Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Accounting > Ch 1 > Flashcards

Ch 1 Flashcards

0
Q

Business entity

A

Organization operated to earn a profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

Business

A

All activities necessary to provide members of economic system
With goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sole proprietorship

A

Form of organization with single owner

Note: business’s profits are taxed on individual’s returns

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Economic entity concept

A

Assumption that a single identifiable unit must be
accounted for in all situations
Ex. Owner must separate personal costs with costs associated with business
- financial statements must not overlap personal affairs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Partnership

A

Business owned by two or more individuals
Organization form often used by accounting and law firms

Note: individual partners pay taxes on their proportionate shares of business’s profits as partnership is not a taxable entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Corporation

A

Form of entity organized under laws of particular state

Ownership evidenced by shares of stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Share of stock

A

Certificate that acts as evidence of ownership of corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Primary advantage of running organization as corporation?

A

Ability to raise large amounts of money in relatively brief periods of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Bonds

A

Certificate that represents corporations promise to repay certain amount of money with interest in future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Describe ease in transfer of ownership In corporation

A

Another advantage, where a stockholder can sell shares through his brokerage instantly

Stockholders face limited liability and
can only lose amount invested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Non business entity

A

Organization operated for some purpose other than to earn profits
Ex. Hospitals, municipal government, local school districts

Note: none of these entities have an identifiable owner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Businesses engage in which three types of activities?

A

Financing, investing and operating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Financing

A

Necessary to start a business

Funds are obtained from stockholders and creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Investment

A

Used for various assets needed to run a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Business operations

A

May consist of providing goods or services or both

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Liability

A

Obligation of a business
Ex. Notes payable, bonds payable, taxes payable

Liabilities are satisfied by transferring assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Capital stock

A

Indicates owner’s contributions to a corporation

Someone who buys stock isn’t lending money to a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Stockholder/shareholder

A

One of the owners of the corporation

Provides permanent form of financing to business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Creditor/Lender

A

Someone to whom a company or person has a debt

Doesn’t provide a permanent form of financing to the business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Asset

A

Future economic benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Revenue

A

Inflow of assets resulting from sale of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Expense

A

Outflow of assets resulting from sale if goods and services

22
Q

Accounting

A

Process of identifying, measuring and communicating economic info to various users

23
Q

List four examples of product companies

A

Suppliers, manufacturers, wholesalers, retailers

24
Q

Management accounting

A

Branch of accounting used to provide
internal users (management) with info to facilitate
Planning and control

25
Q

Financial accounting

A

Branch of accounting used for communication with outsiders/external users through financial statements

26
Q

Who are internal users of financial statements?

A

Managers of company

27
Q

External users of financial statements?

A

Stockholders, investors, creditors and government agencies

28
Q

Accounting equation

A

Assets = liabilities + owner’s equity

29
Q

Owners’ equity

A

Owner’s claims on assets of an entity

30
Q

Stockholders’ equity

A

Owners’ equity of corporation

31
Q

2 ways stockholders’ equity arises.

A

1 when company issues shares to investors

2 through retained earnings of a company

32
Q

Retained earnings

A

The part of owners equity that represents
The income earned less dividends paid
Over life of an entity

33
Q

Balance sheet (sometimes called the statement of financial position)

A

Financial statement that summarizes assets, liabilities and owners equity of company at specific point in time

Assets need to equal liabilities + owners equity

34
Q

Income Statement AKA statement of income

A

Statement that summarizes revenues and expenses

35
Q

Net income

A

Excess of revenues over expenses

36
Q

Dividends

A

Distribution of net income of a business to its owners

37
Q

Statement of retained earnings

A

Statement that summarizes income earned and dividends
Paid over the life of the business

Beginning balance. Xxx
Add net income for period. Xxx
Deduct dividends for period. Xxx
Ending balance. Xxx

38
Q

Statement of cashflow

A

Financial statement that summarizes company’s cash receipts
And cash payments during period from operating, investing
And financing activities

Shows reader where company got cash during year
and how it used that cash

39
Q

Economic entity concept

A

Requires that an identifiable, specific entity be the subject
Of a set of financial statements

Ex. Keep business separate from personal affairs

40
Q

Cost Principle AKA Original cost/historical cost

A

Assets are recorded at cost to acquire them

41
Q

Going concern

A

Assumption that entity is not in process of liquidation

And that it will continue indefinitely

42
Q

Monetary unit

A

Yardstick used to measure amounts in financial statements
The dollar in the US

Note: financial statements are prepared under the assumption that monetary unit is relatively stable

43
Q

Time period

A

Artificial segment on calendar used as basis for preparing financial statements

44
Q

Generally Accepted Accounting Principles (GAAP)

A

Various methods, rules, practices and other procedures
That have evolved over time in response to need to regulate
Preparation of financial statements

45
Q

Securities and Exchange Commission (SEC)

A

Federal agency with ultimate authority
To determine rules for preparing statements for
Publicly sold companies

46
Q

Financial Accounting Standards Board (FASB)

A

Group in private sector with

Authority to set accounting standards

47
Q

American Institute of Certified Public Accountants (AICPA)

A

Professional organization of certified public accountants

48
Q

Certified Public Accountant (CPA)

A

Designation for an individual who has passed a uniform exam
Administered by the AICPA and has met other requirements
Determined in individual states

49
Q

Public Company Accounting Oversight Board (PCAOB)

A

Five member body created by congress in 2002

Sets auditing standards

50
Q

International Accounting Standards Board (IASB)

A

Organization formed to develop worldwide accounting standards

51
Q

Auditing

A

Process of examining financial statements
and underlying records of company to
See if statements are fairly presented

52
Q

Sarbanes Oxley Act passed by congress 2002

A

Brought reform to corporate accountability in face of
Many corporate scandles

1 established Public Company Accounting Oversight Board
2 requires external auditors to report directly to audit committee
3 prohibits other services from external auditors that create
conflict of interest

53
Q

Explain the critical role that ethics plays in providing useful financial info

A

All decision makers must consider moral
and social implications of their decisions

Professional judgement is need when there are conflicts
To arrive at appropriate decisions In application of GAAP

Financial Accounting (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions