WEEK 1

Question 1

Accounting (3 activities)

Answer 1

three basic activities: identifies, records and communicates the economic events of an organ to interested users

Question 1

Which three of the following belong to financial accounting?

Identifies
Analyzes
Records
Reports
Calculates
Organizes
Communicates
Evaluates

Answer 1

identifies, communicates and records

Question 2

identification

Answer 2

a company identifies the economic events relevant to its business

Question 3

recording

Answer 3

keeping a systematic, chronological diary of events

Question 4

communication

Answer 4

the collected info is communicated to interests users by means of accounting reports

Question 5

internal users

Answer 5

managers who plan, organize and run the business

Question 6

external users

Answer 6

individuals/organ outside a company who want financial information about the company

Question 7

GAAP

Answer 7

standards that indicate how to report economic events

Question 8

there are two measurements when it comes to GAAP

Answer 8

1. historical cost principle
   - record assets at their costs
2. fair value principle
   - assets should be reported at the cost of if you would sell it at that moment

Question 9

Monetary unit assumption

Answer 9

requires that companies include in the accounting records only transaction data that can be expressed in money terms

Question 10

Economic entity assumption

Answer 10

requires that the activities of the entity be kept separate and distinct from the activities of its owner and all the economic entities

Question 11

proprietorship

Answer 11

*The owner is often the manager/operator of the business.

*Small service-type businesses

*Is personally liable for all debts of the business.

Question 12

Partnership

Answer 12

• Owned by two or more persons
• Each partner generally has unlimited personal liability for the debts of the partnership.

Question 13

Corporation

Answer 13

• Separate legal entity under state corporation law ownership divided into transferable shares of stock stockholders).
• Enjoy limited liability; that is, they are not personally liable for the debts of the corporate entity.

Question 14

whats the formula of owners equation

Answer 14

share capital + revenues - expenses

Question 15

External transactions

Answer 15

involve economic events between the company and some outside enterprise.

Question 16

Internal transactions

Answer 16

economic events that occur entirely within one company

Question 17

income statement

Answer 17

revenues and expenses and resulting net income or net loss for a specific period of time

Question 18

owner’s equity statement

Answer 18

the changes in owner’s equity for a specific period of time

Question 19

statement of cash flows

Answer 19

summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time

Question 20

Public Accounting

Answer 20

professionals that work for accounting firms, not for just one company

Question 21

3 things that belong to public accounting:
1. auditing
2. taxation
3. management consulting

Answer 21

1. auditing
   an independent account examines the company financial statements and provides an opinion as to how accurately the financial statements present the company’s results and financial positions in accordance with international financial reporting standards
2. taxation
   tax advice and planning, preparing tax returns and representing clients before governmental agencies
3. management consulting
   installing basic account software, or highly complex enterprise resource planning systems, performing support to major marketing projects and merger/acquisition activities.

Question 22

Forensic Accounting

Answer 22

uses accounting, auditing, and investigative skills to conducts investigations into theft and fraud

Question 22

private accounting

Answer 22

accounting for only 1 for-profit organization

Question 22

cost accounting

Answer 22

finding the cost of producing specific products; budgeting; accounting info system design and support and tax and planning and preparation

Question 22

Governmental Accounting

Answer 22

Government accountants might work in places like tax authorities and law enforcement agencies

Question 22

normal balance

Answer 22

the side where an increase in the account is recorded

Question 23

3 steps of the recording process

Answer 23

1. recording: Which accounts are affected? Is something going up or down? 2. journalize: write the transaction down in a journal 3. post to the ledger: take that info from the journal and update the individual accounts in the ledger

Question 24

The Ledger

Answer 24

like a big book that holds all the individual accounts

Question 25

What’s the Journal?

Answer 25

the act of writing things down in the journal. Each entry = one transaction.

Question 26

General Ledger

Answer 26

includes Assets, Liabilities, and Owner’s Equity

Question 27

Posting

Answer 27

moving the transaction from the journal to the ledger

Question 28

What’s the trial balance for?

Answer 28

Lists all account balances to check if debits = credits (but doesn’t catch all errors).

Question 29

3 errors trial balance

Answer 29

1. A transaction is not journalized. 2. A correct journal entry is not posted. 3. A journal entry is posted twice.