Chapter 1: Accounting Present and Past

Question 1

accounting

Answer 1

the language of business / The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.

Question 2

users of accounting information

Answer 2

1. management - planning, directing, controlling
2. investors/shareholders - assessing future returns
3. creditors/suppliers - assessing risk
4. employees - assessing long-term job prospects/benefits
5. government (SEC) - reviewing for compliance

Question 3

financial accounting

Answer 3

preparation and reporting of financial statements for an entity [externally oriented i.e. BOD/ historical performance]

Question 4

cash flow

Answer 4

Cash receipts or disbursements of an entity.

Question 5

financial statements

Answer 5

present the financial position, operations, cash flow, resources of an entity at a point in time

Question 6

bookkeeping

Answer 6

keep track of financial transactions and accumulate the results of an entity’s financial activities. [part of financial accounting process]

Question 7

controller/comptroller

Answer 7

chief accounting officer of a corporation

Question 8

Certified Public Accountant (CPA)

Answer 8

professional designation earned by fulfilling certain education and experience requirements, in addition to passing a comprehensive, 4 part exam

Question 9

managerial/management accounting

Answer 9

Accounting that uses economic and financial information to plan and control many activities of the entity and to support the management decision-making process. (internal orientation i.e. employees/future-oriented way i.e. budgets)

Question 10

cost accounting

Answer 10

A subset of both financial and managerial accounting that relates to the accumulation and determination of product, process, or service costs. (internal orientation i.e. employees/future-oriented way i.e. budgets)

Question 11

Certified Management Accountant (CMA)

Answer 11

Professional designation earned by passing a broad, two-part examination and meeting certain experience requirements

Question 12

public accounting

Answer 12

The segment of the accounting profession that provides auditing, income tax accounting, and management consulting services to clients / third party

Question 13

auditing

Answer 13

The process of examining the financial statements of an entity by an independent third party (referred to as public accounting)

Question 14

independent auditor’s report

Answer 14

resulting report of an audit (contains 4 brief paragraphs)

Question 15

generally accepted auditing standards (GAAS)

Answer 15

Standards for auditing established by the Auditing Standards Board of the American Institute of Certified Public Accountants

Question 16

generally accepted accounting principles (GAAP)

Answer 16

Pronouncements of the Financial Accounting Standards Board (FASB) and its predecessors that constitute appropriate accounting for various transactions used for reporting financial position

Question 17

annual report

Answer 17

a document distributed to shareholders and other interested parties that include financial statements and notes to the financial statements, management discussion and analysis

Question 18

internal auditing

Answer 18

an audit/examination of financial statements done internally (done by accountant with CIA designation; performs duties similar to external auditor but smaller scale)

Question 19

Securities and Exchange Commission (SEC)

Answer 19

A unit of the federal government that is responsible for establishing regulations and ensuring full disclosure to investors about companies and their securities that are traded in interstate commerce

Question 20

Financial Accounting Foundation (FAF)

Answer 20

An organization composed of people from the public accounting profession, businesses, and the public that is responsible for the funding of and appointing members to the Financial Accounting Standards Board and the Governmental Accounting Standards Board.

Question 21

Financial Accounting Standards Board (FASB)

Answer 21

standard-setting body within the accounting profession / issued 8 statements of financial accounting concepts

Question 22

Statements of Financial Accounting Standards (SFAS)

Answer 22

168 standards of accounting and reporting for particular issues

Question 23

FASB Accounting Standards Codification (FASB Codification)

Answer 23

reorganized GAAP in a more accessible and researchable format /

Question 24

Accounting Standards Update (ASU)

Answer 24

A transient document which communicates the details of specific amendments to the FASB Codification

Question 25

International Accounting Standards Board (IASB)

Answer 25

Standard-setting body responsible for the development of International Financial Reporting Standards (IFRS) globally permitted/accepted

Question 26

Public Company Accounting Oversight Board (PCAOB)

Answer 26

Established in 2002 with authority to set and enforce auditing and ethics standards for public companies and their auditing firms; affiliated with the SEC.

Question 27

4 parts of an independent auditor’s report

Answer 27

1. financial statements audited
2. Public Company Accounting Oversight Board standards explained
3. auditor’s opinion
4. auditor’s opinion about effectiveness of entity’s internal control of financial reporting

Question 28

Income Tax Accounting

Answer 28

develop specialties in the taxation of individuals, partnerships, corporations, trusts and estates, or in international tax law issues.

Question 29

standards for types of accounting

Answer 29

Managerial/cost -> cost accounting standard board (CASB) for govt contracts

auditing/public -> auditing standards board (part of AICPA)

state and local govt -> govt accounting standards board (GASB)

Question 30

common code of ethics for both AICPA and IMA

Answer 30

integrity / objectivity