Ch.1 Terms

Question 1

Accounting

Answer 1

The information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

Question 2

Managerial Accounting

Answer 2

The field of accounting that focuses on proving information for internal decision makers.

Question 3

Certified Public Accountants (CPA)

Answer 3

Licensed professional accountants who serve the general public.

Question 4

Chartered Global Management Accountants (CGMA)

Answer 4

Professional accountants with advanced knowledge of finance, operations, strategy, and management.

Question 5

Certified Management Accountants (CMA)

Answer 5

Professional accountants who specialize in accounting and financial management knowledge.

Question 6

Certified Financial Planners (CFP)

Answer 6

Certified professional who specializes in budgeting, planning for retirement, and managing finances.

Question 7

Financial Accounting Standards Board (FASB)

Answer 7

The private organization that oversees the creation and governance of accounting standards in the United States.

Question 8

Securities and Exchange Commission (SEC)

Answer 8

U.S. Governmental agency that oversees the U.S. financial market.

Question 9

Financial Accounting

Answer 9

The field of accounting that focuses on proving information for external decision makers.

Question 10

Creditors

Answer 10

A person or business to whom a business owes money.

Question 11

Generally Accepting Accounting Principles (GAAP)

Answer 11

Accounting guidelines, currently formulated by the Financial Accounting Standards Board (FASB); the main U.S. accounting rule book.

Question 12

Faithful Representation

Answer 12

Providing information that is complete, natural, and free of charge.

Question 13

Economic Entity Assumption

Answer 13

An organization that stands apart as a separate economic unit.

Question 14

Sole Proprietorship

Answer 14

A business with a single owner.

Question 15

Partnership

Answer 15

A business with two or more owners and not organized as a corporation.

Question 16

Limited-Liability Company (LLC)

Answer 16

A company in which each member is only liable for his or her own actions.

Question 17

Stockholders

Answer 17

A person who owns stock in a corporation.

Question 18

Cost Principle

Answer 18

A principle that states that acquired assets and services should be recorded at their actual cost.

Question 19

Going Concern Assumption

Answer 19

Assumes that the entity will remain in operation for the foreseeable future.

Question 20

Monetary Unit Assumption

Answer 20

The assumption that required the items on the financial statement to be measured in terms of a monetary unit.

Question 21

International Financial Reporting Standard (IFRS)

Answer 21

A set of global accounting guideline, formulated by the International Accounting Standards Board (IASB)

Question 22

International Accounting Standards Board (IASB)

Answer 22

The private organization that oversees the creation and governance of International Financial Reporting Standards (IFRS)

Question 23

Audit

Answer 23

An examination of a company’s financial statement and records.

Question 24

Sarbanes-Oxley Act (SOX)

Answer 24

Requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

Question 25

Public Company Accounting Oversight Board (PCAOB)

Answer 25

Monitors the word of independent accountants who audit public companies.

Question 26

Accounting Equation

Answer 26

The basic tool of accounting, measuring the resources of the business (what the business owns or has control of) and the claims to those resources (what the business owes to creditors and to the owners): Assets = Liabilities + Equity

Question 27

Assets

Answer 27

Economic resources that are expected to benefit the business in the future and something the business owns or has control of.

Question 28

Liabilities

Answer 28

Debts that are owed to creditors.

Question 29

Equity

Answer 29

The owners claims to the assets of the business.

Question 30

Contributed Capital

Answer 30

Owner contribution to a corporation.

Question 31

Common Stock

Answer 31

Represents the basic ownership of a corporation.

Question 32

Retained Earnings

Answer 32

Equity earned and profitable operations of a corporation that is not distributed to stockholders.

Question 33

Dividends

Answer 33

A distribution of a corporation's earning to stockholders.

Question 34

Revenues

Answer 34

Amounts earned from delivering goods or services to customers.

Question 35

Expenses

Answer 35

The costs of selling goods or services.

Question 36

New Income

Answer 36

The result of operations that occurs when total revenues are greater than total expenses.

Question 37

Net Loss

Answer 37

The result of operation that occurs when total expenses are greater than total revenues.

Question 38

Transaction

Answer 38

An event that affects the financial position of the business and can be measured with faithful representation.

Question 39

Account Payable

Answer 39

A short-term liability that will be paid in the future.

Question 40

Account Receivable

Answer 40

The right to receive cash in the future from customers for goods sold or for services performed.

Question 41

Financial Statements

Answer 41

Business documents that are used to communicate information needed to make business decisions.

Question 42

Income Statement

Answer 42

Reports the net income or net loss of a business for a specific period.

Question 43

Statement of Retained Earnings

Answer 43

Reports how the company's retained earnings balance changed form the beginning to the end of the period.

Question 44

Balance Sheet

Answer 44

Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.

Question 45

Statement of Cash Flow

Answer 45

Reports on a business's cash receipts and cash payment for a specific period.

Question 46

Return of Assets (ROA)

Answer 46

Measures how profitable a company uses its assets. Net income / Average total assets.

Question 47

Corporation

Answer 47

A business organized under state law that is a seperate legal entity.