The Purpose of Accounting

Question 1

The American Institute of Certified Public Accountants is the national organization that represents accountants in the United States.

Answer 1

AICPA

Question 2

is a collection of financial information about an enterprise. In particular the role of accounting is to analyze, measure, record and report financial information in an organized way so that interested people may use it to help them make decisions.

Answer 2

Accounting

Question 3

usually conduct routine tasks in specific areas of the accounting system and are often given specialized titles for the area in which they work.

Answer 3

Accounting clerks

Question 4

are the investments needed to carry out the business activity . Typical examples of assets include land, building, equipment, inventory and cash

Answer 4

Assets

Question 5

Something we presume is true about the company .

Answer 5

Assumptions

Question 6

To verify that what is reported in the financial statements conforms to generally accepted accounting principles or standards.

Answer 6

Auditing

Question 7

While not licensed professionals, bookkeepers perform the general accounting work. They may perform most of the accounting duties and supervise other employees, such as accounting clerks. They may not perform the professional audit function.

Answer 7

Bookkeepers:

Question 8

Certified Public Accountant. Licensed professional accountant.

Answer 8

CPA

Question 9

An idea. Accounting concepts are desirable ideas that further the goal of providing useful financial information.

Answer 9

Concept:

Question 10

is a business that is incorporated under the laws of a particular country or state. The owners of the business are called shareholders or stockholders.

Answer 10

Corporation

Question 11

lend funds, usually money , to the company . Creditors have a legal right to be repaid the amount lent, together with interest.

Answer 11

Creditors

Question 12

What is left for the owners after all the creditors have been paid. What they own free and clear.

Answer 12

Equity:

Question 13

The resources used in order to make revenues. Salaries of employees are an expense. The office supplies used in everyday business are another example of an expense.

Answer 13

Expenses:

Question 14

The Financial Accounting Standards Board (FASB) of the AICPA. This Board has the sole responsibility to establish and improve the accounting concepts and principles to help accountants deal with the many difficult issues that arise in a changing world.

Answer 14

FASB:

Question 15

concerns itself with preparing reports mainly for those outside the company .

Answer 15

Financial accounting

Question 16

generally consist of cash, but there also may be other resources such as inventory .

Answer 16

Funds

Question 17

Generally accepted accounting principles (see “Principles”).

Answer 17

GAAP:

Question 18

The goals of any business establish what the business hopes to achieve.

Answer 18

Goals:

Question 19

The reward many creditors receive for lending money . It is a charge for using their money .

Answer 19

Interest:

Question 20

Once the company has obtained funds for the business, it must invest those funds. The funds are invested in assets.

Answer 20

Investments

Question 21

Something (like a corporation) that is considered to be an artificial person and can enter into legal contracts, just like a real person. An important note: unlike a real person, a legal entity (the corporation) does not have to die. Corporations have unlimited lives.

Answer 21

Legal entity

Question 22

What you owe your creditors. You are liable to your creditors.

Answer 22

Liabilities

Question 23

This means the owners can not be held personally responsible for debts of the firm. Their liability is limited to the money they have invested in the firm. Owners, i.e., shareholders, of a corporation enjoy limited liability

Answer 23

Limited liability

Question 24

concerns itself with preparing reports to be used by managers inside the company .

Answer 24

Managerial accounting

Question 25

We will value our resources in dollars.

Answer 25

Monetary unit assumption

Question 26

Once a company establishes its goals, sets its strategies, obtains financing and invests in assets, it is ready to carry out operations. Conducting its business.

Answer 26

Operations

Question 27

A .............. is a legal agreement between two or more individuals to operate a business enterprise. At least one of the partners has unlimited liability for the debts of the business.

Answer 27

Partnerships

Question 28

Generally accepted accounting principles – or standards – help us to ensure the accounting reports are useful. These principles are the rules accountants follow to ensure good accounting practice.

Answer 28

Principles

Question 29

Normally , the goal of a business is to operate the business at a profit. Profits are made when what the company takes in (revenues) are greater that what it must send out (expenses).

Answer 29

Profits:

Question 30

What is available for the company to use (assets).

Answer 30

Resources:

Question 31

Normally a result of the business making sales. The resources earned by operating the business.

Answer 31

Revenues

Question 32

This assumption states that a business enterprise should be accounted for separately from its owners.

Answer 32

Separate entity assumption:

Question 33

is a business owned by one individual, and is the simplest form of business organization.

Answer 33

Sole proprietorship

Question 34

of the business describe how management plans to achieve its goals.

Answer 34

Strategies