Chapter 1: The Nature and Purpose of Financial Accounting

Question 1

A system of providing “quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions”

Answer 1

Accounting

Question 2

The professional organization of certified public accountants in the United States

Answer 2

American Institute of Certified Public Accountants (AICPA)

Question 3

Document which reports the resources of a company (assets), the company’s obligations (liabilities), and the owner’s equity, which represents how much money has been invested in the company by its owners

Answer 3

Balance Sheet

Question 4

The preservation of a systematic, quantitative record of an activity

Answer 4

Bookkeeping

Question 5

A person who has taken a minimum number of college-level accounting classes, has passed the CPA exam, and has met other requirements set by their state

Answer 5

Certified Public Accountant

Question 6

The name given to accounting information provided for and used by external users

Answer 6

Financial Accounting

Question 7

The three primary financial information documents; the balance sheet, income statement, and statement of cash flows

Answer 7

Financial Statements

Question 8

Reports the amount of net income earned by a company during a period, with annual and quarterly income statements being the most common

Answer 8

Income Statement

Question 9

The government agency responsible for tax collection and tax law enforcement

Answer 9

Internal Revenue Service (IRS)

Question 10

An independent, international body formed to develop worldwide standards

Answer 10

International Accounting Standards Boards (IASB)

Question 11

The accounting standards produced by the IASB

Answer 11

International Financial Reporting Standards (IFRS)

Question 12

The name given to accounting systems designed for internal users

Answer 12

Managerial Accounting

Question 13

A private, non-profit organization that effectively serves as an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly traded companies

Answer 13

Public Company Accounting Oversight Board (PCAOB)

Question 14

This document reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing

Answer 14

Statement of Cash Flows