Chapter 1

Question 1

What is accounting?

Answer 1

It is a information and measurement system that identifies, records, and communicates and organization’s business activities.

Question 2

What is bookkeeping?

Answer 2

The recording of transactions and events. It is also analysis and interpretation of information.

Question 3

What is an external user of accounting?

Answer 3

Users of accounting information that do not directly run the organization and have limited access to its accounting information.

Question 4

What is an internal user of accounting information?

Answer 4

Directly manages the organzation. For example, human resource managers need information about employees payroll info.

Question 5

What is the definition of data analysis?

Answer 5

is a process of analyzing data to identify meaningful relations and trends.

Question 6

Definition of Data Visualization

Answer 6

is a graphical presentation of data to help people understand their significance.

Question 7

What three factors influence a person to commit fraud?

Answer 7

1. Opportunity: The ability to commit fraud with a low risk of getting caught.
2. Pressure: A person must feel pressure to commit fraud.
3. Rationalization: A person justifies fraud or does not see its criminal nature.

Question 8

Financial accounting is governed by concepts and rules known as what?

Answer 8

Generally accepted accounting principles. (GAAP)

Question 9

What two factors does the GAAP use to govern financial accounting?

Answer 9

Relevant information: affects decision of users.
Faithful representation means information accurately reflects the business results.

Question 10

What is the FACB?

Answer 10

THE FASB is the financial accounting standard board. Independent group of full-time members responsible for setting accounting rules

Question 11

What is the SEC? Securities and Exchange Commision

Answer 11

Is a U.S. government agency that gave the FASB its power. The power to make sure accounting firms and business use GAAP.

Question 12

What are the rules or conceptual framework used by the FASB?

Answer 12

1. Objectives (Goals) - to provide information useful to investors, credits and others.
2. Qualitative characteristics - to require information that has relevance and faithful representation.
3. Elements - to define items in financial statements.
4. Measurement onmeasurement - to set criteria for an item to be recognized as dn element and how to measure it.

Question 13

What are conceptual framework Objectives?

Answer 13

Provides useful information to investors, creditors and others.

Question 14

What are conceptual framework Qualitative Characteristics?

Answer 14

information has relevance and faithful representation.

Question 15

What are conceptual framework Elements?

Answer 15

Defines items in financial statements.

Question 16

What are conceptual framework Recognition and Measurement?

Answer 16

Criteria for an item to be recognized as an element and how to measure it.

Question 17

What are assets?

Answer 17

Are resources a company owns or controls. They are expects to yield FUTURE ECONOMIC BENEFITS.

Question 18

What are some examples of assets?

Answer 18

Cash, Vehicles, Buildings, Factories, Land, Patents, Account Receivable, Prepaid Expenses, “On Credit”, “On account”

Question 19

What is a liabilities?

Answer 19

________ are everything owed by a business to outsiders. Represent future sacrifice of economic benefits DEBT

Question 20

What are examples of liabilities?

Answer 20

Note payable, interest payable, account payable, accrued bills

Question 21

What is an equity?

Answer 21

Owners contribution to a business.

Question 22

What examples of equity?

Answer 22

Retained earning, common stock, Expense, Revenue

Question 23

What factors DECREASE equity?

Answer 23

Dividends and expenses.

Question 24

What INCREASES

Question 25

What is the accounting equation? What is the formal definition of accounting equation?

Answer 25

Assets = Liabilities + Equity
Refers to all transaction and events to all companies and all organization in any point in time.

Question 26

What is an external transaction?

Answer 26

Are business events that involve the exchange of resources between a business and third parties.

Question 27

What is an example of an external transaction?

Answer 27

involve purchase of goods from suppliers, sale of goods to consumers, purchase of fixed assets for business use, payment of rent to owner, payment of gas, electricity or water bills, payment of salary to staff

Question 28

What are internal transactions?

Answer 28

Financial activities that occur within a company, rather than with a third party.

Question 29

Examples of a Internal transaction?

Answer 29

Recording depreciation on a fixed asset
Recording the loss of merchandise by fire
The use of supplies, such as packaging tape, papers, and boxes
An employee receiving their salary
A department giving office supplies to another department