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ACCTG 241 Exam.1
| Question | Answer |
|---|---|
| Accounting | An information and measurement system that identifies, records, and communicates an organization's business activities. (THE LANGUAGE OF BUSINESS) |
| Bookkeeping | The recording of transactions and events, either manually or electronically |
| Identifying | Select transactions and events |
| Recording | Input, measure, and log |
| Communicating | Prepare, Analyze, and interpret |
| External Users | Individuals using accounting information who are not directly involved in running the organization (Ex: Lendors, Shareholder (investors)) |
| Internal Users | Individuals using accounting information who are directly involved in managing the organization (Ex: Mangers, Sales, CEO, and HR) |
| Data Analytics | A process of analyzing data to identify meaningful relations & trends. |
| Ethics | Beliefs that separate right from wrong |
| Fraud Triangle | Opportunity, Pressure, and Rationalization |
| Opportunity (FT) | A person must be able to commit fraud with a low risk of getting caught |
| Pressure (FT) | A person must feel pressure or have incentive to commit fraud |
| Rationalization (FT) | A person justifies fraud or does not see its criminal nature |
| Internal Controls | Procedures to protect assets, ensure reliable accounting, promote efficiency, and uphold company policies |
| GAAP | Generally Accepted Accounting Principles; Set by FASB A standardized set of accounting rules U.S. companies must follow when preparing financial statements |
| FASB | Financial Accounting Standards Board; Sets GAAP Independent nonprofit organization that creates and updates GAAP |
| IASB | International Accounting Standards Board |
| IFRS | International Financial Reporting Services |
| The conceptual framework contains: | Objectives, Qualitative Characteristics, Elements, and Recognition and Measurement |
| Measurement Principle | Accounting information is based on actual cost. Cost is measured on a cash or equal-to-cash basis (Buy a truck for 2,000 but think it's worth 10,000 you record it for 2,000 |
| Revenue Recognition Principle | Revenue should be recognized in the period in which goods or services were provided, and at the amount expected to be received from the customer (Jacob washes windows in September with a price of $450 but doesn’t get paid until November. Revenue recognize |
| Matching/Expense Recognition Principle | Expense should be recognized in the same period as the revenue recognized as a result of that expense (Credit cards are used to pay $200 in gas for a lawn service during June and July. The cards are paid in August. When is the expense recorded?June&July) |
| Full-Disclosure Principle | Any information that could impact users' decisions should be included in the financial statements. |
| Going Concern Assumption | It can be assumed that the business will continue to operate, rather than being closed or sold |
| Monetary Unit Assumption | Transaction or events are recorded as a monetary unit |
| Time Period Assumption | The life of a company can be divided into time periods, such as months or years (IS - For year Ended, BS - As of Decem. 31) |
| Business Entity Assumption | A business is accounted for separately from its owner |
| Sole Proprietorship | 1 owner; Unlimited Liability |
| Partnership | 2 or more owners; Unlimited Liability |
| Corporation | 1 or more owners; Limited Liability |
| LLC | 1 or more owners; Limited Liability |
| Assets | Resources a company owns or controls that are expected to yield a future benefit (Ex: Cash, Land, Equipment, Accounts Receivable) |
| Liabilities | Creditors claim on assets or an obligation to provide assets, products, or services to others (Ex: Accounts Payable, Note Payable, Taxes Payable, Unearned Revenue) |
| Equity | A creditor's claim on assets is equal to assets minus liabilities. This is what the business is worth to its owners or shareholders (Ex: Dividends, Common Stock, Retained Earnings) |
| Accounting Equation | Assets = Liabilities + Equity |
| Expanded Acct. Equation | Assets = Liabilities + Common Stock - Dividends + Revenue - Expenses |
| Dividends have a ___ impact on equity | Negative |
| Common Stock have a __ impact on equity | positive |
| Revenues have a __ impact on equity | positive |
| Expenses have a __ impact on equity | negative |
| Revenues, Expense & Dividends have a direct impact on ___ | Retained Earnings |
| What is on the Income Statement? | Revenues - Expenses = Net Income |
| What is on the Statement of Retained Earnings? | Beginning of Retained Earnings + Net Income - Dividends = Ending Retained Earnings |
| What is on the Balance Sheet? | Assets = Liabilities + Equity |
| Unearned Revenue | Cash received in advance of providing products or services |
| Which component of the Fraud Triangle involves a person JUSTIFYING their criminal actions by convincing THEMSELVES it is not actually a crime? | Rationalization |
| The principle that requires accounting information to be based on actual cost, rather than what the owner "thinks" an item is worth... | Measurement Principle |
| Which of the following is considered an external user of accounting information? | Shareholders, Auditors |
| Which business entity type is characterized by having only having one owner and the business is not being separate legal entity from its owner? | Sole Proprietorship (1 owner; Unlimited Liabilities) |
| Under the revenue recognition principle, when should revenue be recognized? | When the good or service is provided |
| What accounting principle requires all expenses be recognized and recorded in the same period as the revenue they help generate? | Matching/Expense recognition principle |
| Account | A record of increases and decreases in a specific asset, liability, equity, revenue, or expense (Keeps track of everything) |
| General Ledger | A record of all accounts and their balances |
| Asset Accounts | Things we own that have future value (Cash, Prepaid Accounts, Accounts Receivable) |
| Liability Accounts | Obligations that we have to pay or provide resources (Unearned Revenue, Accounts Payable, Accrued Liabilities) |
| Equity Accounts | Value of our business and corresponding chnages increases & decreases to the value of our business (Common Stock, Revenue, Expenses, Dividends) |
| Charts of Accounts | A list of all accounts and includes an identifying number for each account |
| Level 100 | Assets |
| Level 200 | Liabilities |
| Level 300 | Common Equity |
| Level 400 | Revenues |
| Level 600 | Expenses |
| True or False; Debits do not have to equal credits when making journal entries | False |
| Accrual Basis | Revenues are recorded when products or services are delivered, and records expenses when incurred |
| Cash Basis | Revenues are recorded when cash is received and expenses are recorded when cash is paid |
| Accrual basis accounting recognizes revenues when... | Goods or services are provided |
| Which account is typically involved in a deferred expense? | Prepaid asset |
| True/False. Deferred revenues become earned revenues as the company satisfies its performance obligations. | True |
| Which statement best describes the purpose of the trial balance? | To prove that debits equal credits |
| Which of the following is not a step in the accounting cycle? | Record transactions only at year-end |
| Which of these accounts is a temporary account? | Expenses |
| When would a company typically record an adjusting entry to recognize supplies expense? | At the end of the current period, after a physical count of supplies is taken |
| An accrued expense refers to: | An expense is being recorded now, but cash is paid later |
| Which of the following correctly defines the matching principle? | Expenses should be recognized in the same period in which they help generate revenue |
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