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Accounting 1 > Chapter 1+2 > Flashcards

Chapter 1+2 Flashcards

overview of audit reports the accounting equation fundemental elements of financial statements anoverview of accounting standard setting - four basic financial statements - assumptions of reporting model

1
Q

Who is financial accounting made to report to?

A

external users (investors, creditors, suppliers, customers, etc.)

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2
Q

Who is managerial accounting made to report to?

A

Management

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3
Q

Who is tax accounting made to report to?

A

tax authorities, IRS

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4
Q

What does FASB stand for?

A

Financial accounting standards board

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5
Q

The typical annual report consists of what

A

four basic financial statements + Notes + Audit opinion

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6
Q

what are the four basic financial statements in an annual report

A

balance sheet, income statement, statement of cash flow, statement of shareholders equity.

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7
Q

What does the balance sheet communicate?

A

reports the entity’s assets, liabilities, and stockholder’/s equity at a point in time (snapshot)

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8
Q

What does the income statement communicate

A

reports the revenues less the expenses of the accounting period (flow concept)

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9
Q

What does the statement of Cash flow communicate

A

reports inflows and outflows of cash during the accounting period

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10
Q

what does the statement of shareholders’ equity communicate

A

reports changes in stockholders’ equity accounts during the accounting period

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11
Q

what is cash base accounting based on?

A

revenue or expense is recognized based on cash flow

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12
Q

what is accrual accounting based on?

A

revenue or expense is recognized based on whether its earned or incurred

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13
Q

T or F? Over the long term, cash based accounting = accrual based accounting?

A

T

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14
Q

What are the 4 types of audit opinion?

A

unqualified opinion, qualified opinion, adverse opinion, disclaimer of opinion

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15
Q

What is the accounting equation used for the balance sheet?

A

assets = liabilities + shareholders’ equity

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16
Q

What does assets represent in how management treated the source?

A

assets represent investments that management has made

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17
Q

what does liabilities and shareholders’ equity represent in how management is treating that source?

A

liabilities and equity inform us how management paid for those assets

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18
Q

What is the definition of an asset?

A

resources that have probable future economic benefits

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19
Q

what is the definition of a liability?

A

probable future sacrifices for economic benefit

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20
Q

what is the definition of a shareholders’ equity?

A

stockholders residual interest in the firm

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21
Q

what are the two sources of financial resources to a business (from liabilities and equity side of things)

A

creditors, and stockholders

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22
Q

what is the potential return for creditors when they invest?

A

interest

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23
Q

what is the potential return for stockholders when they invest?

A

dividends and higher returned stock prices

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24
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. Cash

A

asset

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25
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. short-term investments

A

asset

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26
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. accounts receivable

A

asset

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27
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. notes receivable

A

asset

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28
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. inventory

A

asset

29
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. supplies

A

assets

30
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. prepaid expenses

A

assets

31
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. long term investments

A

assets

32
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. equiptment

A

assets

33
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. buildings

A

asset

34
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. land

A

asset

35
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. intangables (faculty members)

A

asset

36
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. accounts payable

A

liabilities

37
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. accrued expenses

A

liabilities

38
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. notes payable

A

liabilities

39
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. taxes payable

A

liabilities

40
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. unearned revenue

A

liabilities

41
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. bonds payable

A

liabilities

42
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. common stock

A

stockholders’ equity

43
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. retained earnings

A

stockholders equity

44
Q

Balance sheet elements, is it Asset, liability, or a stockholders’ equity. additional paid-in capital

A

stockholders’ equity

45
Q

What is the equation for the income statement

A

revenue - expenses = net income

46
Q

what does the income statement show?

A

what value company operations have generated over the year

47
Q

what is revenue

A

inflow of assets

48
Q

what is expenses?

A

outflow of assets

49
Q

income statement elements, is it a revenue or an expense? sales revenue

A

revenue

50
Q

income statement elements, is it a revenue or an expense? fee revenue

A

revenue

51
Q

income statement elements, is it a revenue or an expense? interest revenue

A

revenue

52
Q

income statement elements, is it a revenue or an expense? rent revenue

A

revenue

53
Q

income statement elements, is it a revenue or an expense? cost of goods sold

A

expenses

54
Q

income statement elements, is it a revenue or an expense? wages expense

A

expense

55
Q

income statement elements, is it a revenue or an expense? rent expense

A

expense

56
Q

income statement elements, is it a revenue or an expense? depreciation expense

A

expense

57
Q

what is revenue in an income statement

A

cash and promises from delivery of goods and services

58
Q

what is expenses in an income statement

A

resources used to earn periods revenue

59
Q

what does the statement of cash flow tell?

A

shows what cash operations the company has generated or used over the year

60
Q

what is the equation for the statement of cash flow

A

operating CF + investing CF + financing CF

61
Q

what does GAAP stand for?

A

generally accepted accounting principles

62
Q

what is the GAAP

A

a set of rules that guides how companies should present financial information to external users in the US

63
Q

What does IFRS stand for?

A

international financial reporting standards

64
Q

what does the IFRS do

A

used by numerous countries abroad to do what the GAAP does

65
Q

what are the 4 assumptions of the reporting model

A

separate entity, periodicity, going concern, and monetary assumption

66
Q

what does the separate entity assumption talk about

A

assuming that the company is only reporting on their finances, and not a partners.

67
Q

what does the periodicity assumption talk about

A

there is a constant time period that they are measuring throughout the report

68
Q

what does the going concern assumption talk about

A

that business will continue in the foreseeable future

69
Q

what does the monetary unit assumption talk about

A

that the financial numbers are reported in a singular unit.

Accounting 1 (1 decks)

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