Chapter 1 - Accounting - Present & Past

Question 1

What is accounting?

Answer 1

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

Question 2

What is an Accounting Standards Update (ASU)?

Answer 2

A transient document that communicates the details of specific amendments to the FASB Codification and explains the basis for the board’s decisions.

Question 3

What is accrual accounting?

Answer 3

Accounting that recognizes revenues and expenses as they occur, even though the cash receipt or disbursement may occur before or after the event that causes recognition.

Question 4

What is an annual report?

Answer 4

A document distributed to shareholders and other interested parties that contains financial statements, notes, management’s discussion, and the external auditor’s report.

Question 5

What is auditing?

Answer 5

The process of examining the financial statements of an entity by an independent third party to express an opinion about the fairness of the presentation of the entity’s financial position.

Question 6

What is bookkeeping?

Answer 6

Procedures used to keep track of financial transactions and accumulate the results of an entity’s financial activities.

Question 7

What is cash flow?

Answer 7

Cash receipts or disbursements of an entity.

Question 8

What is a Certified Management Accountant (CMA)?

Answer 8

A professional designation earned by passing a two-part examination and meeting experience requirements, covering topics like budgeting and financial statement analysis.

Question 9

What is a Certified Public Accountant (CPA)?

Answer 9

A professional designation earned by fulfilling education and experience requirements and passing a comprehensive four-part examination.

Question 10

What is a controller?

Answer 10

The chief accounting officer of an organization, responsible for financial and managerial accounting functions.

Question 11

What is cost accounting?

Answer 11

A subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs.

Question 12

What is the Cost Accounting Standards Board (CASB)?

Answer 12

A group authorized by the U.S. Congress to establish cost accounting standards for government contractors.

Question 13

Who is a creditor?

Answer 13

An organization or individual who lends to the entity, such as suppliers or banks.

Question 14

What is an entity in accounting?

Answer 14

An organization, individual, or group for which accounting services are performed.

Question 15

What is the FASB Accounting Standards Codification?

Answer 15

An advanced user-accessible application that systemized U.S. GAAP into one composite structure for review and research.

Question 16

What is financial accounting?

Answer 16

Accounting that focuses on reporting an entity’s financial position at a point in time and/or its results of operations and cash flows for a period.

Question 17

Financial Accounting Foundation (FAF)

Answer 17

Organization composed of people from the public accounting profession, businesses, and the public that is responsible for the funding of an the appointment of members to the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board.

Question 18

Financial Accounting Standards Board (FASB)

Answer 18

The body responsible for establishing U.S. generally accepted accounting principles

Question 19

generally accepted accounting principles (GAAP)

Answer 19

pronouncements of the Financial Accounting Standards Board (FASB) and its predecessors that constitute appropriate accounting for various transactions used for reporting financial position and results of operations to investors and creditors. Since July 2009, the FASB Codification has represented a single source of U.S. GAAP.

Question 20

generally accepted auditing standards (GAAS)

Answer 20

standards for auditing that are established by the Auditing Standards Board of the American Institute of Certified Public Accountants unless superseded or amended by the PCAOB

Question 21

Governmental Accounting Standards Board (GASB)

Answer 21

established by the Financial Accounting Foundation to develop guidelines for financial accounting and reporting by state and local governmental units

Question 22

independence

Answer 22

the personal characteristic of an accountant, especially an auditor, that refers to both appearing and in fact being objective and impartial

Question 23

independent auditor’s report

Answer 23

the report accompanying audited financial statements that explains briefly the auditor’s responsibility and the extent of work performed. the report includes an opinion on whether the information contained in the financial statements is presented fairly in accordance with generally accepted accounting principles

Question 24

integrity

Answer 24

the personal characteristic of honesty, including being forthright in dealings and communications with others

Question 25

internal auditing

Answer 25

the practice of auditing within a company by employees of the company

Question 26

International Accounting Standards Board (IASB)

Answer 26

standard-setting body responsible for the development of International Financial Reporting Standards (IFRS) permitted or required by more than 120 countries

Question 27

International Financial Reporting Standards (IFRS)

Answer 27

pronouncements of the International Accounting Standards Board that are considered to be a 'principle-based' set of standards in that they establish broad rules as well as dictate specific treatments. many of the standards forming part of the IFRS are known by the older name of International Accounting Standards (IAS)

Question 28

investor

Answer 28

an organization or individual who has an ownership interest in the firm. for corporations, referred to as stockholder or shareholder.

Question 29

managerial accounting

Answer 29

accounting that uses economic and financial information to plan and control many of the activities of an entity and to support the management decision-making process. sometimes called management accounting

Question 30

objectivity

Answer 30

personal characteristic of impartiality, including freedom from conflict of interest

Question 31

public accounting

Answer 31

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

Question 32

Public Company Accounting Oversight Board (PCAOB)

Answer 32

established 2002 with authority to set an enforce auditing and ethics standards for public companies and their auditing firms; affiliated with SEC

Question 33

Securities and Exchange Commission (SEC)

Answer 33

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 34

Statements of Financial Accounting Standards (SFAS)

Answer 34

pronouncements of the Financial Accounting Standards Board that formerly constituted generally accepted accounting principles. effective July 2009, SFAS series was superseded by the FASB Accounting Standards Codification