midterm #1 Flashcards
1
Q
GAAP
A
- Generally Accepted Accounting Principles
- FASB maintains GAAP principles
- Provides the general framework for what info is included in the financial statements & how this info is prepared and presented
2
Q
Sarbanes-Oxley 2002
A
Gov’t passed act which requires public companies to issue a yearly report indicating whether they have an effective system of internal control over financial reporting
3
Q
PCAOB
Public Company Accounting Oversight Board
A
- Board created after Sarbanes-Oxley Act (SOX)
- Charged with oversight of the public accounting profession
- Inspects the quality of audits (developed standard for CPAs)
- Every CPA has to register with the PCAOB
- Conducts investigations and administers penalties
4
Q
FASB
Financial Accounting Standards Board
A
- Developing and maintaining GAAP
- Created by the SEC (Security and Exchange Commission)
- Independent rule-making body
5
Q
GAAP Principles
A
- Business Entity
- Cost Principle
- Going Concern Assumption
- Objectivity Principle
- Stable Dollar Assumption
- Adequate Disclosure
- Objectivity
- Conservatism
6
Q
3 Primary Financial Statements
A
- Balance sheet (shows financial standing on specific date)
- Income Statement (prepared over a period of time)
- Statement of Cash Flows (prepared over a period of time)
7
Q
3 Types of Accounting
A
- Financial Accounting
- Management Accounting
- Tax Accounting
8
Q
Financial Accounting
A
- external use only
- Their information reflects the financial resources, obligations, and activities of an economic entity
- Assists users such as investors and creditors in the decision-making process
9
Q
Management Accounting
A
- internal use only (executives, product managers, sales managers)
- Involves the development and interpretation of accounting information for management
- Uses this info to assist in the decision-making process
10
Q
Tax Accounting
A
- Historical use
- Information must conform with income tax reporting requirements
- Specialized field of accounting
- used by individuals, businesses, corporations and other entities
11
Q
IASB
International Accounting Standards Board
A
- Issues International Financial Reporting Standards (IFRS)
- International version of FASB
12
Q
8 Steps of Accounting
A
- Record all economic events in the General Journal
- Classify like transactions and post information to the General Ledger
- Summarize on Unadjusted trial balance
- Make end-of-period adjusting entries
- Prepare adjusted trial balance
- Prepare financial statements
- Journalize and post closing entries (only year-end)
- Prepare after-closing trial balance (only balance sheet accounts left)
13
Q
Balance Sheet Accounts
A
Assets. Liabilities
- Cash - Notes/Accounts Payable
- Accounts Receivable - Income Taxes Payable
- Inventory - Unearned Revenue
- Supplies
- Prepaid expenses
- Land Owner’s Equity
- Buildings - Retained Earnings
- Equipment - Capital Stock
- Accum. Deprec.
14
Q
Income Statement Accounts
A
Revenue Expenses
- Revenue Earned - Insurance Expense
- Unearned Revenue - Rent Expense
- Supplies expense
- Salary Expense
- Interest Expense
- Depreciation Expense
- Repair Expense
- Travel Expense
15
Q
Accounting System
A
- Interpret and record the effects of business transactions
- Classify the effects of similar transactions to compute totals to be used in reports.
- Summarize and communicate the information contained in the system to decision makers
