Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Accounting > Chapter 1: Accounting and the Business Enviroment > Flashcards

Chapter 1: Accounting and the Business Enviroment Flashcards

1
Q

Accounting is…

A

the language of business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Accounting

A

The information system that measures business activities, processes that information into reports, and communicates the results to decision makers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Financial Statements

A

Documents thats report on a business in monetary amounts, providing information to help people make informed business decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Financial Accounting

A

The branch of accounting that focuses on information for people outside the firm

Provides data for outsiders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Managerial Accounting

A

The branch of accounting that focuses on information for internal decision makers of a business

Provides data for insiders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

The Various People Who Use Accounting Information to Make Important Decisions Include…

A

Individuals, business owners, managers, investors, creditors (bank), and tax authorities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

CPAs

A

Certified Public Accountants: licensed accountants who serve the general public rather than one particular company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

CMAs

A

Certified Management Accountant: A certified accountant who works for a single company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

FASB

A

Financial Accounting Standards Board: The private organization that determines how accounting is practiced in the United States

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

GAAP

A

Generally Accepted Accounting Principles: Accounting guidelines - formulated by the Financial Accounting Standards Board - that govern how accountants measure, process, and communicate financial information.

Main U.S. accounting rule book

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

IFRS

A

International Financial Reporting Standards: Accounting guidelines - formulated by the International Accounting Standards Board - that govern how accountants measure, process, and communicate financial information.

Less specific and based more on general principles = more room for professional judgement

international accounting rulebook

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

IASB

International Accounting Standards Board

A

The organization that determines how accounting is practiced internationally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

An Audit

A

An examination of a company’s financial records

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

5 Types of Business Organizations (TItles Only)

A
  1. Propietorships
  2. Partnerships
  3. Corporations
  4. Limited-Liability Partnerships(LLPs) & Limited-Liability Companies (LLCs)
  5. Not-for-Profits
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Propietorships

A

a business with a single owner called a propietor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Partnerships

A

a business with two or more owners called partners (co-owners)

not organized as a corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Mutual Agency

A

The ability of partners in a partnership to commit other partners andt he business to a binding contract

Mutual agency means that one partner can make all partners mutually liable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Corporations

A

A business owned by stockholders or shareholders

It has one or more owners called shareholders

A corporation begins when the state grants a charter to the company, and approves its articles of incorporation and the first share of stock is issued.

It is a legal entity, an “artifical person,” in the eyes of the law

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Stockholders aka Shareholders

A

People who own shares of stock in a corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Stock

A

A certificate representing ownership interest in a corporation.

The holders of stock are called stockholders or shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

a Charter

A

Document that gives the state’s permission to form a corporaiton

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

the articles of incorporation

A

Articles approved by the state that govern the management of the corporation

24
Q

Limited-Liability Partnerships

  • LLPs -
A

Company in which each partner is only liable for his or her own actions or those under his or her control.

25
Q

Limited-Liability Companies

  • LLCs -
A

Company in which each member is only liable for his or her own actions or those under his or her control

has one or more owners called members

26
Q

Not-for-Profits

A

Organization that has been approved by the Internal Revenue Service to operate for a religious, charitable, or educational purpose

has no owners

27
Q

fudiciary responsibility

A

an ethical and legal obligation to perform a person’s duties in a trustworthy manner

28
Q

several features that distinguish a proprietorship from other types of business organizations including…

(hint: 7)

A

Separate Legal Entity

No Continuous Life or Transferability of Ownership

Unlimited Liability of Owner

Unification of Ownership and Management

Business Taxation

Government Regulation

Organization of a Corporation

29
Q

Authorization

A

the acceptance of the state by the Corporate by-laws

30
Q

Bylaws are…

A

are the rule book that guides the corporation

The incorporators agree to a set of bylaws, which act as the constitution for governing the corporation

31
Q

Accounting Concepts & Principles: 5

A

The Entity Conept

The Faithful Representation Principle

The Cost Principle

The Going-Concern Conept

The Stable Monetary Unit Concept

32
Q

The Entity Principle

A
  • The most basic concept on accounting is that of the entity
  • An accounting entity, is an organization that stands apart as a separate economic unit. Boundaries are drawn around each entity to keep its affairs distinct from those of other entities
  • An entity refers to one business, separate from its owners
33
Q

The Faithful Representation Principle

A
  • Accounting information is based on the fact that the data faithfull represents the measurement or description of that data.
  • Faithfully represented data are compelte, neutral, and free from material error.
34
Q

The Cost Principle

A
  • A principle that states that aquired assets and services should be recordded at thier actual cost
  • This principle also holds that the accounting records should continue reporting the historical cost of an asset over its useful life.

actual cost = historical cost

*Note that generally, unlike GAAP, IFRS allows periodic revaluation of certain assets and liabilities to restate them to market value, rather than historical cost*

35
Q

The Going Concern concept

A

This cocept assumes that the entity will remain in operation for the foreseeable future

36
Q

The Stable Monetary Unit Concept

A

The concept that says that accountants assume that the dollar’s purchasing power is stable

stable currency buying power

37
Q

The Accounting Equation

A

The basic tool of accounting that measures the resources of a business and the claims to those resources

Assets = Liabilities + Equity

38
Q

Assets

(include examples)

A

Economic resources that are expected to benefit the business in the future

Something the business owns that has value

examples = Cash, merchandise inventory, furniture, land

39
Q

Liabilities

(include examples)

A

something the business owes

Economic obligations (debts) payable to outsiders (individual or organization) who are known as creditors

examples = Accounts payable, Notes payable, Salary payable

40
Q

Equity

A

The claim of a company’s owners to the assets of the business.

Called owner’s equity for propietorships & partnerships

Called shareholder’s equity or stockholder’s equity for a corporation

It is the companies net worth

**Equity = Assets (owned) - Liabilities (owed) **

41
Q

Capital

A

The net amount invested in the business by the owner

An owner can contribute cash or other net assets to the business and recieve capital

42
Q

Two types of events that affect capital

A

Revenues - **Increases capital **

Expenses - Decrease capital

Revenues = earnings =** **Amounts earned by delivering goods or services to customers

Expenses = Decrease in equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customers = Incurred costs that you will have to pay for, either now or later

43
Q

Types of Revenue

A
  • Sales revenue
  • Service revenue
  • Interest revenue
  • Dividend revenue
44
Q

Types of Expenses

A
  • Store (or office) rent expense
  • Salary expense for employees
  • Advertising expense
  • Utilities expense - water, electricity, gas
  • Insurance expense
  • Supplies expense
  • Interest expense on loans payable
  • Property tax expense
  • etc…
45
Q

Net Income

A

What business strive for… PROFIT

  • Excess of total revenues
  • ————————-over———————–
  • total expenses

also called: Net Earnings or Net Profit

46
Q

Net Loss

A
  • Excess of total expeses
  • ——————over——————–
  • Total revenues
47
Q

Drawings

A

Distributions of capital (usually of cash) by a company to its owner.

DO NOT represent expenses because they are not related to the earning of revenue. THUS they do not affect the business’s net income or net loss.

After earning net income, the business may distribute cash or other assets to the owner, a 3rd type of transaction that affects capital.

48
Q

Components of Capital

A
  • Beginning Capital
  • +
  • Owner Investments
  • + /** -**
  • Net Income / Net Loss
  • -
  • Drawings
  • =
  • Ending Capital
49
Q

Owner’s equity of parnerships - main difference (in comparison to propietorships)

A

There are separate capital accounts for each partner

50
Q

Stockholder’s Equity has two components:

A

Paid-in capital or Contributed captal

amount invested in the corporation by its owners, the stockholders.

Basic component = stock = which the corporation issues to the stockholders as evidence of thier ownership

Retained Earnings

represent the net earnings - the amount earned over the life of a business by income-producing activites - and kept (retained) for use in the business.

51
Q

Common Stock

A

Represents the basic ownership of every corporation

52
Q

A Transaction

A

An event that affects the financial position of a particular entity AND can be measured and recorded reliably

Affects what the company owns, owes, and its net worth

53
Q

Many events affect a company - such as ? - BUT they are not recorded by an accountant. WHY?

A

Events not recorded by accountants include economic recessions and economic booms.

These are NOT recorded because accountants only record events that have dollar amounts that can be measured reliably, such as the pirchase of a building, a sale of merchandise, and the payment of rent.

54
Q

Income Statement

A

summary of an entity’s revenues, expenses, and net income or net loss for a specific period.

*very important because reports if company is making a profit

also called the statement of earnings or the statement of operations

55
Q

Statement of Owner’s Equity

A

Summany of the changes in an owner’s capital account during a specific period

  • Can answer what the business did wtih any profits earned -

capital increases when the business has…

owner contributions of capital

a net income

capital decreases when the business has…

a net loss

owner withdrawls of cash or other assets

56
Q

Balance Sheet

A

An entity’s assets, liabilities, and owner’s equity as of a specific date

it mirrors the accounting equation

also called the statement of financial position

57
Q

Statement of Cash Flows

A

Report of cash receipts and cash payments during a period

Stating if cash increased or decreased - which can tell a banker if the agency generates enough cash to pay its bills.

Accounting (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions