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ACT 701 > Mod1 > Flashcards

Mod1 Flashcards

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1
Q

Business organization

A

Accounting Entity or Business Entity

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2
Q

the activities of each business should be kept separate from the activities of other businesses and from the personal financial activities of the owner(s).

A

Business Entity Concept

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3
Q

unincorporated business owned by an individual and often managed by that same person

A

single proprietorship

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4
Q

the inflows of assets (such as cash) resulting from the sale of products or the rendering of services to customers.

A

Revenues

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5
Q

measure revenues by the prices agreed on in the exchanges in which a business delivers goods or renders services

A

Revenues

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6
Q

the costs incurred to produce revenues

A

Expenses

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7
Q

measured by the assets surrendered or consumed in serving customers

A

Expenses

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8
Q

Service companies; Merchandising companies; Manufacturing companies

A

3 companies in Acct

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9
Q

services for a fee

A

Service companies

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10
Q

purchase goods that are ready for sale and then sell them to customers

A

Merchandising companies

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11
Q

include auto dealerships, clothing stores, and supermarkets

A

Merchandising companies

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12
Q

buy materials, convert them into products, and then sell the products to other companies or to the final consumers

A

Manufacturing companies

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13
Q

steel mills, auto manufacturers, and clothing manufacturers.

A

Manufacturing companies

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14
Q

the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows.

A

four common financial statements

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15
Q

two primary objectives of every business

A

profitability and solvency

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16
Q

ability to generate income

A

Profitability

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17
Q

ability to pay debts as they become due

A

Solvency

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18
Q

present the profitability and strength of a company

A

the income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows.

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19
Q

financial statement that reflects a company?s profitability

A

income statement

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20
Q

shows the change in retained earnings between the beginning and end of a period

A

statement of retained earnings

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21
Q

shows the cash inflows and outflows for a company over a period of time

A

balance sheet

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22
Q

The headings and elements of each statement are similar from company to company.

A

TRUE

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23
Q

shows the cash inflows and outflows for a company over a period of time

A

statement of cash flows

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24
Q

sometimes called an earnings statement, reports the profitability of a business organization for a stated period of time

A

income statement

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25
Q

In accounting

A

measure profitability for a period

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26
Q

are the inflows of assets (such as cash) resulting from the sale of products or the rendering of services to customers

A

Revenues

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27
Q

measure revenues by the prices agreed on in the exchanges in which a business delivers goods or renders services.

A

Revenues

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28
Q

are the costs incurred to produce revenues

A

Expenses

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29
Q

measured by the assets surrendered or consumed in serving customers

A

Expenses

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30
Q

the result If the revenues of a period exceed the expenses of the same period

A

net income

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31
Q

net income equation

A

Net income = Revenues ? Expenses

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32
Q

often called the earnings of the company

A

Net income

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33
Q

When expenses exceed revenues

A

net loss

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34
Q

means by which a corporation rewards its stockholders (owners) for providing it with investment funds.

A

dividend

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35
Q

is a payment (usually of cash) to the owners of the business; it is a distribution of income to owners rather than an expense of doing business

A

dividend

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36
Q

Corporations are not required to pay dividends because dividends are not an expense

A

TRUE

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37
Q

effect of a dividend

A

reduce cash and retained earnings by the amount paid out

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38
Q

company no longer retains a portion of the income earned but passes it on to the

A

stockholders

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39
Q

sometimes called the statement of financial position, lists the company?s assets, liabilities, and stockholders? equity (including dollar amounts) as of a specific moment in time

A

balance sheet

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40
Q

for a period of time.

A

Income Statement(A) and Statement of Retained Earnings(B)

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41
Q

like a photograph; it captures the financial position of a company at a particular point in time

A

Balance Sheet ?

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42
Q

financial statement provides information about the solvency of the business.

A

balance sheet

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43
Q

debts owed by a business

A

Liabilities

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44
Q

liabilities by purchasing items on credit

A

Liabilities

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45
Q

amounts owed to suppliers for previous purchases

A

accounts payable

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46
Q

written promises to pay a specific sum of money

A

notes payable

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47
Q

1ÿ an amount paid by the borrower to the lender (in addition to the amount of the loan) for use of the money over time.

A

Interest

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48
Q

owners? interest in a corporation

A

stockholders? equity

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49
Q

shows the amount of the owners? investment in the corporation

A

Capital stock

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50
Q

generally consists of the accumulated net income of the corporation minus dividends distributed to stockholders

A

Retained earnings

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51
Q

shows the cash inflows and cash outflows from operating, investing, and financing activities

A

statement of cash flows

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52
Q

generally include the cash effects of transactions and other events that enter into the determination of net income

A

Operating activities

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53
Q

generally include business transactions involving the acquisition or disposal of long-term assets such as land, buildings, and equipment.

A

Investing activities

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54
Q

generally include the cash effects of transactions and other events involving creditors and owners (stockholders)

A

Financing activities

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55
Q

show the results of management?s past decisions

A

The income statement, the statement of retained earnings, the balance sheet, and the statement of cash flows

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56
Q

the first to know the financial results; then, it publishes the financial statements to inform other users

A

Management

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57
Q

The most recent financial statements for most companies can be found on their websites under

A

Investor Relations

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58
Q

Assets = Equities

A

Assets

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59
Q

things of value owned by the business, or the economic resources of the business

A

Assets

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60
Q

all claims to, or interests in, assets

A

Equities

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61
Q

Assets A Equation

A

Assets A = Liabilities L + Stockholders? Equity SE/ A = L + SE

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62
Q

TRUE

A

liabilities are not only claims against assets but also sources of assets. right side of this equation

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63
Q

provide all the assets in a corporation

A

creditors and owners

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64
Q

a business activity or event that causes a measurable change in the accounting equation, Assets = Liabilities + Stockholders? equity

A

accounting transaction

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65
Q

An exchange of cash for merchandise

A

transaction

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66
Q

usually supports the evidence of the transaction

A

source document

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67
Q

any written or printed evidence of a business transaction that describes the essential facts of that transaction

A

source document

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68
Q

Examples of source documents

A

receipts for cash paid or received, checks written or received, bills sent to customers for services performed or bills received from suppliers for items purchased, cash register tapes, sales tickets, and notes given or received

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69
Q

Both preparers and users of financial statements must understand these assumptions

A

Business entity concept (or accounting entity concept). Money measurement concept. Exchange-price (or cost) concept (principle). Going-concern (continuity) concept. Periodicity (time periods) concept

70
Q

concept assumes that each business has an existence separate from its owners, creditors, employees, customers, other interested parties, and other businesses.

A

Business entity concept (or accounting entity concept).

71
Q

Economic activity is initially recorded and reported in a common monetary unit of measure?the dollar in the United States. This form of measurement is known as money measurement.

A

Money measurement concept

72
Q

Most of the amounts in an accounting system are the objective money prices determined in the exchange process. As a result, we record most assets at their acquisition cost.

A

Exchange-price (or cost) concept (principle).

73
Q

is the sacrifice made or the resources given up, measured in money terms, to acquire some desired thing, such as a new truck (asset).

A

Cost

74
Q

Unless strong evidence exists to the contrary, accountants assume that the business entity will continue operations into the indefinite future. Accountants call this assumption the going-concern or continuity concept

A

Going-concern (continuity) concept

75
Q

an entity?s life can be meaningfully subdivided into time periods (such as months or years) to report the results of its economic activities.

A

Periodicity (time periods) concept

76
Q

ÿShareholders want the company?s executives to carry out activities that have a positive effect on stock prices and the value of dividends distributed to shareholders. Also, shareholders would want the company to focus on expansion, acquisitions, mergers and other activities that increase the company?s profitability and overall financial health.

A

Shareholders

77
Q

On the other hand, stakeholders focus on longevity and better quality of service. For example, the company?s employees may be interested in better salaries and wages, rather than on higher profitability. The suppliers may be interested in timely payments for goods delivered to the company, as well as better rates for their products and services. The customers will be interested in receiving better customer service as well as buying high-quality products.

A

Stakeholders/Stockholders

78
Q

provide information that can be used in making economic decisions

A

accounting

79
Q

to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions?in making reasoned choices among alternative courses of action

A

function of acct

80
Q

a feature of acct helps in making decisions in what

A

allocate scarce resources

81
Q

are all parties interested in the financial health of a company

A

Stakeholders

82
Q

are stakeholders who make decisions that directly affect the internal operations of the enterprise.

A

Internal users

83
Q

are stakeholders who make decisions concerning their relationship to the enterprise.

A

External users

84
Q

is concerned primarily with financial reporting for internal users, especially management.

A

Management accounting

85
Q

focuses on the development and communication of financial information for external users

A

Financial accounting

86
Q

External and Internal

A

Financial Accounting

87
Q

US GAAP or IFRS

A

Financial Accounting

88
Q

General, overall health of the company

A

Financial Accounting

89
Q

Annual and quarterly

A

Financial Accounting

90
Q

Internal

A

Managerial Accounting

91
Q

Flexible

A

Managerial Accounting

92
Q

Product costing, project management, decision making

A

Managerial Accounting

93
Q

As needed

A

Managerial Accounting

94
Q

Stockholders and potential investors need info concerning safelt and profitability of their investiments

A

Investors

95
Q

Creditors, Stockholders, Investors

A

External investors

96
Q

need information about the profitability and stability of the company to decide whether to lend money to the company and, if so, what interest rate to charge

A

Creditors

97
Q

long for longevity in a corporation, employee, can be internal and external

A

Stakeholders

98
Q

profitability because they have share of investments in the corporation . Directly afects them, has equity and capital investments, shares in the company

A

Shareholders

99
Q

Not all stakeholders are can be shareholders

A

Shareholders can be stakeholders

100
Q

is the private sector body that sets accounting standards in the United States (commonly referred to as generally accepted accounting principles (GAAP)).

A

Financial Accounting Standards Board (FASB)

101
Q

private-sector

A

Financial Accounting Standards Board (FASB)

102
Q

is led by five full-time members drawn from a variety of backgrounds?auditing, corporate accounting, financial services, and academia; 5 fulltime, 5 year term

A

Financial Accounting Standards Board (FASB)

103
Q

Appointment of new Board members for FASB

A

Financial Accounting Foundation (FAF).

104
Q

supports and selects members for Governmental Accounting Standards Board (GASB).

A

Financial Accounting Foundation (FAF).

105
Q

to study issues and to establish accounting standards

A

major functions of the FASB

106
Q

issues and to establish accounting standards is sissued by FASB through

A

Accounting Standards Updates.

107
Q

FASB also issued that provide a framework within which specific accounting standards can be developed.

A

Statements of Financial Accounting Concepts

108
Q

various FASB pronouncements

A

U.S. Generally Accepted Accounting Principles (GAAP).

109
Q

created by an act of Congress in 1934

A

Securities and Exchange Commission (SEC)

110
Q

role of SEC

A

to regulate the issuance and trading of securities by corporations to the general public

111
Q

requires companies to have their external financial statements audited by independent accountants

A

Securities and Exchange Commission (SEC)

112
Q

that represent practices followed by the staff administering SEC disclosure requirements

A

Staff Accounting Bulletins

113
Q

auditors of SEC-required financial information must be registered and periodically inspected by

A

Public Company Accounting Oversight Board (PCAOB)

114
Q

is the professional organization of practicing certified public accountants (CPAs) in the United States

A

American Institute of Certified Public Accountants (AICPA)

115
Q

Published by AICPA monthly

A

Journal of Accountancy

116
Q

responsible for preparing and grading the Uniform CPA Examination

A

American Institute of Certified Public Accountants (AICPA)

117
Q

an organization of accounting professors

A

American Accounting Association (AAA)

118
Q

accounting professors discuss technical research and share innovative teaching techniques and materials

A

American Accounting Association (AAA)

119
Q

AAA publishes a number of academic journals

A

The Accounting Review and Accounting Horizons

120
Q

has the primary goal of equitably collecting revenue. tax and financial accounting are closely related.

A

Internal Revenue Service (IRS)

121
Q

international nature of business requires companies to be able to make their financial statements understandable to users all over the world

A

International Accounting Standards Board (IASB)

122
Q

attempt to harmonize conflicting standards, formed in 1973 to develop worldwide accounting standards.

A

International Accounting Standards Board (IASB)

123
Q

Similar w/ FASB, develops proposals, circulates these among interested organizations, receives feedback, and then issues a final pronouncement.

A

International Accounting Standards Board (IASB)

124
Q

Accounting standards issued by the IASB are referred if issued after to 2001

A

International Financial Reporting Standards (IFRS)

125
Q

Accounting standards issued by the IASB are referred if issued prior to 2001

A

International Accounting Standards (IAS)

126
Q

SEC began allowing non-U.S. companies with shares trading on U.S. stock exchanges to issue their financial reports using IASB standards

A

2008

127
Q

reports, as of a certain point in time, the resources of a company (the assets), the company?s obligations (the liabilities), and the equity of the owners.

A

balance sheet

128
Q

reports, for a certain interval, the net assets generated through business operations (revenues), the net assets consumed (the expenses),

A

income statement

129
Q

the net assets generated through business operations (revenues), the net assets consumed (the expenses), and the difference, which is called

A

net income

130
Q

reports, for a certain interval, the amount of cash generated and consumed by a company through the following three types of activities: operating, financing, and investing activities

A

statement of cash flows

131
Q

FASB conceptual framework is influenced by five basic assumptions

A

Economic entity, going concern, Arm’s-length transactions, stable monetary unit, and accounting period

132
Q

FASB conceptual framework is influenced by five basic assumptions

A

EGASA

133
Q

business enterprise is viewed as a specific economic entity separate and distinct from its owners and any other business unit

A

economic entity

134
Q

it is assumed that the enterprise will last indefinitely

A

going concern

135
Q

Transactions are assumed to occur between independent parties, each of which is capable of protecting its own interests

A

Arm’s Length Transcations

136
Q

assumption allows for the ignoring of changes in the dollar?s purchasing power resulting from inflation

A

stable monetary unit

137
Q

Because accounting information is needed on a timely basis, the life of a business is divided into specific periods

A

Accounting Periods

138
Q

Normal period of reporting

A

Annually or Quarterly / yearly and interim quarterly reports

139
Q

objectives of financial reporting

A

Usefulness, Undersatndability, Target Audience, Assessing Future Cash Flows, Evaluating Economic Resources, Focus Primary on Earnings

140
Q

Usefulness, Undersatndability, Target Audience, Assessing Future Cash Flows, Evaluating Economic Resources, Focus Primary on Earnings

A

UUFATE

141
Q

For an item to be formally recognized, it must meet one of the definitions of the elements of the financial statements.

A

Recognition Criteria

142
Q

Assets recorder on balance sheet

A

Receivables

143
Q

Asset=Equity

A

DC ADLER

144
Q

Measurement Criteria

A

Historical Cost, Current Replacement Cost, Fair Value, Net Realizable Value, Present (or discounted) value

145
Q

Measurement Criteria

A

CHPFN

146
Q

willing buyers, unwilling buyers

A

fair value

147
Q

for cash and cash equivalents

A

present or discounted value

148
Q

Included in the recommended set of general-purpose financial statements are reports that show the following

A

Reporting

149
Q

recommended reporting should show

A

Financial position at the end of the period, Earnings for the period (Net Income), Investments by the distributions to owners during the period, Comprehensive income (earnings + unrealized gains and losses) for the period

150
Q

show reports

A

ICECF

151
Q

For financial statement reporting to be most effective, all relevant information should be presented in an unbiased, understandable, and timely manner. This is sometimes referred to as

A

full disclosure principle

152
Q

preferable to recognition in situations in which relevant information cannot be reliably measured

A

Disclosure

153
Q

working independently of a company?s management, examine the financial statements

A

Auditors

154
Q

about the fairness of the statements and their adherence to proper accounting principles

A

auditor?s opinion

155
Q

Economic Entity

A

E

156
Q

Going Conern

A

G

157
Q

Arm’s Length Transcations

A

A

158
Q

Stable Monetray Unit

A

S

159
Q

Accounting Periods

A

A

160
Q

usefulness

A

U

161
Q

understandability

A

U

162
Q

Focus Primary on Earnings

A

F

163
Q

Assessing Future Cash Flow

A

A

164
Q

Target Audience

A

T

165
Q

Evaluating Economic Resources

A

E

166
Q

Current Replacment Cost

A

C

167
Q

Historical Cost

A

H

168
Q

Present Value

A

P

169
Q

Fair Value

A

F

170
Q

Net Realizable Value

A

N

ACT 701 (3 decks)

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