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Intro to Accounting > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

recording system + measuring economic transactions

A

ACCOUNTING

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2
Q

efficient allocation of scare resources

A

ECONOMICS

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3
Q

FINANCIAL ACCOUNTING

A

External + Have incentive to inflate numbers

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4
Q

MANAGERIAL ACCOUNTING

A

Internal + Accurate data used (Usually)

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5
Q

INTERNAL DECISION MAKERS

A

Management, employees

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6
Q

EXTERNAL DECISION MAKERS

A

Stockholders, creditors, suppliers, regulators, IRS (tax)

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7
Q

FASB

A

Financial Accounting Standards Board

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8
Q

WHAT IS FASB?

A
  • Privately funded

- GAAP (information must be relevant and useful)

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9
Q

SEC

A

Securities + Exchange Commission

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10
Q

WHAT IS SEC?

A
  • Oversees US financial markets

- Sarbanes-Oxley (SOX) increased regulatory oversight

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11
Q

ACCOUNTING ASSUMPTIONS

A

Economic Entity, Cost Principle, Monetary Unit, Going Concern

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12
Q

ECONOMIC ENTITY ASSUMPTION

A

Business stands apart as a separate economic unit from its owners

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13
Q

TYPES OF ECONOMIC ENTITIES

A
  • Sole Proprietorship (Owner fully liable, individ. tax)
  • Partnership (Owners fully liable, individ. tax)
  • Corporation (Limited liability, pay corporate + personal tax)
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14
Q

COST PRINCIPLE

A

Acquired assets should be recorded at their actual / historical cost (reliable & conservative)

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15
Q

MONETARY UNIT ASSUMPTION

A
  • Items measured in financial statements are measured in terms of a monetary unit
  • Potential issues with inflation + exchange rates
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16
Q

GOING CONCERN ASSUMPTION

A

Assumes that the entity will remain in operation for the foreseeable future

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17
Q

ACCOUNTING EQUATION

A

Asset = Liabilities + Equity

18
Q

ASSETS

A

Economic resources that are expected to benefit the business in the future (i.e. land, inventory, furniture, cash)

19
Q

LIABILITIES

A

Debts owed to creditors (i.e. accounts payable, notes payable, salaries payable)

20
Q

EQUITY

A

Equity is the owner’s residual claim against the assets of the company

21
Q

EQUITY EXPANDED

A

+Owner’s Capital
-Owner’s Withdrawal
+Revenues
-Expenses

22
Q

REVENUES

A

Economic resources that have been earned by delivering products or services to customers

23
Q

INCOME STATEMENT

A

Reports success | failure of company’s operations for a period of time (profitability)

24
Q

STATEMENT OF OWNER’S EQUITY

A

Shows amounts + causes of changes in owner’s capital during the period

25
Q

BALANCE SHEET

A

Reports assets + claims to those assets at a specific point in time

26
Q

STATEMENT OF CASH FLOWS

A

Reports cash receipts + cash payments for a period of time

27
Q

ACCOUNT

A

The detailed record of all increases and decreases that have occurred in an individual asset, liability, equity, revenue or expense during a specific period

28
Q

ASSETS (CHART OF ACCOUNTS)

A
  • Cash
  • Accounts Receivable
  • Notes Receivable
  • Office Supplies
  • Furniture
  • Building
  • Land
29
Q

LIABILITIES (CHART OF ACCOUNTS)

A
  • Accounts Payable
  • Salaries Payable
  • Interest Payable
  • Unearned Revenue
  • Notes Payable
30
Q

EQUITY (CHART OF ACCOUNTS)

A
  • Capital, Withdrawals
  • Expenses (Rent, Salaries, Utilities, Advertising)
  • Revenues (Service, Interest)
31
Q

DEBITS / CREDITS

A

Assets (Left Debit Inc, Right Credit Dec)

Liabilities + Equity (Left Debit Dec, Right Credit Inc)

32
Q

STEPS TO RECORDING TRANSACTIONS

A
  1. Determine DR and CR accounts affected.
  2. Journalize transaction
  3. Post to T-Accounts
33
Q

TRIAL BALANCE STEPS

A
  1. Prepare Income Statement → Net Income
  2. Statement of Owner’s Equity
  3. Balance Sheet → Assets, Liabilities, Equity
34
Q

CASH BASIS ACCOUNTING

A
  • Revenue is recorded when cash is received
  • Expenses are recorded when cash is paid
  • Not allowed under GAAP
35
Q

ACCRUAL BASIS ACCOUNTING

A
  • Revenue is recorded when it is earned
  • Expenses are recorded when incurred
  • Generally used by larger businesses
36
Q

TIME PERIOD CONCEPT

A
  • Business’s activities can be prepared for specific time periods (ex. month, quarter)
  • Any 12 month period is a fiscal year
37
Q

REVENUE RECOGNITION PRINCIPLE

A
  • Must be actual selling price

- Revenue should be recorded when EARNED

38
Q

MATCHING PRINCIPLE

A
  • Expenses are recorded when incurred

- Expenses and revenues are matched for same end of period

39
Q

PLANT ASSETS

A
  • Paid for when acquired
  • Used up over time
  • Used to produce revenues
40
Q

DEPRECIATION

A

The process of systematically recording the periodic usage of plant assets to generate revenues (land is never depreciated)

Intro to Accounting (3 decks)

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