to decide whether to lend money to the company and, if so, what interest rate to charge
Creditors
97
long for longevity in a corporation, employee, can be internal and external
Stakeholders
98
profitability because they have share of investments in the corporation . Directly afects them, has equity and capital investments, shares in the company
Shareholders
99
Not all stakeholders are can be shareholders
Shareholders can be stakeholders
100
is the private sector body that sets accounting standards in the United States (commonly referred to as generally accepted accounting principles (GAAP)).
Financial Accounting Standards Board (FASB)
101
private-sector
Financial Accounting Standards Board (FASB)
102
is led by five full-time members drawn from a variety of backgrounds?auditing, corporate accounting, financial services, and academia; 5 fulltime, 5 year term
Financial Accounting Standards Board (FASB)
103
Appointment of new Board members for FASB
Financial Accounting Foundation (FAF).
104
supports and selects members for Governmental Accounting Standards Board (GASB).
Financial Accounting Foundation (FAF).
105
to study issues and to establish accounting standards
major functions of the FASB
106
issues and to establish accounting standards is sissued by FASB through
Accounting Standards Updates.
107
FASB also issued that provide a framework within which specific accounting standards can be developed.
Statements of Financial Accounting Concepts
108
various FASB pronouncements
U.S. Generally Accepted Accounting Principles (GAAP).
109
created by an act of Congress in 1934
Securities and Exchange Commission (SEC)
110
role of SEC
to regulate the issuance and trading of securities by corporations to the general public
111
requires companies to have their external financial statements audited by independent accountants
Securities and Exchange Commission (SEC)
112
that represent practices followed by the staff administering SEC disclosure requirements
Staff Accounting Bulletins
113
auditors of SEC-required financial information must be registered and periodically inspected by
Public Company Accounting Oversight Board (PCAOB)
114
is the professional organization of practicing certified public accountants (CPAs) in the United States
American Institute of Certified Public Accountants (AICPA)
115
Published by AICPA monthly
Journal of Accountancy
116
responsible for preparing and grading the Uniform CPA Examination
American Institute of Certified Public Accountants (AICPA)
117
an organization of accounting professors
American Accounting Association (AAA)
118
accounting professors discuss technical research and share innovative teaching techniques and materials
American Accounting Association (AAA)
119
AAA publishes a number of academic journals
The Accounting Review and Accounting Horizons
120
has the primary goal of equitably collecting revenue. tax and financial accounting are closely related.
Internal Revenue Service (IRS)
121
international nature of business requires companies to be able to make their financial statements understandable to users all over the world
International Accounting Standards Board (IASB)
122
attempt to harmonize conflicting standards, formed in 1973 to develop worldwide accounting standards.
International Accounting Standards Board (IASB)
123
Similar w/ FASB, develops proposals, circulates these among interested organizations, receives feedback, and then issues a final pronouncement.
International Accounting Standards Board (IASB)
124
Accounting standards issued by the IASB are referred if issued after to 2001
International Financial Reporting Standards (IFRS)
125
Accounting standards issued by the IASB are referred if issued prior to 2001
International Accounting Standards (IAS)
126
SEC began allowing non-U.S. companies with shares trading on U.S. stock exchanges to issue their financial reports using IASB standards
2008
127
reports, as of a certain point in time, the resources of a company (the assets), the company?s obligations (the liabilities), and the equity of the owners.
balance sheet
128
reports, for a certain interval, the net assets generated through business operations (revenues), the net assets consumed (the expenses),
income statement
129
the net assets generated through business operations (revenues), the net assets consumed (the expenses), and the difference, which is called
net income
130
reports, for a certain interval, the amount of cash generated and consumed by a company through the following three types of activities: operating, financing, and investing activities
statement of cash flows
131
FASB conceptual framework is influenced by five basic assumptions
Economic entity, going concern, Arm's-length transactions, stable monetary unit, and accounting period
132
FASB conceptual framework is influenced by five basic assumptions
EGASA
133
business enterprise is viewed as a specific economic entity separate and distinct from its owners and any other business unit
economic entity
134
it is assumed that the enterprise will last indefinitely
going concern
135
Transactions are assumed to occur between independent parties, each of which is capable of protecting its own interests
Arm's Length Transcations
136
assumption allows for the ignoring of changes in the dollar?s purchasing power resulting from inflation
stable monetary unit
137
Because accounting information is needed on a timely basis, the life of a business is divided into specific periods
Accounting Periods
138
Normal period of reporting
Annually or Quarterly / yearly and interim quarterly reports
139
objectives of financial reporting
Usefulness, Undersatndability, Target Audience, Assessing Future Cash Flows, Evaluating Economic Resources, Focus Primary on Earnings
140
Usefulness, Undersatndability, Target Audience, Assessing Future Cash Flows, Evaluating Economic Resources, Focus Primary on Earnings
UUFATE
141
For an item to be formally recognized, it must meet one of the definitions of the elements of the financial statements.
Recognition Criteria
142
Assets recorder on balance sheet
Receivables
143
Asset=Equity
DC ADLER
144
Measurement Criteria
Historical Cost, Current Replacement Cost, Fair Value, Net Realizable Value, Present (or discounted) value
145
Measurement Criteria
CHPFN
146
willing buyers, unwilling buyers
fair value
147
for cash and cash equivalents
present or discounted value
148
Included in the recommended set of general-purpose financial statements are reports that show the following
Reporting
149
recommended reporting should show
Financial position at the end of the period, Earnings for the period (Net Income), Investments by the distributions to owners during the period, Comprehensive income (earnings + unrealized gains and losses) for the period
150
show reports
ICECF
151
For financial statement reporting to be most effective, all relevant information should be presented in an unbiased, understandable, and timely manner. This is sometimes referred to as
full disclosure principle
152
preferable to recognition in situations in which relevant information cannot be reliably measured
Disclosure
153
working independently of a company?s management, examine the financial statements
Auditors
154
about the fairness of the statements and their adherence to proper accounting principles
auditor?s opinion
155
Economic Entity
E
156
Going Conern
G
157
Arm's Length Transcations
A
158
Stable Monetray Unit
S
159
Accounting Periods
A
160
usefulness
U
161
understandability
U
162
Focus Primary on Earnings
F
163
Assessing Future Cash Flow
A
164
Target Audience
T
165
Evaluating Economic Resources
E
166
Current Replacment Cost
C
167
Historical Cost
H
168
Present Value
P
169
Fair Value
F
170
Net Realizable Value
N
