Chapter 1 Flashcards
What is accounting?
It is a information and measurement system that identifies, records, and communicates and organization’s business activities.
What is bookkeeping?
The recording of transactions and events. It is also analysis and interpretation of information.
What is an external user of accounting?
Users of accounting information that do not directly run the organization and have limited access to its accounting information.
What is an internal user of accounting information?
Directly manages the organzation. For example, human resource managers need information about employees payroll info.
What is the definition of data analysis?
is a process of analyzing data to identify meaningful relations and trends.
Definition of Data Visualization
is a graphical presentation of data to help people understand their significance.
What three factors influence a person to commit fraud?
- Opportunity: The ability to commit fraud with a low risk of getting caught.
- Pressure: A person must feel pressure to commit fraud.
- Rationalization: A person justifies fraud or does not see its criminal nature.
Financial accounting is governed by concepts and rules known as what?
Generally accepted accounting principles. (GAAP)
What two factors does the GAAP use to govern financial accounting?
Relevant information: affects decision of users.
Faithful representation means information accurately reflects the business results.
What is the FACB?
THE FASB is the financial accounting standard board. Independent group of full-time members responsible for setting accounting rules
What is the SEC? Securities and Exchange Commision
Is a U.S. government agency that gave the FASB its power. The power to make sure accounting firms and business use GAAP.
What are the rules or conceptual framework used by the FASB?
- Objectives (Goals) - to provide information useful to investors, credits and others.
- Qualitative characteristics - to require information that has relevance and faithful representation.
- Elements - to define items in financial statements.
- Measurement onmeasurement - to set criteria for an item to be recognized as dn element and how to measure it.
What are conceptual framework Objectives?
Provides useful information to investors, creditors and others.
What are conceptual framework Qualitative Characteristics?
information has relevance and faithful representation.
What are conceptual framework Elements?
Defines items in financial statements.
What are conceptual framework Recognition and Measurement?
Criteria for an item to be recognized as an element and how to measure it.
What are assets?
Are resources a company owns or controls. They are expects to yield FUTURE ECONOMIC BENEFITS.
What are some examples of assets?
Cash, Vehicles, Buildings, Factories, Land, Patents, Account Receivable, Prepaid Expenses, “On Credit”, “On account”
What is a liabilities?
________ are everything owed by a business to outsiders. Represent future sacrifice of economic benefits DEBT
What are examples of liabilities?
Note payable, interest payable, account payable, accrued bills
What is an equity?
Owners contribution to a business.
What examples of equity?
Retained earning, common stock, Expense, Revenue
What factors DECREASE equity?
Dividends and expenses.
What INCREASES
What is the accounting equation? What is the formal definition of accounting equation?
Assets = Liabilities + Equity
Refers to all transaction and events to all companies and all organization in any point in time.
What is an external transaction?
Are business events that involve the exchange of resources between a business and third parties.
What is an example of an external transaction?
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
What are internal transactions?
Financial activities that occur within a company, rather than with a third party.
Examples of a Internal transaction?
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
