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P.A.1 1
| Question | Answer |
|---|---|
| what is accounting? | is an information & measurement system that identified, records, & communicates an organization's business activities |
| what is accounting called? | the language of business |
| what are the opportunities in accounting? | financial, managerial, taxation, accounting-related |
| where are the majority of accounting oppotunities? | in private accounting, where employees work for a business |
| what are traits of FINANCIAL accounting? | preparation, analysis, external auditing, regulatory, consulting, planning, criminal investigation |
| what are traits of MANAGERIAL accounting? | general accounting, cost accounting, budgeting, internal auditing, consulting, controller, treasurer, strategy |
| what are traits of TAXATION accounting? | planning, preparation, regulatory, investigations, consulting, enforcement, legal services, estate plans |
| what are traits of ACCOUNTING-RELATED accounting? | lenders, consultants, analysts, traders, directors, underwriters, planners, appraisers, FBI investigators, market researchers, systems designers, merger services, business valuation, forensic accounting, litigation support, entrepreneurs |
| what is Generally Accepted Accounting Principals (GAAP)? | financial accounting is governed by concepts & rules known as this. they want information to have relevance & faithful representation |
| what does the Financial Accounting Standards Board (FASB) do? | They set GAAP, have authority provided by the Securities & Exchange Commission (SEC), & the SEC is a U.S. government agency that oversees GAAP by companies that sell stock & debt to the public |
| what does the International Accounting Standards Board (IASB) do? | International Financial Reporting Standards (IFRS), standards identify preferred accounting practices, standards are similar to, but sometimes different from U.S. GAAP, FASB & the term are working to reduce differences. |
| what are the accounting principals? | Measurement Principle ( Cost Principle ), Revenue Recognition Principle, Expense Recognition Principle ( Matching Principle ), Full Disclosure Principle |
| What is the Measurement Principle ( Cost Principle )? | Accounting information is based on actual cost. Actual cost is considered objective |
| what is Revenue Recognition Principle? | 1. Recognize revenue when goods or services are provided to customers & 2. at an amount expected to be received from the customer. |
| what is the Expense Recognition Principle (Matching Principle)? | a company records its expenses incurred to generate the revenue reported |
| what is the Full Disclosure Principle? | a company reports the details behind financial statements that would impact users' decisions in the notes to the financial statements |
| what are the accounting assumptions? | Going-Concern assumption, Monetary Unit assumption, Time Period assumption, Business Entity Assumption |
| What is the Going-Concern assumption? | the business is presumed to continue operating instead of being closed or sold |
| what is the Monetary Unit assumption? | Transactions & events are expressed in monetary, or money, units |
| What is the Time Period assumption? | The life of a company can be divided into time periods, such as months & years |
| what is the Business Entity Assumption? | a business is accounted for separately from other business entities, including its owner |
| what are traits of a sole proprietorship? | 1 owner--easy to set up, no additional business income tax, unlimited liability--owner is personally liable for PROPRIETORSHIP debts, NOT a separate legal entity, business ends with owner death or choice |
| what are traits of a partnership? | 2 or more--easy to set up, no additional business income tax, unlimited liability--they are jointly liable for partnership debt, NOT a separate legal entity, business ends with a partner death or choice |
| what are traits of a corporation? | 1 or more, called shareholders--can get many more investors by selling stock or shares of corporate ownership, corporate income tax, limited liability, separate entity, indefinite |
| what are the traits of a limited liability company (LLC)? | 1 or more, called members, no additional business income tax, limited liability, separate entity, indefinite |
| what are the types of businesses? | service, merchandising, & manufacturing |
| what is the accounting equation? | assets = liabilities + equity |
| what are assets? | resources owned or controlled by a company |
| what are examples of assets? | Account receivable, cash, notes receivable, vehicles, land, store supplies, equipment, & buildings |
| what are liabilities? | creditors' claims on assets/amount company owes |
| what are examples of liabilities? | accounts payable, notes payable, taxes payable, & wages payable |
| what is equity? | owner's claim on assets, or the assets remaining after liabilities have been paid belong to the owner |
| what is the expanded accounting equation? | assets = liabilities + owner, capital - owner, withdrawals + revenues - expenses |
| what part of the expanded accounting equation considered equity? | owner, capital - owner, withdrawals + revenues - expenses |
| what part of the expanded accounting equation considered net income? | revenues - expenses |
| what is owners capital? | owner's investments in the business. increase owner's equity |
| what is owner's withdrawals? | owner's withdrawals from the business for personal use. are NOT expenses. instead, are the opposite of owner's investments. decrease owner's equity |
| what are revenues? | received from sale of products/services to customers. increase owner's equity. examples: sales, consulting revenue, interest revenue |
| what are expenses? | costs incurred in earning revenue. Decrease owner's equity. examples: wages expense, supplies expense, utilities expense |
| what is the order of a financial statement? | income statement, statement of owner's equity, balance sheet, then statement of cash flows |
| what is an income statement? | reports the revenues & expenses for a period of time, based on the matching principle |
| what is the matching principle? | when recording revenue, report expenses incurred to generate that revenue in the same accounting period |
| what is a statement of owner's equity? | reports the changes in the owner's equity for a period of time |
| what is a balance sheet? | lists a business' assets, liabilities, & owner's equity as of a specific date |
| what is a statement of cash flows? | it summarizes the cash receipts & payments for a specific period of time divided into three sections. 1) operating activities, 2) investing activities, & 3) financing activities |
| what are the activities in a statement of cash flows? | operating activities, investing activities, & financing activities |
| what are operating activities? | relates to core business. cash received from customers. Cash paid for wages, supplies, utilities, rent, etc. |
| what are investing activities? | cash received, when you sell land, buildings, & equipment. Cash paid when you buy land, buildings, & equipment. |
| what are financing activities? | cash received when owner invests in business. cash paid when owner makes withdrawal from business. cash received when money is borrowed & cash paid when loans are repaid |
| what is return on assets? | is stated in ratio form as net income divided by the average total assets invested |
| what is the formula for return on assets? | net income / average total assets |
Created by:
leestudymaster
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