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Tyler K. > Accounting 2110 > Flashcards

Accounting 2110 Flashcards

1
Q

Two fundamental characteristics of useful information

A

Relevance- Is the info capable of making a difference by helping users predict, providing feedback, or influencing a decision? (predictive value, confirmatory value, or material)
Faithful Representation- complete, neutral, and free from error

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2
Q

Info should have 4 enhancing characteristics:

A

Comparability
Verifiability
Timeliness
Understandability

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3
Q

Cost Constraint Definition

A

Benefit received from accounting info should be greater than the cost of providing that info
If cost doesn’t exceed benefit = not useful
If cost of obtaining info is a constraint and results in excessive costs, entity is allowed to avoid reporting that info

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4
Q

4 basic assumptions of Accounting

A

Economic Entity
Going Concern
Time Period
Monetary Unit

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5
Q

Economic Entity Assumption

A

Each company is accounted for separately from owners

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6
Q

Going Concern Assumption

A

Assumes that a company will continue to operate long enough to carry out existing commitments

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7
Q

Time Period Assumption

A

Allows the life of a company to be divided into artificial time periods sp that net income can be measures for specific need (monthly, quarterly, annually)

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8
Q

Monetary Unit Assumption

A

Requires a company to account for and report its financial results in monetary terms, such as US dollars or Japanese Yen

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9
Q

4 Basic Principles of Accounting

A

Historical Cost
Revenue Recognition
Expense Recognition
Conservatism

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10
Q

Historical Cost Principle

A

Requires company activities to be initially measured at cost- the exchange price at the time off the activity

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11
Q

Revenue Recognition Principle

A

Used to determine when revenue is recorded and reported, usually occurs when services are performed or goods are delivered. Collection of cat is reasonably assured

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12
Q

Expense Recognition Principle

A

Requires that expenses are reported and recorded in the same period as the revenue that it helped generate
AKA Matching Principle
May or may not be the same period that cash is exchanged

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13
Q

Conservatism Principle

A

States that accountant s should take care to avoid overstating assets or incomes when they prepare financial statements

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14
Q

Accounting Transaction

A

Any economic event that affects a comoamnys assets liabilities, or equity at tevent time

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15
Q

Account

A

Accounting record that accumulates the activity of a specific item and yields the items balance

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16
Q

Chart of Accounts

A

List of accounts the company uses

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17
Q

Events

A

Things that much be recorded in financial statements

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18
Q

Internbal vs External Events

A

Internal- Occurs within company, Transaction iF it results in a financial impact that you can measure with reasonable accuracy
External - Between company and outside party, involving change of assets, liabilities, equity
Must be recorded

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19
Q

Transaction Analysis (Definition + 3 steps)

A

Process of determining the economic effects of a transaction.
1. Write down accounting equation
2. Identify financial statements elements that are affected by transaction
3. Determine whether the elements increased or decrease

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20
Q

Double Entry Accounting

A

Describes the system used by companies to record the effects of transactions on the accounting equation

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21
Q

Debit/Credit Procedures

A
  1. Draw a T-Account and label each side as either debit or credit (right- credit. left- debit.)
  2. Determine the normal balance of an account. All counts have a normal balance
  3. Increases or decreases to an account are based on the normal balance of the account.
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22
Q

Double entry system requires debit and credit to _______

A

Always balance

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23
Q

Balance of T-account is determined by _____

A

excess

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24
Q

Basic accounting equation gives us our ____

A

“normal balances”

25
Q

Journal Definition

A

Chronological record showing the debit and credit effects of transactions on a company

26
Q

3 parts of a Journal Entry

A
  1. Transaction Date
  2. Accounts and amounts to be increased/decreased
  3. Brief explanation of the Transaction
27
Q

General Ledger

A

Collection of all the individual financial statement accounts that a company uses

28
Q

Posting definition

A

Process of transferring the info from journalized transaction to the general ledger

29
Q

Trial Balance

A

List of all active accounts and each accounts debit or credit balance. Appear in order of which they appear on ledger. (Assets, liabilities, stockholder’s equity, revenues, expenses)

30
Q

Sole Proprietorships

A

One person bears all risks and rewards of ownership
70% of all businesses

31
Q

Partnerships

A

Owned by 2+ people
Small businesses + many professional practices

32
Q

Corporations

A

Separate legal entity owned by stockholders
Organized under laws of state
Private vs Public

33
Q

Financing Activities

A

Borrow/acquire funds to begin and operate business
* Borrowing money or acquiring funds from owners
* Bank loan
* Debt security (bond)
* Selling shares of stock

34
Q

Investing Activities

A

Asset/resource acquisition to enable a business to operate
* Acquiring property and equipment to operate
* Acquiring other businesses

35
Q

Operating Activities

A

Day to day activities
* Revenue from sales/services
* Expenses (or costs) associated with earnings and revenue

36
Q

Assets

A

Resources that will provide a future benefit
* Examples: cash, accounts receivable, inventory, investments, equipment
Assets = Liabilities + Stockholders Equity

37
Q

Liabilities

A

Liabilities: obligations requiring future sacrifice of a resource
* Examples: accounts payable, notes payable, taxes payable,

38
Q

Equity

A

Difference between assets and liabilities—represents share of
assets claimed by the owner

39
Q

Contributed Capital

A

Resources exchanged for ownership interest

40
Q

Retained Earnings

A

Profits earned and retained in the business

41
Q

Dividends

A

Portion of profits distributed to owners

42
Q

Revenue

A

Increase in assets due to sales of goods/services

43
Q

Expenses

A

Cost of assets consumed or liabilities created due to sale of
goods/services

44
Q

4 Basic Financial Statements

A

Income Statement
Balance Sheet
Retained Earnings Statement
Statement of Cash Flow

45
Q

Income Statement

A

Revenues/Expenses
Success of operations over time period

46
Q

Balance Sheet

A

Assets = Liabilities + Stockholder’s Equity
Snapshot at a point in time

47
Q

Retained Earnings Statement

A

Net Income/Net Loss
Dividends and Net Income over time period

48
Q

Statement of Cash Flows

A

Uses and sources cash over time period
Shown by activity

49
Q

Examples of Current Assets

A

Cash, Accounts Receivable, Inventories

50
Q

Examples of Long Term Assets

A

Equipment, Land

51
Q

Examples of Intangible Assets

A

Patents, Copyrights

52
Q

Examples of Current Liabilities

A

Accounts Payable, Salaries Payable

53
Q

Examples of Long-Term Liabilities

A

Notes Payable, Bonds Payable

54
Q

Liquidity

A

The ability to pay obligations as they become due

55
Q

Working Capital

A

Signals that a company has adequate funds with which to pay its current obligations and is expressed in $ amounts
* Working Capital = Current Assets – Current Liabilities

56
Q

Current Ratio

A

Alternate measure of liquidity that allows comparisons to
be made between different companies
* Current Ratio = Current Assets / Current Liabilities

57
Q

Net Profit Margin

A

The percentage of profit in each $ of sales
* Net Profit Margin = Net Income / Sales Revenue

58
Q

DEAD CRLS

A

Debit Expenses, Assets, Dividends
Credit Revenues, Liabilities, Stockholders Equity

Tyler K. (15 decks)

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