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Financial Acct Ex 1

Ivy Tech-Bloomington, book: Financial Accounting

QuestionAnswer
Who are the users of Financial Accounting information? Investors, Creditors, and Regulatory Bodies
What are examples of Regulatory Bodies that use Financial Accounting information? IRS, SEC (US Securities & Exchange Commission, State Department of Revenue.
What is the GAAP? Generally Accepted Accounting Principles
Who establishes the GAAP? The Financial Accounting Standards Board.
What characteristic of financial information means the information must be readily understandable to users of the financial statements? Understandability
What characteristic of financial information means the information must be relevant to the needs of the users? Relevance
What characteristic of financial information means the information must be free of material error and bias, and not misleading? Reliability
What characteristic of financial information means the information must be comparable to the financial information presented for other accounting periods, so that users can identify trends in the performance and the financial position? Comparability
What characteristic of financial information is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. Materiality
What are the 5 qualitative characteristics of financial information? Understandability, Relevance, Reliability, Comparability, Materiality
What is the accounting equation? Assets = Liabilities + Owner's Equity
To calculate Retained Earnings: Beg R/E + Net Income/- Net Loss -_____________ =Ending Retained Earnings DIVIDENDS
Which 2 financial statements does net income appear? Income Statement and Statement of Retained Earnings
Name the 3 sections of the Statement of Cash Flows. Operating, Investing, and Financing
A record of an economic/financial event on a business that can be reliably measured. A journal entry.
How does income statement data appear under the Retained Earnings classification? Revenues and Expenses
Define the balance in an account. The amount remaining.
How many accounts can a journal entry have? There is no limit, it just has to balance.
Does accrual accounting record CASH transactions as well as NON-CASH transactions? Yes
What is the primary means by which fraud and unintentional financial statement errors are prevented? Internal Control
Assets should be recorded at their actual costs on the date of purchase. Cost Principle
What are the 2 main components of Stockholder's Equity? Retained Earnings and Pain in Capital
At least one account is debited and at least one account is debited is the definition of ________________. Double-entry accounting
An accounting period ending other than December 31. Fiscal Year
What kind of entry is prepared at the end of the accounting period to update certain accounts? Adjusting Entry
What are 3 basic categories of adjusting entries? Depreciation, Deferrals, and Accruals
What is the purpose of a closing entry? To transfer revenue, expenses, and dividends to retained earnings.
How do you compute the Current Ratio? Current Assets/Current Liabilities
What are the 3 main components of a fraud triangle? Rationalization, Opportunity, and Motive
Created by: 100001123651952