Exam 1 Chap 1-3 Review Flashcards
Chapter 1
3 organizational forms
Corporation
Partnership
Sole proprietorship
Accounting is the ______ of _______
Accounting is the language of business
Chap 1
Identify 2 accounting reports
Managerial reports (internal) Financial reports (external)
Chap 1
Who uses financial reports?
Investors, customers, government, creditors
What is the accounting equation?
Assets = liabilities + stockholders equity
Define assets
Something the company has or controls that can have future benefits
Chap 1
Identify 4 financial statements
- Income statement: revs & exp > net income
- Statement of retained earnings: net income or loss
- Balance sheet: acct equation
- Statement of cash flows: cash in and out, not net income
Chap 1
What is GAAP
Generally accepted accounting principles
Chap 1
GAAP is created by who?
FASB Financial accounting standards board
Chap 2
Identify 2 types of financing
Equity: sell stock
Debt: barrow money
Chap 2
What is cost principle?
Record assets and liabilities at the amount they cost us
Chap 2
Define transaction
A measurable effect on the accounting equation
Chap 2
Define external transaction
You and somebody outside the firm affect the accounting equation
Chap 2
Define internal transaction
No outsiders involved in the transaction
Chap 2
Define duality of effects
Every transaction has an effect in at least two accounts of the accounting equation
Chap 2
Define the chart of accounts
A list of all accounts arranged by anoint number and arranged by assets liabilities and stockholders equity
Chap 2
The journal is organized by and summarizes what?
Journal is organized by date and summarizes all transactions for the day
Chap 2
Ledger is organized by and summarizes what?
Ledger is organized by account number and summarizes activity (journal entry) in each account
Chap 2 Debit •definition •increases •decreases
Debit is left
Debit increases assets
Debit decreases liabilities and stockholders equity
Chap 2 credit •definition •increases •decreases
Credit is right
Credit increases liabilities and stockholders equity
Credit decreases assets
Chap 2 define classified balance sheet
Organize assets and liabilities into two categories
•current- can be used, settled, or fulfilled within one year
Long term- can be used, settled, or fulfilled in longer than one year
Chap 2
What is the current ratio
Current assets
Current ratio = ———————
Current liabilities
Chap 2
What does the current ratio tell us
The companies ability to pay off short term liabilities
Chap 3
Identify 3 revenue transactions
- Standard revenue transaction
- Cash paid before goods or service received
- Cash is paid after good or service is received
Chap 3
Identify three types of expense transactions
- Standard expense transaction
- Cash paid before goods or service is received
- Cash is paid after good or service is received
