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Accounting Test 1 > 1-3 > Flashcards

1-3 Flashcards

1
Q

What is accounting?

A
  1. Investment
  2. Lending
  3. Regulatory
  4. Employment
  5. Management
  6. Tax authority
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2
Q

Proprietorship

A

Single owner, owner personally liable for business debts

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3
Q

Partnership

A

Two or more people, unlimited liability

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4
Q

Limited liability corporations

A

Owners are not personally liable, popular due to the combo of tax status and limited liability

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5
Q

Corporation

A

Formed under state law
Advantage: large sums of capital from issuance of stock to the public
Disadvantage: double taxation (corporate, dividend)

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6
Q

Financing activities

A

External sources of funding:
Owners
Lenders

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7
Q

Owners

A

Stockholders equity and dividends

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8
Q

Lenders

A

Liabilities

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9
Q

Investing

A

Purchase and sale of long term resources or other resources

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10
Q

Operating

A

Primary operations of the company

-expenses and revenues

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11
Q

Revenues

A

Providing products and services to customers

Sales of goods and services

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12
Q

Expenses

A

Associated costs of producing revenue

Cost of earning revenues

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13
Q

Accounting equation (balance sheet)

A

Assets= liabilities + stockholders equity

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14
Q

4 basic financial statements

A

Income statement
Statement of stockholders equity
Balance sheet
Statement of cash flows

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15
Q

Net income is aka

A

Profit and earnings

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16
Q

Assets

A

Resources owned by the company

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17
Q

Liabilities

A

Creditors claims to those resources

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18
Q

Stockholders equity

A

Any resources not claimed by creditors

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19
Q

Statement of cash flows

A

Operating + investing + financing = total cash flows

20
Q

Look at why financial accounting is important on slides for chapter 1

A

…

21
Q

GAAP(what does this stand for?)

A

generally accepted accounting principles

22
Q

Financial accounting standards board

A

Rules for US companies

23
Q

International accounting standards board

A

Rules for most other countries

24
Q

Securities and Exchange Commission

A

Enforce rules in US

25
Q

Auditor

A

Verified rules are followed, independent of company

26
Q

Financial accounting should provide info that:

A

Useful to investors and creditors
Helps predict cash flow
Tells about economic resources and claims

27
Q

Constraints of financial accounting

A

Materiality

Cost

28
Q

What does the balance sheet report?

A

Financial position of the company

29
Q

What does the income statement report?

A

Probability of the company

30
Q

Retained earnings

A

All earnings over life of the company less payments to owners

31
Q

Common stock & retained earnings

Internal or external

A

Common stock = external

retained earnings = internal

32
Q

Stock holders equity statement

A

Common stock + retained earnings (beg. RE + net income - dividends)

33
Q

Transactions

A

An event that has a financial impact on the business and can be measured reliably

34
Q

The 6 accounts

A 
Dividends 
Expenses
Assets
Liabilities 
Owners equity
Revenues
35
Q

Debit and credit left or right

A 
Debit = left
Credit = right
36
Q

Cash basis

A

record revenues when cash is received

Record expenses when cash is paid

37
Q

Accrual basis

A

Record revenues when earned
Record expenses in period the benefit is received

Most used

38
Q

Revenue recognition principle

A

Record revenue when earned

39
Q

Matching principle

A

All costs that are used to generate revenue are recorded as expenses in the period the revenue is recognized

40
Q

Adjusting entries

A
  • Internal transactions
  • record events that have occurred but that we have not yet recorded
  • needed bc we are accrual based
  • necessary to make sure all revenues and expenses are recorded in the current period
  • recorded on the last day of the period
41
Q

Deferrals

A

Paid or received cash in advance

  • prepaid expenses
  • unearned revenues
42
Q

Prepaid expenses

A

Paid cash for the purchase of an asset before incurring the expense

43
Q

Unearned revenues

A

Received cash and recorded a liability before earning the revenue

44
Q

Accruals

A

The opposite of deferrals

-accused expenses and revenues

45
Q

Accured expenses

A

Paid cash after incurring the expense and recording a liability

46
Q

Acured revenues

A

Received cash after earnings the revenue and recording an asset

47
Q

Depreciation

A

Allocate the cost of a plant asset to expense over the assets useful life
-common type of long term deferral

Accounting Test 1 (1 decks)

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