Accounting 1: Program #2 - "Basic Accounting Concepts"

Question 1

Why accounting is so important?

Answer 1

cause we live in an information age, where that information, and its reliability, IMPACTS the financial WELL-BEING of us ALL.

Question 2

what is accounting?

Answer 2

is an INFORMATION and MEASUREMENT SYSTEM that :
IDENTIFIES-> RECORDS->COMMUNICATES information that
relevant, reliable, and comparable
->to help users make better decision.

Question 3

what is the language of business?

Answer 3

Accounting

Question 4

what is Net Income (NI)?

Answer 4

NI is a companny’s total earning or PROFIT

NI= revenues - cost (such as interest, taxs and other expense)

Question 5

take an example of accounting?

Answer 5

Free-throws report:
ACCOUNTING–is a system that–>
-> IDENTIFIES: hear the whistle blow, and it would identify that I need to record sth
->RECORD: after identify that sb was going to the line, I need to record it with a method.
->COMMUNICATES that to the coach.
–information that is–>
->RELEVANT: it needs to be in regards to the game that he’s concerned about.
->RELIABLE
->COMPARABLE: there has to be a RULE/ CONSISTENT METHOD that we are using to keep track of this stuff.

Question 6

who are the users of accounting?

Answer 6

• External usersthose who not work at the company

- Internal usersthose who works at the company

Question 7

What is IRS?

Answer 7

Internal Revenue Service

Question 8

whats is audit?

Answer 8

when you go in and you at the records of a company, and you verify it.
sometimes people think of an IRS audit

Question 9

what is a Controller?

Answer 9

The Controller is the Chief accounting individual.
he/she is in charge of all accounting.
=>they’re called Accounting Controller.

Question 10

GAAP?

Answer 10

Generally Accepted Accounting Principles.

rules of accounting that must be followed and this will help insure that the information remains RELEVANT, RELIABLE, AND COMPARABLE=> to be USEFUL

Question 11

Who sets GAAP?

Answer 11

Financial Accounting Stardard Board

we abbreviate that sometimes the FASB

Question 12

what is FASB?

Financial Accounting Stardard Board

Answer 12

This is the private group that sets the rules of accounting. They take input from alot different groups, such as SEC and IASB.

Question 13

what is the purpose of accounting?

Answer 13

identifies, records, communicates information that is relevant, reliable, and comparable to help users make better decisions.

Question 14

SEC?

Answer 14

Security and Exchange Commission:

is the government group that establishes reporting requirements for companies that issue stock to the public,

Question 15

IASB?

Answer 15

the Iinternational Accounting Standards Board:

issues IFRS

Question 16

IFRS?

Answer 16

International Financial Reporting Standards:
identify the preferred accounting for companies, mantain stablility and transparency (clarity) through out the financial world.

Question 17

what is the relation between accounting and recordkeeping?

Answer 17

recordkeeping is just one part of accounting.

• RECORDKEEPING: is the recording of transactions and events.
• ACCOUNTING: recordkeeping+ identifies and communicates information on transactions and events

Question 18

Identify some advantages of technology for accounting?

Answer 18

-technology reduces the time, effort and cost of recording while inproving the CLERICAL ACCURACY.

Question 19

Identify at least five types of managers who are internal users of accounting information.

Answer 19

• PURCHASING MANAGERS: need to know what, when and how much to purchase.
• HUMAN RESOURSE MANAGERS: need information about employee’s payroll, benefits, performance, and compensation.
• PRODUCTION MANAGERS: depend on information to monitor costs and ensure quality.
• RESEARCH AND DEVELOPMENT MANAGERS: need information about projected costs and revenues of any proposed changes in products and services.
• MARKETING MANAGERS: use reports about sales and costs to target consumers, set prices, and monitor consumer needs, tastes, and price concerns.
• DISTRIBUTION MANAGERS: need reports for timely, accurate, and efficient delivery of products and services.
• SEVICE MANAGERS: require information on the costs and benifits of looking after products and services.

Question 20

what are internal controls and why are they important?

Answer 20

• internal controls are procedures( course of action) set up to protect assets, ensure reliable accounting reports, promote efficiency, and encouraget
• they are important because they are crucial for relevant and reliable information.

Question 21

Why are ethics crucial in accounting?

Answer 21

For accounting to provide useful information for decisions. For information to be useful, it must be trusted. Trust require ethics in accounting.

Question 22

what are the 3 basic ways you can set up a business?

Answer 22

there are 3 main ways:
you can set it up
-as a proprietorship
-as a partnership
-as a corporation.

Question 23

what are the advantages and disadvantages about being a proprietorship?

Answer 23

• a business owned by one owner.
• good things:
• no special legal requirements must be met to start a proprietorship.
• proprietorship’s income is not subject to a business income tax but is instead reported and taxed on the owner’s personal income tax return.
• bummer: Unlimited Liability: it is not a separate legal entity from its owner.

Question 24

what are the advantages and disadvantages about being a partnership?

Answer 24

• a business owned by two or more people, called partners.
• good things:
• you would not pay taxes at business level, only at personal level.
• no special legal requirement must be met in starting a partership.
• bad things:
• not legally separate from its owners. (unlimited liability)

Question 25

what are the good things and bummer things about being a corporation?

Answer 25

• the nice thing about a corporation is that s corporation has what is called Limited Liability: A corporation is a business legally separate from its owners, meaning it is responsible for its own acts and its own debts. when something happens, they can come try to take the assets of the business, they can’t take owner’s personal assets. (corporate shild)
• bad things: double taxation:
• (1) the corporation income is taxed and
• (2) any distribution of income to its owners through dividends is taxed as part of the owner’s personal income.

Question 26

what is a great way to start a business?

Answer 26

LLC :A limited liability company
(LLC) offers the limited liability of a corporation and the tax treatment of a partnership
(and proprietorship)

Question 27

what does a corporation mean?

Answer 27

A corporation means you have gone through the paperwork, fees, and procedures to set it up as a SEPARATE LEGAL ENTITY.

Question 28

**(quiz) what is the accounting equation?

Answer 28

Assets = Liabilities + Equity

Question 29

what are assets?

Answer 29

these are the resources owned or controlled by a company:

• Cash
• Notes receivable: quite similar to AC but a little bit more formal and there is interest involves.(usually with bank)
• Accounts receivable: you’re going to receive cash in the future.
• Land
• Buildings
• Equipment
• Store supplies
• Vehicles

Question 30

what are Liabilities?

Answer 30

these are DEBT: these are the things that you have to pay in the future.

• accounts payable
• notes payable: such as student loans payable, and mortgage payable.
• taxes payable
• Wages payable or salaries payable

Question 31

What is Equity?

Answer 31

the owner’s investment in the company.

Question 32

(quiz)How does owner’s equity increase?

Answer 32

there’s two ways:

1. investments of assets by the owner INTO the business. (assets in)
2. Revenue: what you pay to the company’s product. kind of like INCOME.

Question 33

(quiz)How does owner’s equity decrease?

Answer 33

1. (assets out) withdrawals of assets by owner OUT OF the business.
   2 Expenses: gasoline expense, salary expense, advertising expense, etc.