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HR Accounting and Finance > Module 1 Intro to Accounting > Flashcards

Module 1 Intro to Accounting Flashcards

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1
Q

Finance Governing Bodies

A 
FASB: 
financial accounting standards board
SEC: 
Securities and Exchange Commission
IASB: 
international accting standards board
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2
Q

What policies provide practices and guidelines surrounding financial statements?

A

GAAP:
Generally accepted accounting principles

  • basis to convert business transactions to accounting entries
  • different rules exist outside of US
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3
Q

Define FASB and what role they play

A

Financial Accounting Standards Board

Body of professional accountants - not government agency

Source of the GAAP

Applies to non government entities

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4
Q

Define the SEC and role it plays

A

Securities Exchange Commission

Confirms standards set by FASB

Requires publicly owned companies to Provide financial info to shareholders using GAAP

Responsible for enforcement/penalties

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5
Q

Define IASB and it’s function

A

International Accounting Standards Board

Issues international financial reporting standards

Companies that operate internationally impacts expense and profit associated with comp and benefits

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6
Q

Sarbanes-Oxley Act of 20002 - define

A

Federal Law regulating accounting oversight, corporate responsibility, financial statements, documentation and reporting

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7
Q

Sarbanes-Oxley Provisions

A

Reporting structure: company must structure reports and processes according to external auditors requirements

Senior Management: must accept responsibility for the effectiveness of internal controls and reporting

Goal: improve accuracy of financial statements for investor reliance

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8
Q

What does Sarbanes-Oxley Compliance require company’s to do?

A

Document existing controls

Analyze Gaps - design appropriate controls

Correct material weaknesses when identified

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9
Q

What are the 5 Major Groups of Accounts?

A 
Assets
Liabilities
Equity
Revenue/Sales
Expenses
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10
Q

What are Assets?

A

What a company owns

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11
Q

What are liabilities?

A

What a company owes

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12
Q

What is Equity in terms of accounting

A

What owners/investors have put into the business

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13
Q

Define Revenue/Sales

A

Money generated from the sale of goods or services provided

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14
Q

Define expenses

A

Cost of doing business

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15
Q

Which major accounts are on the balance sheet?

A

Assets
Liabilities
Equity

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16
Q

What major accounts are on the income statement?

A

Revenue/sales

Expenses

17
Q

What are the 4 financial statements associated with accounting

A

Balance sheet
Income statement
Statement of cash flows
Statement of shareholder equity

18
Q

What is included in the balance sheet?

A 
- What’s owned, owed, and equity
AKA: liabilities and equity
- book value of a company
-represents financial health of company
- snapshot of financial position on specific date
19
Q

What is included in the income statement?

A

Revenues and expenses incurred over a period of time

Shows profitability of a company

20
Q

Define the statement of cash flow

A

Shows the liquidity of a company

Includes cash flows from operating, investing and transactions

Covers a period of time

21
Q

What is contained in the statement of shareholder equity?

A

Capital invested by shareholders

Retained earnings (profit earned and retained by the company)

Covers a period of time

22
Q

What are the minimum number of books that must be kept?

A

Tax Books (IRC)

Shareholder Books (GAAP)

Due to different standards

23
Q

What are the Two types of accounting

A

Accrual Accounting

Cash Accounting

24
Q

Define Accrual Accounting and what types of organizations use it

A

Revenue and expenses are recorded in the time period they apply regardless of actual cash exchange.

Used by public and privately held companies

25
Q

Define Cash Accounting and what type of organization uses it

A

Revenues are recorded based on actual cash in and cash out

Individuals, government, small service organizations

26
Q

What is double entry accounting

A

Double entry accounting states that there are 2 parts to every transaction: debit and credit.

The books are always in balance

27
Q

In double entry accounting define debit

A

Use of funds

28
Q

In double entry accounting define Credit

A

Source of funds

29
Q

Which type of accounting uses double entry accounting and why?

A

Both accrual and cash accounting

Reduces errors

30
Q

What are the 4 problems with Accounting?

A

Accuracy
Valuation
Timing
Methods

31
Q

What are the components of the annual report?

A

The 4 Financial statements

Foot notes

Management discussion/ analysis

Auditors opinion

SEC requirements (annual audited financial statements)

Quarterly statements - publicly traded companies are required to provide (called 10Q) to SEC. Shareholders have a right to see quarterly statements

32
Q

Advantages of financial measures

A

Forecasting future performance

Appraise financial condition, efficiency, profitability

Compare companies

Compare performance year over year

33
Q

Disadvantages of financial measures

A

Do not provide all answers

Affected by different accounting methods

Affected by historical cost principles - based on historical values

34
Q

Which national body initiates financial accounting standards

A

FASB

35
Q

Which group of accounts is recorded on the income statement

A

Expenses

36
Q

Which financial statement shows the financial position of a company at a specific point in time?

A

Balance Sheet

37
Q

Which type of accounting records revenues and expenses when cash is received or spent?

A

Cash Accounting

38
Q

Which of the following best describes a “problem” with accounting?

A. The Market Value of Assets is not shown
B. Management has no discretion regarding the timing of transactions
C. Companies Change Accounting Methods to often
D. The value of assets is based on future projections

A

The Market Value of Assets is not shown

HR Accounting and Finance (7 decks)

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