Chapter 1-Intro to Accounting

Question 0

Bookkeeping

Answer 0

Only the recording of economic events and therefore only one part of accounting

Question 1

3 basic principles of accounting

Answer 1

Identifies, records and communicates economic events

Question 2

Sarbanes-Oxley Act (SOX)

Answer 2

Intended to. Reduce unethical corporate behavior and decrease I likelihood of scandal

Question 3

GAAP

Answer 3

Generally accepted accounting principles

Question 4

FASB

Answer 4

Financial accounting standards board

Accounting standards setting body

Question 5

SEC

Answer 5

Securities and Exchange commission

Us agency which oversees financial markets and standards boards

Question 6

IFRS

Answer 6

International financial reporting standards

Standards set by IASB

Accounting is turning towards IFRS instead of GAAP

Question 7

Cost principle

Answer 7

Records assets at their cost

Even if asset increases in value a year later, still go by beginning cost

Question 8

Fair value principle

Answer 8

Assets and liabilities reported at fair value (price received to sell assets or settle liabilities)

Question 9

Monetary Unit Assumption

Answer 9

Include in accounting records only transactions which can be expressed in monetary terms

Question 10

Economic entity assumption.

Answer 10

Activities of the business are kept separate from activity of the owners

Question 11

Proprietorship

Answer 11

Business owned by one person

Question 12

Partnership

Answer 12

Two or more owners

Question 13

Corporation

Answer 13

Organized into separate legal entity under the law and divides ownership into stocks

Question 14

Basic accounting equation

Answer 14

Assets=liabilities + owners equity

Question 15

Assets

Answer 15

Resources a business owns (cash, equipment, land, accounts receivable)

Question 16

Liabilities

Answer 16

Claims against assets (debts and obligations)

*“payable” accounts

Question 17

Owners equity

Answer 17

Ownership claim on total assets

Question 18

Investments by owner

Answer 18

Assets put into business by owner

Recorded in owners capital

Question 19

Revenues

Answer 19

Increase in OE from business activities

Question 20

Drawings

Answer 20

Cash/assets removed by owner for personal use

Decreases owners equity

Question 21

Expenses

Answer 21

Cost of assets consumed

Decreases in OE from business operations

Question 22

Expanded accounting equation

Answer 22

Assets =liabilities + (owners capital-drawings+revenues-expenses)

Question 23

Income statement

Answer 23

Revenues and expenses resulting in net income or loss for a specific time period

Question 24

Owners equity statement

Answer 24

Summarizes changes in owners equity for specific period of time

Includes drawings and investments

Question 25

Balance sheet

Answer 25

Assets, liabilities and OE at SPECIFIC DATE

Question 26

Statement of cash flows

Answer 26

Summarizes information about cash inflows and outflows for specific period

Question 27

Order of financial statements (interrelationship)

Answer 27

1) income statement
2) owners equity statement
3) balance sheet
4) statement of cash flows