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Betty's acct 101

Acct 101 Ch1/2

QuestionAnswer
Define Accounting A process by which financial information about a business is recorded, classified, summarized, and communicated to interested parties.
Identify jobs opportunities in accounting. Accounting clerks, Bookkeepers, public, managerial, governmental
Identify the users of financial information. Owners, and managers, employees, suppliers,banks,tax authorities, and investors.
What are the three types of businesses? Sole Proprietor-Owned by one person legally responsible for dept and taxes. Partnership-Two or more people who are responsible for debt and taxes. Corporation-One or more owners stockholders are not responsible for firms debt.
GAAP? Generally Accepted Accounting Principles
SEC? Securities and Exchange Commission
Why is the GAAP needed? To determine proper accounting standards!
Who has the final say on matters of financial reporting by publicly owned corporations? SEC ...Securities and Exchange Commission.
How are (GAAP) generally accepted accounting principles developed? 1.Issue discussion 2. obtain response to discussion. 3. Issue exposure draft. 4.Obtain response to exposure draft. 5. Issue statement of principle.
A non profit organization such as a school is a(n): Social entity.
An organization that has two or more owners who are legally responsible for the debts and taxes of the business is a: A Partnership
The Language of Business. Accounting
Separate Entity Assumption: For accounting purposes, all forms of business are considered separate entities from their owners. however the corporation is the only form of business that is a separate legal entity.
G.A.A.P. Generally accepted accounting principles are developed by? (F.A.S.B.)Financial Accounting Standards Board
Who is responsible for the accounting system we use today? Luca Paciola, a Franciscan monk from Italy in 1494.
What is an ASSET? The property that a business owns.
What is a LIABILITY? The debts and obligations of a business.
What is Owners EQUITY? The owners financial interest. aka-Net worth
What information is on a Balance Sheet? Assets,Liabilities,and Owners Equity
What is a Balance Sheet? A financial position of a given day.
What is a Business Transaction? A financial event that changes the resources of the firm/business.
Describe a transaction that increases an asset and the owners equity. Initial investment of cash by the owner.
What does the term Accounts Payable mean? Amounts that a company must pay to creditors in the future.
The Fundamental Accounting Equation. ASSETS = LIABILITIES + OWNER'S EQUITY
Revenue, increases owner's equity and Expenses, decrease owner's equity True!
Revenue Inflow of money or other assets.
Expense Outflow of money or assets.
Accounts Receivable Amounts owed by clients. usually due in 30 days.
Withdrawals are? Funds taken by the owner for personal use.
Financial Statements are? reports that summarize a firms financial affairs.
What information is included in the financial statement heading? The firms name (who), the title of the statement (what), and the time period covered by report (when).
Net Income Results when revenue is greater than expenses.
Net Loss Results when expenses are greater than revenue.
Break Even Revenue and Expenses are equal.
What order are financial reports generated? 1.The Income Statement. 2. The Statement of Owner's Equity. 3. The Balance Sheet
Fair Market Value is the current worth of an asset or the price the asset would bring if sold.
If an owner gives personal tools to the business how is the transaction recorded? as an investment recorded on the basis of fair market value.
If one side of the fundamental accounting equation is decreased, what will happen to the other? and why? It will decrease because a decrease in assets results in a corresponding decrease in either liability or the owner's equity.
What is the difference between buying on cash and buying on account? Buying on cash results in an immediate decrease in cash: buying on account results in a liability recorded as accounts payable.
What effect do revenue and expenses have on owner's equity? Revenue increases owner's equity and expenses decrease owner's equity.
Describe a transaction that will cause accounts payable and cash to decrease by 700 A payment of $700 to a creditor on account.
Why does the third line of the heading differ on the balance sheet and the income statement? Because a balance sheet is for a given day not a given period.
The review of financial statements to assess their fairness and adherence to GAAP is? auditing.
An independent accountant who performs financial audits is a Certified Public Accountant (CPA).
To become a CPA, an individual must? Have a certain number of college credits in accounting course,demostrate good personal character, pass Uniform CPA exam and fulfill experience requirements and follow code of ethics.
The entity that has final authority over the financial reporting of publicly owned corporations is the Securities and Exchange Commission (SEC).
The financial statements submitted by a corporation to the SEC include the auditor's report. The auditor's report: confirms that the financial information is prepared in conformity with generally accepted accounting principles.
The group of accounting educators who perform research to determine the possible effects on financial reporting and the economy and then offer their opinions about proposed FASB statements is the American Accounting Association (AAA).
The balance sheet is also called the statement of owner's equity the income statement the statement of operations the statement of financial position
When the owner invests cash in a business, Assets and Equity increase assets increase and owner's equity decreases. liabilities decrease and owner's equity increases. assets and owner's equity increase
When the owner withdraws cash for personal use Owners equity decreases
Types of Accounting Information Tax,Financial,and Managerial
Created by: Bjones1283
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