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Financial Accounting > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is an information & measurement system that identifies, records, & communicates relevant information about a company’s business activities?

A

ACCOUNTING

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2
Q

What is the accounting or balance sheet equation?

A

ASSETS = LIABILITIES + EQUITY

Must always balance on both sides of the ‘=’

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3
Q

What are the resources a business owns or controls that are expected to provide current and future benefits to the business?

A

ASSETS

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4
Q

Who are the individuals hired to review financial reports & information systems?

A

AUDITORS

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5
Q

Which financial statement lists the types and dollar amounts of assets, liabilities, & equity at a specific date?

A

BALANCE SHEET

Assets Liabilities
Stockholders’ Equity
Common Stock
Retained Earnings

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6
Q

The part of accounting that involves recording transactions & events, either manually or electronically.

A

BOOKKEEPING or RECORDKEEPING

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7
Q

The principle that requires a business to be accounted for separately from its owner(s) and from any other entity.

A

BUSINESS ENTITY ASSUMPTION

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8
Q

What is a corporation’s basic ownership share called?

A

COMMON STOCK or CAPITAL STOCK

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9
Q

The _____________ ________________ is a set of basic concepts that underlie the preparation and presentation of financial statements for external users. It can serve as a guide for developing future standards & to resolve accounting issues that are not addressed directly in current standards using the definitions, recognition criteria, and measurement concepts for assets, liabilities, revenues & expenses.

A

CONCEPTUAL FRAMEWORK

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10
Q

The total amount of cash & other assets received from stockholders in exchange for stock.

A

CONTRIBUTED CAPITAL or PAID-IN CAPITAL

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11
Q

A business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders.

A

CORPORATION

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12
Q

The notion that the benefit of a disclosure exceeds the cost of that disclosure.

A

COST-BENEFIT CONSTRAINT

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13
Q

Accounting principle that prescribes financial statement information be based on actual costs incurred in business transactions.

A

COST PRINCIPLE

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14
Q

A corporation’s distributions of assets to its owners.

A

DIVIDENDS

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15
Q

The Act that:

  1. promots accountability & transparency in the financial system;
  2. put an end to the notion of ‘too big to fail’;
  3. protects taxpayers by ending bailouts; &
  4. protects consumers from abusive financial services.
A

DODD-FRANK WALL STREET REFORM & CONSUMER PROTECTION ACT

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16
Q

An owner’s claim on the assets of a business; equals the residual interest in an entity’s assets after deducting liabilities.

A

EQUITY or NET ASSETS

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17
Q

Codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest.

A

ETHICS

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18
Q

Happenings that both affect an organization’s financial position and can be reliably measured.

A

EVENTS

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19
Q

What is the expanded accounting equation for a non-corporation?

A

ASSETS = LIABILITIES + [OWNER CAPITAL - OWNER WITHDRAWALS + REVENUES - EXPENSES]
* [equity]

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20
Q

What is the expanded accounting equation for a corporation?

A

ASSETS = LIABILITIES + [CONTRIBUTED CAPITAL + RETAINED EARNINGS + REVENUES - EXPENSES] for a corporation where dividends are subtracted from retained earnings
* [equity]

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21
Q

Outflows or using up of assets as part of operations of a business to generate sales.

A

EXPENSES

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22
Q

Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

A

EXPENSE RECOGNITION PRINCIPLE or MATCHING PRINCIPLE

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23
Q

Exchanges of economic value between one entity and another entity.

A

EXTERNAL TRANSACTIONS

24
Q

Persons using accounting information who are not directly involved in running the organization.

A

EXTERNAL USERS

25
Q

Area of accounting aimed mainly at serving external users.

A

FINANCIAL ACCOUNTING

26
Q

Independent group of full-time members responsible for setting accounting rules.

A

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB)

27
Q

Principle that prescribes financial statements (including notes) to report all relevant information about an entity’s operations and financial condition.

A

FULL DISCLOSURE PRINCIPLE

28
Q

Rules that specify acceptable accounting practices.

A

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

29
Q

Principle that prescribes financial statements to reflect the assumption that the business will continue operating.

A

GOING-CONCERN ASSUMPTION

30
Q

Financial statement that subtracts expenses from revenues to yield a net income or loss over a specified period of time; also includes any gains or losses.

A

INCOME STATEMENT

Revenues
- Expenses
= Net Income (Loss)

31
Q

Amount earned after subtracting all expenses necessary for and matched with sales for a period.

A

INCOME or NET INCOME or PROFIT or EARNINGS

32
Q

Activities within an organization that can affect the accounting equation.

A

INTERNAL TRANSACTIONS

33
Q

Persons using accounting information who are directly involved in managing the organization.

A

INTERNAL USERS

34
Q

Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS)

A

INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB)

35
Q

Set of international accounting standards explaining how types of transactions and events are reported in financial statements; IFRS are issued by the IASB

A

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

36
Q

Creditors’ claims on an organization’s assets; involves a probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events.

A

LIABILITIES

37
Q

Area of accounting aimed mainly at serving the decision-making needs of internal users

A

MANAGERIAL ACCOUNTING or MANAGEMENT ACCOUNTING

38
Q

Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP.

A

MATERIALITY CONSTRAINT

39
Q

Principle that prescribes financial statement information and its underlying transactions and events be based on relevant measures of valuation.

A

MEASUREMENT PRINCIPLE or COST PRINCIPLE

40
Q

Principle that assumes transactions and events can be expressed in monetary units.

A

MONETARY UNIT ASSUMPTION

41
Q

Excess of expenses over revenues for a period.

A

NET LOSS

42
Q

Unincorporated association of two or more persons to pursue a business for profit as co-owners.

A

PARTNERSHIP

43
Q

Business owned by one person that is not organized as a corporation.

A

PROPRIETORSHIP or SOLE PROPRIETORSHIP

44
Q

Cumulative income less cumulative losses & dividends.

A

RETAINED EARNINGS

45
Q

Monies received from an investment; often in percent form.

A

RETURN

46
Q

Ratio reflecting operating efficiency. defined as net income / average total assets

A

RETURN ON TOTAL ASSETS or RETURN ON INVESTMENT

47
Q

The principle prescribing that revenue is recognized when earned.

A

REVENUE RECOGNITION PRINCIPLE

48
Q

Gross increase in equity from a company’s business activities that earn income.

A

REVENUES or SALES

49
Q

Uncertainty about an expected return.

A

RISK

50
Q

Corporation that meets special tax qualifications so as to be treated like a partnership for tax purposes.

A

S-CORPORATION

51
Q

Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting & control disclosures, impacts insider transactions & executive loans, establishes new types of criminal conduct, & expands penalties for violations of federal securities laws.

A

SARBANES-OXLEY ACT (SOX)

52
Q

Owners of a corporation

A

SHAREHOLDERS or STOCKHOLDERS

53
Q

Equity of a corporation divided into ownership units.

A

SHARES or STOCK

54
Q

A financial statement that lists cash inflows (receipts) and outflows (payments) during a period; arranged by operating, investing & financing

A

STATEMENT OF CASH FLOWS

55
Q

Report of changes in retained earnings over a period; adjusted for increases (net income), for decreases (dividends & net loss), and for any prior period adjustment.

A

STATEMENT OF RETAINED EARNINGS

56
Q

Assumption that an organization’s activities can be divided into specific time periods such as months, quarters or years.

A

TIME PERIOD ASSUMPTION

Financial Accounting (12 decks)

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