Chapter 1 Flashcards
What do External uses of accounting information use the accounting information for?
External user of accounting information use the information to make business decisions for themselves.
What is the communicating portion of accounting?
The communicating portion of accounting is preparing reports and statements which we analyze and interpret.
Define managerial accounting.
Managerial accounting is the area of the county that serve the decision-making needs of internal users.
What is the identifying portion of accounting?
Give an example.
Identifying requires selecting relevant transactions and events.
Example: The amount of money brought in from the sale of an item.
What are the four areas of accounting opportunities?
- Financial
- Managerial
- Taxation
- Accounting-Related
Define the internal users of accounting information.
Internal users of accounting information are those who are directly involved in managing an operating in organization.
What is the recording portion of accounting?
The recording portion of accounting is the chronological log of transactions and events measured in dollars.
Define: Recordkeeping/Bookkeeping.
The recording or transactions and events either manually or electronically.
Define external users of accounting information.
External users of accounting information are people who are not directly involved in running the organization.
Define: Accounting
Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, a comparable information about an organizations business activities.
What do internal users of accounting information use the accounting information for?
Internal users use the accounting information to make the company more efficient and effective.
What are the three sides to the fraud triangle?
Opportunity, rationalization, financial pressure.
Define GAAP.
GAAP is the generally excepted accounting practices, which aims to be sure that accounting information is reliable, relevant, and comparable.
What is the SEC?
The SEC is the securities and exchange commission. They are government agency that has legal authority to set G A A P. They also receive proper use of GAAP in companies that issue stock in the US exchanges
What is the IASB?
The international accounting standards Board. It is a independent group that issues preferred accounting practices internationally
Explain the measurement Principle (aka cost principle)
- It prescribes that accounting information is based on actual cost.
- Cost is measured on equal to cash basis.
- If something besides cash is exchanged, cost is measured in a cash value.
- Emphasizes reliability and verifiability.
Explain the revenue recognition principle.
- Provides guidance on when a company must record revenue.
What are the three concepts of revenue recognition?
- revenue must be recognized when earned (when transaction is fully complete).
- Proceeds are not Always cash. (Credit sales)
- Revenue is measured by cash received plus cash value of any other items received.
Explain the full disclosure principle.
The full disclosure principal prescribes that a company must report the details behind financial statements that would impact and external or internal users decisions.
Explain the expense Recognition or matching principle.
The expense recognition principle or matching principle prescribe that a company must record the expenses that it incurred to generate the revenue reported.
What is the going concern assumption?
Going to consign assumption assumes that the financial information that is being reported is reported as such as the business will continue operating instead of being closed or sold.
What is the monetary unit assumption?
The monetary unit assumption means that we could express transactions and events in monetary or money units.
What is the time period Assumption?
The Time Period Assumption presumes that a company can be divided into time periods such as months and years. Therefore useful reports can be prepared for those periods.
What is the business entity assumption?
The business entity assumption means that a business is accounted for separately from other business entities including its owner.
