Chapter 1 - Intro To Corporate Accounting

Question 1

An accounting assumption that a business entity will continue to operate indefinitely

Answer 1

Going Concern Concept

Question 2

Focuses on raising capital through borrowing or selling stock as well as the specific financial vehicles that will be used.

Answer 2

Capital Structure Management

Question 3

The planning and managing of a corporation’s long-term investments, which can be tangible or intangible assets

Answer 3

Capital Budgeting

Question 4

Encompass financial accounting, taxation, and financial reporting

Answer 4

Accounting Activities

Question 5

Liquidity measure that is calculated by subtracting current liabilities from current assets. Used to determine a company’s ability to finance immediate operations (to buy inventory, finance growth, and obtain credit

Answer 5

Working Capital

Question 6

A corporation’s mix of long-term debt and equity

Answer 6

Capital Structure

Question 7

Focuses on what resources the corporation needs to meet its long-term goals and how these resources should be obtained

Answer 7

Capital Structure Decision Making

Question 8

A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results (specific to a particular region or market)

Answer 8

Generally Accepted Accounting Principles (GAAP)

Question 9

Requires an organization’s assets to be recorded at their purchase price or production price

Answer 9

Cost Principle

Question 10

As a result of this principle, financial statements do not indicate how much a business is worth, nor do they indicate the values for which assets can be sold or replaced; they simply record the historical costs of the assets

Answer 10

Cost Principle

Question 11

Requires revenues to be recognized and recorded at the time services are rendered or goods sold to customers

Answer 11

Revenue Recognition Principle

Question 12

Requires expenses incurred in generating revenues to be matched against those revenues. As a result, the profitability of the organization’s activity can be accurately measured

Answer 12

Matching Principle

Question 13

The accounting basis under which revenues and expenses are recorded as they are incurred

Answer 13

Accrual Based Accounting

Question 14

Accounting basis under which revenues and expenses are recorded only when cash is received or paid

Answer 14

Cash Basis Accounting

Question 15

Allows accountants to ignore generally accepted accounting principles when recording items that are not material if to do so is less expensive and more convenient

Answer 15

Materiality Principle

Question 16

Requires an organization to use the same accounting principles and recording practices in every accounting period (but can have an exception if the alternative method will make the financial statements more informative for users)

Answer 16

Consistency Principle

Question 17

Requires transactions to be recorded in a manner such that the assets and earnings are not overstated

Answer 17

Conservatism Principle

Question 18

The two most globally recognized accounting standards

Answer 18

U.S. Generally Accepted Accounting Practices (GAAP) & International Financial Reporting Standards (IFRS)

Question 19

The accounting principles and practices that are prescribed or permitted by an insurer’s domiciliary state (by U.S. insurance regulators) and that insurer’s must follow

Answer 19

Statutory Accounting Principles (SAP)

Question 20

Recognized by the Securities and Exchange Commission (SEC) as the private-sector authority charged with establishing and maintaining the standards of financial accounting in the U.S.

Answer 20

Financial Accounting Standards Board (FASB)

Question 21

The independent standard-setting body responsible for the development and publication of the IFRS.

Answer 21

International Accounting Standards Board (IASB)

Question 22

What are the components of a complete set of financial statements?

Answer 22

Balance sheet, Income statement, Statement of Recognized Income and Expense (SORIE), Statement of cash flows, and accompanying notes to the financial statements

Question 23

Reports assets and liabilities as if their value had not changed since the date of the acquisition

Answer 23

Historical Cost Accounting

Question 24

The market value, either actual or estimated, of an asset or liability

Answer 24

Fair value

Question 25

FASB’s & IASB’s commitment to convergence of their respective accounting standards in 2002.

Answer 25

Norwalk Agreement

Question 26

Addresses an organization’s investing and financing decisions

Answer 26

Corporate Finance

Question 27

An activity that provides financial information through various types of reports, including financial statements.

Answer 27

Accounting

Question 28

The main goals of corporate finance and accounting are to…

Answer 28

Maximize shareholder wealth, provide for transparency in financial reporting, and to conduct financial operations in an ethical manner.

Question 29

A federal statutory law governing corporate directors in the areas of investor protection, internal controls, and penalties (both civil and criminal)

Answer 29

Sarbanes-Oxley Act of 2002