Chapter 1 Flashcards
What is a system of maintaining records of a company’s operations and communicating that information to decision makers?
Accounting
Which type of accounting provides information for internal users?
Managerial Accounting
Which type of accounting provides information for external users?
Financial Accounting
What are the two primary functionals of financial accounting?
Measure and Communicate
What is the Accounting Equation?
Assets = Liabilities + Stockholders’ Equity
What is the equation to find net income?
Revenue - Expenses
What is another name for net income?
Profit
What is the distribution of profit to stockholders?
Dividends
The resources of a company are referred to as:
a. Liabilities
b. Revenues
c. Assets
d. Expenses
c. Assets
The amounts recorded when the company sells products or provides services to customers are referred to as:
a. Liabilities
b. Revenues
c. Assets
d. Expenses
b. Revenues
What is a business owned by one person called?
A Sole Proprietorship
What is a business is owned by two or more people called?
A Partnership
What is a business that is legally separate from its owners called?
A Corporation
What are transactions the company has with investors and creditors called?
Financial activities
What are transactions involving the purchase and sale of resources that provide benefit for several years?
Investing activities
What are transactions that relate to the primary operations of the company called?
Operating activities
Give an example of a financial activity
Borrowing money from the bank
Give and example of a investing activity
Buying a building
Fill in the Blank:
________ activities are anything that deals with revenue and expenses
Operating activities
Classify the type of activity as financing, investing, or operating.
- Borrow from the bank
- Provide services to customers
- Issue common stock to investors
- Purchase land
- Pay rent for the current period
- Purchase building
- Financing
- Operating
- Financing
- Investing
- Operating
- Investing
What accounts do you find on an Income Statement?
Revenues and Expenses
What is the equation to find Stockholders’ Equity?
Common Stock + Retained Earnings
What is the equation to find Retained Earnings?
Revenue - Expenses - Dividends
What is the money that is retained in the company called?
Retained Earnings
What accounts do you find on a Statement of Stockholders’ Equity?
Common Stock, Retained Earnings, Total Stockholders’ Equity, Dividends, and Net Income
What are the rows in the Statement of Stockholders’ Equity
- Beginning Balance
- Issuance of Common Stock
- Add: Net Income
- Less: Dividends
- Ending Balance
What accounts do you find on a Balance Sheet?
Assets, Liabilities, and Stockholders’ Equity
What are written loans that you actually sign?
Notes Payable
Which of the following accounts would appear in a company’s income statement?
a. Accounts Payable
b. Cash
c. Dividends
d. Rent Expense
d. Rent Expense
Which relationship is reflected in the balance sheet?
a. Revenues − Expenses = Net income
b. Assets = Liabilities + Stockholders’ Equity
c. Assets − Liabilities = Net Income
d. Assets = Revenues + Dividends
b. Assets = Liabilities + Stockholders’ Equity
What are cash transactions involving revenues and expenses called?
Operating cash flows
What are cash transactions involving purchase and sale of long-term assets called?
Investing cash flows
What are cash transactions involving lenders and stockholders called?
Financing cash flows
The cash collected from a customer would be recorded as which type of activity in the Statement of Cash Flows?
a. Operating Activity
b. Business Activity
c. Investing Activity
d. Financing Activities
a. Operating Activity
What is the tool to remember the order of cash flow and what does it stand for?
Oh IF only
- Operating activity
- Investing activity
- Financing activity
List the order of the financial statements
- Income Statement
- Statement of Stockholders’ Equity
- Balance Sheet
What are the rules of financial accounting called?
The GAAP standards
What does GAAP stand for?
Generally Accepted Accounting Principles
Who established GAAP?
The FASB
What does the FASB stand for?
The Financial Accounting Standards Board
Who is the FASB governed by?
The SEC
What does the SEC stand for?
The Security and Exchange Commission
Who are trained individuals hired by a company as an independent party to express a professional opinion of the extent to which financial statements are prepared in accordance with GAAP?
Auditors
Economic resources are:
a. Assets
b. Liabilities
c. Stockholders’ Equity
d. Both B and C
a. Assets
Claims to resources are:
a. Assets
b. Liabilities
c. Stockholders’ Equity
d. Both B and C
d. Both B and C
Auditors are independent parties that help:
a. To establish accounting rules in the U.S.
b. To ensure management has appropriately prepared the company’s financial statements
c. Investors and creditors in their decisions by adding credibility to the financial statements.
d. Both B and C
d. Both B and C
Financial accounting should provide information that:
a. Is useful to investors and creditors in making decisions.
b. Helps to predict cash flows.
c. Tells about economic resources, claims to resources, and changes in resources and claims
d. All of the above
d. All of the above
Fill in the Blank:
To be useful for decision making, accounting information should have _______ and ___________
Relevance and faithful representation
Which of the following assumptions indicates that the life of a company can be divided into artificial time periods for periodic reporting?
a. Economic Entity
b. Periodicity
c. Going Concern
d. Monetary Unit
b. Periodicity
Which assumption identifies all economic events with a particular economic activity?
a. Economic Entity Assumption
b. Monetary Unit Assumption
c. Periodicity Assumption
d. Going Concern Assumption
a. Economic Entity Assumption
Which assumption needs a unit or scale of measurement?
a. Economic Entity Assumption
b. Monetary Unit Assumption
c. Periodicity Assumption
d. Going Concern Assumption
b. Monetary Unit Assumption
Which assumption provides information of an enterprise at regular time periods?
a. Economic Entity Assumption
b. Monetary Unit Assumption
c. Periodicity Assumption
d. Going Concern Assumption
c. Periodicity Assumption
Which assumption will business entities continue to operate indefinitely?
a. Economic Entity Assumption
b. Monetary Unit Assumption
c. Periodicity Assumption
d. Going Concern Assumption
d. Going Concern Assumption
Match the accountant type with its description: Assets
a. Sales of products or services
b. Owners’ claims to resources
c. Distributions to stockholders
d. Costs of selling products or services
e. Resources of a company
f. Amounts owed
e. Resources of a company
Match the accountant type with its description: Liabilities
a. Sales of products or services
b. Owners’ claims to resources
c. Distributions to stockholders
d. Costs of selling products or services
e. Resources of a company
f. Amounts owed
f. Amounts owed
Match the accountant type with its description: Stockholders’ Equity
a. Sales of products or services
b. Owners’ claims to resources
c. Distributions to stockholders
d. Costs of selling products or services
e. Resources of a company
f. Amounts owed
b. Owners’ claims to resources
Match the accountant type with its description: Dividends
a. Sales of products or services
b. Owners’ claims to resources
c. Distributions to stockholders
d. Costs of selling products or services
e. Resources of a company
f. Amounts owed
c. Distributions to stockholders
Match the accountant type with its description: Revenues
a. Sales of products or services
b. Owners’ claims to resources
c. Distributions to stockholders
d. Costs of selling products or services
e. Resources of a company
f. Amounts owed
a. Sales of products or services
Match the accountant type with its description: Expenses
a. Sales of products or services
b. Owners’ claims to resources
c. Distributions to stockholders
d. Costs of selling products or services
e. Resources of a company
f. Amounts owed
d. Costs of selling products or services
Match the financial statement with its description: Income Statement
a. Change in owners’ claims to resources
b. Profitability of the company
c. Change in cash as a result of operating, investing, and financing activities
d. Resources equal creditors’ and owners’ claims to those resources
b. Profitability of the company
Match the financial statement with its description: Statement of Stockholders’ Equity
a. Change in owners’ claims to resources
b. Profitability of the company
c. Change in cash as a result of operating, investing, and financing activities
d. Resources equal creditors’ and owners’ claims to those resources
a. Change in owners’ claims to resources
Match the financial statement with its description: Balance Sheet
a. Change in owners’ claims to resources
b. Profitability of the company
c. Change in cash as a result of operating, investing, and financing activities
d. Resources equal creditors’ and owners’ claims to those resources
d. Resources equal creditors’ and owners’ claims to those resources
Match the financial statement with its description: Statement of Cash Flow
a. Change in owners’ claims to resources
b. Profitability of the company
c. Change in cash as a result of operating, investing, and financing activities
d. Resources equal creditors’ and owners’ claims to those resources
c. Change in cash as a result of operating, investing, and financing activities
Match the concepts associated with the role of auditor in financial reporting with its description: Securities and Exchange Commission
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
d. Regulatory body that requires audits of all publicly traded companies
Match the concepts associated with the role of auditor in financial reporting with its description: Need for auditing
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
e. Separation of management from those who own the business or finance operations
Match the concepts associated with the role of auditor in financial reporting with its description: Cooking the books
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
a. Phrase meaning to present the accounting records in an altered format
Match the concepts associated with the role of auditor in financial reporting with its description: Management
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
c. Responsible for applying generally accepted accounting principles (GAAP)
Match the concepts associated with the role of auditor in financial reporting with its description: Auditor
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
Match the concepts associated with the role of auditor in financial reporting with its description: Independent
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
b. Auditors are not employees of the company they audit
Match the concepts associated with the role of auditor in financial reporting with its description: Opinion
a. Phrase meaning to present the accounting records in an altered format
b. Auditors are not employees of the company they audit
c. Responsible for applying generally accepted accounting principles (GAAP)
d. Regulatory body that requires audits of all publicly traded companies
e. Separation of management from those who own the business or finance operations
f. Party that reports on whether a company’s financial statements are in accordance with GAAP
g. View expressed by an auditor as to the accuracy of a company’s financial statements
g. View expressed by an auditor as to the accuracy of a company’s financial statements
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Common Stock
Stockholders’ Equity
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Equipment
Asset
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Salaries Payable
Liability
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Service Revenue
Revenue
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Utilities Expense
Expense
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Supplies
Asset
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Research and development expense
Expense
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Land
Asset
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Income Tax Payable
Liability
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Interest Payable
Liability
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Deferred Revenue
Liability
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Accounts Receivable
Asset
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Accounts Payable
Liability
Indicate whether the related account would be classified as an asset, liability, stockholders’ equity, dividend, revenue, or expense: Retained Earnings
Stockholders’ Equity
Pair the term and definition associated with the FASB’s conceptual framework: Completeness
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
d. Including all information necessary to report the business activity
Pair the term and definition associated with the FASB’s conceptual framework: Comparability
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
b. Ability to make comparisons between firms
Pair the term and definition associated with the FASB’s conceptual framework: Neutrality
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
i. Accounting information should not favor a particular group
Pair the term and definition associated with the FASB’s conceptual framework: Understandability
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
c. Comprehending the meaning of accounting information
Pair the term and definition associated with the FASB’s conceptual framework: Cost effectiveness
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
a. Requires the consideration of the costs and value of information
Pair the term and definition associated with the FASB’s conceptual framework: Verifiability
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
g. Implies consensus among different measures
Pair the term and definition associated with the FASB’s conceptual framework: Decision usefulness
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
h. Accounting should be useful in making decisions
Pair the term and definition associated with the FASB’s conceptual framework: Economic entity assumption
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
f. Recording transactions only for the company
Pair the term and definition associated with the FASB’s conceptual framework: Going concern assumption
a. Requires the consideration of the costs and value of information
b. Ability to make comparisons between firms
c. Comprehending the meaning of accounting information
d. Including all information necessary to report the business activity
e. The business will last indefinitely unless there is evidence otherwise
f. Recording transactions only for the company
g. Implies consensus among different measures
h. Accounting should be useful in making decisions
i. Accounting information should not favor a particular group
e. The business will last indefinitely unless there is evidence otherwise
List the 4 underlying assumptions
- Economic Entity
- Periodicity
- Going Concern
- Monetary Unit
