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Accounting > Chapter One > Flashcards

Chapter One Flashcards

1
Q

Accounting

A

Is the “language of business”. And used to communicate financial info to users through reports.

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2
Q

GAAP

A

US Generally accepted accounting principles

Acct Standards: rules
Acct Principles: framework

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3
Q

FASB

A

Financial Accounting Standards Board.

Develops accounting standards in the US and maintains an electronic database called the Accounting Standards Codification

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4
Q

SEC

A

Securities and Exchange Commission.

Has authority over accounting and financial disclosures for companies whose stock shares are traded publicly.

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5
Q

IASB

A

International Accounting Standards Board.
Most countries use these accounting standards.

More “principles-based”

They set IFRS international Financial Reporting Standards

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6
Q

AICPA

A

American institute of certified public accountants

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7
Q

Data Analytics

A

Analyzing raw data to find patterns, anomalies, and insight.

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8
Q

Relevant

A

Info w potential to impact decisions

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9
Q

2 characteristics
Financial Reports

A

RELEVANT/ impact on decisions

FAITHFUL Representation / accurately reflecting entity’s condition
.

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10
Q

4 Characteristics
of
Relevant & Faithful Representation

A

Comparability -accurate
Verifiability - 3ed party
Timeliness - distributed info
Understandably - clear

Accurately reflects entity’s economic activity or condition.

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11
Q

Measurement Principle

A

OBJECTIVE & VERIFIABLE

based upon unbiased evidence & 3ed party confirmation

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12
Q

Historical Cost
or
Cost Principle

A

Recorded an item at its initial transaction price.

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13
Q

Revenue Recognition Principle

A

Revenue recorded when earned.

When services or goods are delivers to customer.

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14
Q

Expense Recognition
Or
Matching Principle

A

Recorded in same period as it is incurred.

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15
Q

Expenses

A

Cash used to generate revenue.

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16
Q

Arm’s Length Transaction

A

Transaction between two INDEPENDENT parties.

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17
Q

4 Principals of Financial Accounting

A

Measurement Principle

Historical Cost

Revenue Recognition

Expense Recognition

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18
Q

Assets

A

resources owned by a business

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19
Q

Liabilities

A

Debts owed and “payable” to outside creditors.

Accounts Payable
Notes Payable
Wages Payable
Unearned Revenue - cash/ payment before services are provided.

20
Q

Equity

A

Owners Rights

21
Q

Accounting Equation

A

ALOE
(A) = (L) + (OE)
+CS+RE-Divd+R-E

ASSETS=LIABILITIES + OWNERS EQUITY…includes
+ common stock
+ Retained Earnings
- Divideds
+ Recenue
- Expenses

22
Q

Common Stock

A

Shares issued to investors as proof of ownership.

23
Q

Net Income
Net Profit
Earnings

A

Revenues > expenses

24
Q

Net Loss

A

Expenses > Revenue

25
Q

Balance Sheet

A

Assets
Liabilities
Stockholders equity

26
Q

Statement of stock holders equity

A

Common Stock and Retained Earnings

reflects changes

27
Q

Business

A

Uses resources materials and labor are assembled and processed to sell goods or labor to customers for a profit.

28
Q

Financial Accounting

A

Provides info to external users like, investors, creditors, customers, govt.

29
Q

Managerial Accounting

A

Provides internal users with info to run the biz.

managers, CEO, CFO, HR, and employees

30
Q

Ethics

A

Moral principles that guide conduct

31
Q

SOX

A
  • Sarbanes-Oxley Act
  • Congress passed laws to monitor biz and accounting.
  • new oversight body called (Public Company Accounting Oversight Board) (PCAOB)
32
Q

Accounts Recivable

A

Amounts customers owe us

33
Q

Dividends

A

Earnings distributed to owners.

Decreases stockholders equity.

Do NOT effect net income or loss

34
Q

Retained Earnings

A

Revenue - Expenses = net income

35
Q

Biz Transactions

A

Changes an entity’s financial condition

36
Q

4 Financial Statments

A

INCOME STATEMENT

STOCKHOLDERS EQUITY

BALANCE SHEET

STATEMENT CASH FLOW

37
Q

Income Statement

A

REVENUES and EXPENSES

for a time range.
Does not include investments or dividends

38
Q

Statement of stockholders equity

A

Changes in retained earnings

Beginning retained earnings + net income - dividends = ending retained balance.

39
Q

Statement of Cash Flows

A

Cash receipts
and
Cash payments

40
Q

Ratio of liabilities to Stockholders equity

A

Total liabilities / total stockholders equity

41
Q

Paying an amount on account reduces

A

Liabilities

42
Q

4 Assumptions of GAAP

A

MONETARY UNIT / a single

TIME PERIOD / US yearly with quarterly

Biz Entity / separate from owners

Going Concern / future operations, reporting assets at their initial or historical value.

43
Q

Fiscal Year

A

Accounting period used by a company

44
Q

Accounting Standards Codification

A

Electronic data-base run by the FASB

45
Q

Business Entity Principle

A

Maintain separate records from their owners and other businesses

Accounting (14 decks)

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