Chapter 1

Question 1

Accounting

Answer 1

A system of providing ‘quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.’

Question 2

American Institute of Certified Public Accountants (AICPA)

Answer 2

The professional organization of certified public accountants in the United States.

Question 3

Balance Sheet

Answer 3

Document which reports the resources of a company (the assets), the company’s obligations (the liabilities), and the owners’ equity, which represents how much money has been invested in the company by its owners.

Question 4

Bookkeeping

Answer 4

The preservation of a systematic, quantitative record of an activity.

Question 5

Certified Public Accountant

Answer 5

A person who has taken a minimum number of college-level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his or her state.

Question 6

Financial Accounting

Answer 6

The name given to accounting information provided for and used by external users.

Question 7

Financial Statements

Answer 7

The three primary financial information documents: the balance sheet, income statement, and statement of cash flows.

Question 8

Income Statement

Answer 8

This document reports the amount of net income earned by a company during a period, with annual and quarterly income statements being the most common.

Question 9

Internal Revenue Service (IRS)

Answer 9

The government agency responsible for tax collection and tax law enforcement.

Question 10

International Accounting Standards Board (IASB)

Answer 10

An independent, international body formed to develop worldwide accounting standards.

Question 11

International Financial Reporting Standards (IFRS)

Answer 11

The accounting standards produced by the IASB.

Question 12

Managerial Accounting

Answer 12

The name given to accounting systems designed for internal users.

Question 13

Public Company Accounting Oversight Board (PCAOB)

Answer 13

A private, non-profit organization that effectively serves as an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly traded companies.

Question 14

Statement of Cash Flows

Answer 14

This document reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing.