Quiz 1 (Module 1 to Module 2.1) Flashcards
What does AICPA stand for?
American Institute of Certified Public Accountants
How did AICPA define accounting?
Accounting is an art of recording, classifying, and summarizing in a significant manner in terms of money, transactions, and events, which are in part of or at least of a financial character, and interpreting the results thereof.
Who invented the double entry system of accounting?
Benedetto Cotrugi
What were the first organizations of accountants?
Edinburgh Society of Accountants and Glasgow Institute of Accountants and Actuaries
What are the characteristics of business transactions.
- It has to be a sum of money.
- It must be supported by a genuine source document.
- It must have a 2-fold effect on the elements of accounting
a. Debit or value received
b. Credit or value parted with
What are the elements of accounting?
Assets - economic resources that are beneficial in the future
Liabilities - economic obligations or debts you have to pay
Capital - claims held by owners
What are the differences between income, revenue, and gains?
Income is increase in capital that is not from transactions with owners. Revenue is income from the business’ normal operations while gains is income from other than the normal operations of the business.
What are the 4 phases in the accounting process?
Recording -
Classifying
Summarizing
Interpreting
What is the difference between a general journal and a special journal?
A general journal records all kinds of transactions while a special journal records only those that are repetitive.
What is the difference between a general ledger and a subsidiary ledger?
A general ledger is the principal ledger while the subsidiary ledger contains individual accounts with common characteristics.
What are the 6 financial statements?
- Income statement
- Statement of comprehensive income
- Statement of changes in owner’s equity
- Statement of financial position
- Statement of cash flow
6, Notes to financial statements
What is liquidity?
The ability to pay short term obligations.
What is solvency?
The ability to pay long term obligations.
What are analyzed in the interpreting phase?
Liquidity, solvency, profitability, flexibility.
What are current assets?
Cash, those that are readily convertible to cash, those that can be sold or consumed within a year or during the normal operating cycle of a business whichever is longer.
