ACC Exam 1

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ACC Exam 1
2012-06-04 22:44:22

Accounting Terms
Show Answers:

  1. What are the two major types of Accounting?
    Financial: Provides information for external decision makers

    Managerial: Focuses on information for internal decision makers
  2. What is the GAAP?
    • Generally Accepted Accounting Principles
    • (Provides useful information for investment and lending decision)
    • (Must be relevant, reliable, and comparable)
  3. What is the main Accounting equation?
    • Assets = Liabilities + Owners Equity
    • (Economic resources) = (Claims to economic recources)
  4. What are the 4 different Financial Statements
    • Income Statement
    • Statement of Retained Earnings
    • Balance Sheet
    • Statement of Cash Flows
  5. What is the AICPA?
    The American Institute of Certified Public Accountants
  6. What is an Account?
    • Detailed record of all changes that have occurred in a particular asset, liability, or stockholders’ equity
    • (Asset, Liability, or Stockholder Equity)
  7. What are some Asset Accounts?
    • -Cash
    • -Accounts Receivable
    • -Notes Receivable
    • -Supplies
    • -Building
  8. What are some Liability Accounts?
    • -Accounts Payable
    • -Salary Payable
    • -Interest payable
    • -Notes payable
  9. What are some Stockholder equity accounts?
    • -Common Stock
    • -Retained Earnings
    • -Dividends
  10. What is the difference between Journals and Ledgers?
    • -Journals keep chronological record of transactions while Ledgers hold the accounts and balances
    • -Journals are organized by date while Ledgers are organized my account
  11. How do you increase an Asset account
    With a Debit
  12. How do you Increase a Liability account
    With a Credit
  13. How do you increase a Stockholder equity account
  14. How do you Decrease an Asset account?
    With a Credit
  15. How do you Decrease a Liability Account?
    With a Debit
  16. How do you Decrease a Stockholders equity account
    With a Debit
  17. What is a Trial balance?
    • A summary of the ledger
    • Lists all accounts with their balances
    • (NOT a balance sheet)
  18. What is Accrual Accounting?
    Revenues are recognized when earned and Expenses are recognized when incurred
  19. What is the basic Accounting Period?
    One Calender year or One Fiscal year
  20. What is the Matching Principal?
    • Measures all expenses incurred during the period
    • Match the expenses against the revenues earned during the same period
  21. What are the different Adjusting entries?
    • Prepaid expense
    • Depreciation
    • Accrued expense
    • Accrued revenue
    • Unearned revenue
  22. What is the Accounting Cycle?
    • Process used to produce Financial statements
    • (Journalize transactions => Post to accounts => adjust accounts => prepare financial statements => close accounts)
  23. Why do we close accounts?
    • Gets accounts ready for the next period
    • Zeroes out revenue and expense accounts
    • Updates Retained earnings
  24. What are the 4 steps to Closing?
    • Close Revenues to Income Summary
    • Close Expenses to Income Summary
    • Close Income Summary to Retained Earnings
    • Close Dividends to Retained Earnings
  25. What is Liquidity?
    How quickly and item can be converted to cash
  26. What is the Current Ratio equation?
    Current Assets / Current Liabilities
  27. What is the Debt Ratio equation?
    Total Libilities / Total Assets