Chapter 1

Question 1

What do External uses of accounting information use the accounting information for?

Answer 1

External user of accounting information use the information to make business decisions for themselves.

Question 2

What is the communicating portion of accounting?

Answer 2

The communicating portion of accounting is preparing reports and statements which we analyze and interpret.

Question 3

Define managerial accounting.

Answer 3

Managerial accounting is the area of the county that serve the decision-making needs of internal users.

Question 4

What is the identifying portion of accounting?

Give an example.

Answer 4

Identifying requires selecting relevant transactions and events.

Example: The amount of money brought in from the sale of an item.

Question 5

What are the four areas of accounting opportunities?

Answer 5

1. Financial
2. Managerial
3. Taxation
4. Accounting-Related

Question 6

Define the internal users of accounting information.

Answer 6

Internal users of accounting information are those who are directly involved in managing an operating in organization.

Question 7

What is the recording portion of accounting?

Answer 7

The recording portion of accounting is the chronological log of transactions and events measured in dollars.

Question 8

Define: Recordkeeping/Bookkeeping.

Answer 8

The recording or transactions and events either manually or electronically.

Question 10

Define external users of accounting information.

Answer 10

External users of accounting information are people who are not directly involved in running the organization.

Question 11

Define: Accounting

Answer 11

Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, a comparable information about an organizations business activities.

Question 11

What do internal users of accounting information use the accounting information for?

Answer 11

Internal users use the accounting information to make the company more efficient and effective.

Question 12

What are the three sides to the fraud triangle?

Answer 12

Opportunity, rationalization, financial pressure.

Question 13

Define GAAP.

Answer 13

GAAP is the generally excepted accounting practices, which aims to be sure that accounting information is reliable, relevant, and comparable.

Question 14

What is the SEC?

Answer 14

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

Question 15

What is the IASB?

Answer 15

The international accounting standards Board. It is a independent group that issues preferred accounting practices internationally

Question 16

Explain the measurement Principle (aka cost principle)

Answer 16

1. It prescribes that accounting information is based on actual cost.
2. Cost is measured on equal to cash basis.
3. If something besides cash is exchanged, cost is measured in a cash value.
4. Emphasizes reliability and verifiability.

Question 17

Explain the revenue recognition principle.

Answer 17

1. Provides guidance on when a company must record revenue.

Question 18

What are the three concepts of revenue recognition?

Answer 18

1. revenue must be recognized when earned (when transaction is fully complete).
2. Proceeds are not Always cash. (Credit sales)
3. Revenue is measured by cash received plus cash value of any other items received.

Question 19

Explain the full disclosure principle.

Answer 19

The full disclosure principal prescribes that a company must report the details behind financial statements that would impact and external or internal users decisions.

Question 20

Explain the expense Recognition or matching principle.

Answer 20

The expense recognition principle or matching principle prescribe that a company must record the expenses that it incurred to generate the revenue reported.

Question 21

What is the going concern assumption?

Answer 21

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.

Question 22

What is the monetary unit assumption?

Answer 22

The monetary unit assumption means that we could express transactions and events in monetary or money units.

Question 23

What is the time period Assumption?

Answer 23

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.

Question 24

What is the business entity assumption?

Answer 24

The business entity assumption means that a business is accounted for separately from other business entities including its owner.

Question 25

What are the characteristics of a sole proprietorship?

Answer 25

A sole proprietorship is owned by one person and the company and the owner are viewed as one person for tax and liability purposes. However the organization is viewed as separate from the owner for accounting purposes.

Question 26

What is a partnership?

Answer 26

Partnership is a business that is owned by two or more people. There is no legal requirement met to start a partnership. A partnership is not legally separate from his owners. Each partners share profits is reported on their own separate tax return.

Question 27

What is a limited partnership?

Answer 27

A limited partnership is a partnership with a mixture of partners with unlimited liability, and partners whose liability is limited to what they have invested.

Question 28

What is an LLP?

Answer 28

An LLP is a partnership that restricts partners liability to their own acts in the acts of the individuals under their control. Whatever both partners are responsible for partnership debts

Question 29

What is an LLC?

Answer 29

An LLC is a partnership where The company is liable for its own actions however the income is reported in the owner’s personal taxes.

Question 30

What is a C corporation.

Answer 30

A C corporation is a business legally separate from its stockholders/shareholders. It operates with its own rights, duties, and responsibilities. The corporations income is taxed and also any distribution of income to its owners through dividends is taxed as a part of the owners personal income

Question 31

What is an S Corporation?

Answer 31

And S corporation is a corporation, similar to a C corporation but it does not report corporate income with personal income.

Question 32

What is the materiality constraint?

Answer 32

The materiality constraint prescribes the only information that would influence the decisions of a reasonable person we need to be disclosed.

Question 33

What is the cost benefit constraint?

Answer 33

The cost-benefit contract describe the only information of the benefits of disclosure greater than the cost of providing it needs to be disclosed.

Question 34

What is SOX?

Answer 34

It is a congressional at past to help her financial abuses and companies that issue their stock to the public. It requires a public companies apply both accounting oversight and strange internal controls.

Question 35

What are assets?

Answer 35

Assets are what a company owns or controls.

Question 36

What are liabilities?

Answer 36

Liabilities are creditors claims when assets.

Question 37

What is equity?

Answer 37

Equity is the owners claim on assets and is equal to assets minus liabilities.