Exam #1 Study Guide Flashcards
Name the two institutions that set Generally Accepted Accounting Principles.
Financial Accounting Standards Board (FASB)
Securities Exchange Commission (SEC)
What is the name of U.S. accounting rules?
Generally Accepted Accounting Principles (GAAP)
Name the four financial statements
Income Statement
Statement of change of stakeholder´s equity
Balance Sheet
Statement of cash flow
type of information in income statement
Revenue – Expenses = Net Income (Loss)
type of information in Statement of change of stakeholder´s equity
Beg. Retained Earnings + Net Income – Dividends = Ending Retained Earnings + Beg. Common Stock + additional contributions received from owners = Total Stakeholders Equity
type of information in balance sheet
Assets = Liabilities + Common Stock + Retained Earnings
type of information in statement of cash flow
Cash inflows and outflows from investing, financing, and operating activities
What is the basic accounting equation
Assets = Liabilities + Stockholder’s Equity
What is the expanded accounting equation?
Assets = Liabilities + Common Stock + Retained Earnings – Dividends + Revenues – Expenses
What is the difference between Accrual basis method and Cash basis method?
Accrual basis method recognizes revenue when services are provided and recognize expenses when resources are used
Cash basis recognize revenue when cash is received and expense is recognized when cash is paid.
is accrual basis method or cash basis method accepted?
Accrual basis is accepted under GAAP. Cash basis is not accepted under GAAP.
When are adjustments prepared?
Every time financial statements are prepared.
When timing differences occur
Define economic entity assumption.
requires that activities of the business be kept separate from other entities including the company’s owners
What increases stockholders’ equity?
Revenues and investment from owners
What decreases stockholders’ equity?
Expenses and dividends
