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Accounting 1 > Exam 1, Ch 1-3 > Flashcards

Exam 1, Ch 1-3 Flashcards

1
Q

What are the (2) major fields of accounting?

A
  1. Financial accounting

2. Managerial accounting

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2
Q

What is the difference between Financial Accounting and Managerial Accounting?

A

Financial Accounting provides information to EXTERNAL decision makers

Managerial Accounting provides information to INTERNAL decision makers

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3
Q

What is the body of knowledge relied upon to govern accounting in the United States?

A

GAAP (Generally Accepted Accounting Principles)

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4
Q

What are (2) other - slightly smaller - areas of accounting?

A

Tax Accounting

Non-Profit / Governmental Accounting

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5
Q

What is the name of the organization responsible in the United States for maintaining GAAP?

A

Financial Accounting Standards Board (FASB)

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6
Q

What does CPA stand for?

A

Certified Public Accounting

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7
Q

What is a licensed professional accountant who serves the general public referred to as?

A

A CPA

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8
Q

How is a CPA certified?

A

Via a state specific examination - resulting in a state license

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9
Q

What is the major ability of a CPA?

A

To certify that the financial statements of a company are accurate or complete - i.e. Legal

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10
Q

Name (5) examples of ASSET accounts:

A
  1. Cash
  2. Accounts Receivable
  3. Notes Receivable
  4. Prepaid Expense
  5. Equipment, Office Supplies, or Furniture
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11
Q

Defn: A written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future.

A

Notes Receivable

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12
Q

Defn: A payment of an expense in advance

A

Prepaid Expense

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13
Q

Defn: A type of asset account that includes all the business’s money. Includes bank balances, bills, coins, and checks

A

Cash

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14
Q

Defn: A type of asset account that is made up of customers promises to pay in the future for services or goods sold.

Described as “On Account”

A

Accounts Receivable

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15
Q

Name (4) types of LIABILITY accounts:

A
  1. Accounts Payable
  2. Notes Payable
  3. Accrued Liability
  4. Unearned Revenue
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16
Q

Defn: A type of Liability account that is made up of promises made by a business to pay a debt in the future.

Arises from credit purchases

A

Accounts Payable

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17
Q

Defn: A type of Liability account composed of written promises made by a business to pay a debt, usually involving interest, in the future.

These promises are between the business and a bank.

A

Notes Payable

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18
Q

Defn: A type of Liability account made up of an amount owed by a business but not yet payed

A

Accrued Liability

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19
Q

Defn: A type of Liability account that is created when a business collects cash from customers in advance of providing services or delivering goods

A

Unearned Revenue

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20
Q

Name (4) types of EQUITY accounts:

A
  1. Owner, Capital
  2. Owner, Withdrawal
  3. Revenues
  4. Expenses
21
Q

Defn: Type of Equity account that represents the net contributions of the owner in the business.

Increases Equity

A

Owner, Capital

22
Q

Defn: Type of Equity account made up of distributions of cash or other assets to the owner

Decreases equity

A

Owner, Withdrawal

23
Q

Defn: Type of Equity account composed of earnings that result from delivering goods or services to customers.

Increase equity

A

Revenues

24
Q

Defn: type of Equity account comprised of the cost of selling goods or services.

Decreases equity

A

Expenses

25
Q

Name (2) types of Revenue accounts:

A
  1. Service Revenue

2. Rent Revenue

26
Q

Name (3) types of Expense accounts:

A
  1. Rent Expense
  2. Salaries Expense
  3. Utilities Expense
27
Q

Defn: A list of all of a company’s accounts with their account numbers

A

Chart of Accounts

28
Q

Defn: The record holding all the accounts of a business, the changes in those account, and their balances

A

Ledger

29
Q

Defn: The balance that appears on the increase side of an account

A

Normal Balance

30
Q

Defn: A record of transactions in date order

A

Journal

31
Q

Defn: Transferring data from the journal to the ledger

A

Posting

32
Q

7-Steps of the Accounting Cycle

A
  1. Journalization
  2. Posting to the ledger
  3. Prepare an unadjusted trial balance
  4. Prepare Financial Statements
  5. Journalization and Posting of Adjusting Journal Entries
  6. Journalization and Posting of Closing Journal Entries
  7. Prepare a Post Closing Trial Balance
33
Q

Defn: A list of all ledger accounts with their balances at a point in time

A

Trial Balance

34
Q

What is the Accounting Equation?

A

Assets = Liabilities + Equity

35
Q

Defn: shows the proportion of assets financed with debt.

Total liabilities / Total assets

A

Debt ratio

36
Q

Defn: accounting method that records revenues only when cash is received and expenses only when cash is paid

A

Cash Basis Accounting

37
Q

Defn: Accounting method that records revenues when earned and expenses when incurred

A

Accrual Basis Accounting

38
Q

Defn: An accounting concept that requires companies to record revenue when it has been earned and determines the amount of revenue to record

A

Revenue Recognition Principle

39
Q

Defn: An accounting concept that guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period, and matches those expenses against the revenues of the period.

A

Matching Principle

40
Q

Defn: An entry made at the end of the accounting period that is used to record revenues to the period in which they are earned and expenses to the period in which they occur

A

Adjusting Journal Entry

41
Q

Defn: The sum of all the depreciation expense recorded to date for a depreciable asset

A

Accumulated Depreciation

42
Q

Defn: An account that is paired with, and is listed immediately after, its related account in the chart of accounts and associated financial statement and whose normal balance is the opposite of the normal balance of the related account.

A

Contra Account

43
Q

Defn: An expense that the business has incurred but has not yet paid

A

Accrued Expense

44
Q

Defn: A liability created when a business collects cash from customers in advance of completing a service or delivering a product

A

Unearned Revenue

45
Q

Defn: A revenue that has been earned but for which the cash has not yet been collected

A

Accrued Revenue

46
Q

Defn: A list of all the accounts with their adjusted balance

A

Adjusted Trial Balance

47
Q
  • To ensure that total debits equal total credits
  • Ensure that all revenues and expenses for the accounting period examined are recorded
  • Update the balance sheet accounts so all accounts are properly valued

Are all purposes of what?

A

A trial balance

48
Q

What is a Trial Balance used for?

A

To prepare financial statements

49
Q

List the (5) types of transactions that Adjusted Journal Entries are made for:

A
  1. Accrued Revenue
  2. Accrued Expense
  3. Unearned Revenue
  4. PrePaid Expense
  5. Estimated Items (Depreciation)

Accounting 1 (3 decks)

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