Accounting test 1: chapters 1 2 and 3

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  1. "language of business" - a system of maintaining records of a companys operations and communicating that information to decision makers
  2. Two primary functions of financial accounting
    • 1. measure business activities of a company and then to
    • 2. communicate those measurements to external parties for decision-making purposes
  3. Resources of a company
  4. We list our assets in order of
  5. List assets in correct order
    • cash
    • marketable securities
    • accounts receivable
    • supplies
    • long term investments
    • property, plant, and equipment
    • accumulated depreciation
    • intangible assets
  6. Classified balance sheet is recording financial transactions that have occurred within what time period
    one day
  7. Example of an Income statement:
    • Revenues
    •    Service Revenue
    • Operating Expenses
    •    Rent Expense
    •    Salaries Expense
    •    Utilities Expense
    •    Advertising Expense
  8. Trained individuals hired by a company as an independent party to express a professional opinion of the conformity of that company's financial statement with GAAP
  9. a financial statement that presents the financial position between two different business activities
    balance sheet
  10. Define comparability
    the ability of users to see similarities and differences between two different business activities
  11. Consistency
    the use of similar accounting procedures either over time for the same company or across companies at the same point in time
  12. An entity that is legally separate from its owners
  13. Financial accounting info is provided only when the benefits of doing so exceed the costs
    cost constraint
  14. cash payments to stockholders
  15. An independent, private body that has primary responsibility for the establishment of GAAP in the US
    Financial Accounting Standards Board FASB
  16. Periodic reports published by the company for the purpose of providing information to external users
    financial statements
  17. Information being available to users early enough to allow them to use it in the decision process
  18. Users must understand the information within the context of the decision they are making
  19. A consensus among different measures
  20. Formally titled the Public Company Accounting Reform and Investor Protection Act of 2002, this act provides regulation of auditors and the types of services they furnish to clients, increases accountability of corp. executives, addresses conflicts of interest for security analysts, and provides for stiff criminal penalties for violators
    Sarbanese-Oxley Act (SOX)
  21. The use of similar accounting procedures either over tome for the same company or across companies at the same point in time
  22. The standards being developed and promoted by the International Accounting Standards Board IASB
    International Financial Reporting Standards
  23. Define the difference between public and private accounting
    • Public accounting involves working at an accounting firm where you handle multiple clients. These accounting firms focus on 3 major areas: 1, auditing 2, tax prep/planning and 3, business consulting
    • Private accountants usually work only for the company that has employed them
  24. Revenues = $27,000; expenses = $18,000; Net Income = ___________
  25. Increase in stockholders = $17,000; Issuance of common stock = $11,000; Net income = $12,000; dividends = ___________
  26. Assets = $24,000; Stockholders Equity = $15,000; Liabilities = _________
  27. The 6 steps in measuring external transactions
    • 1. Analyze source documents
    • 2. General journal entry
    • 3. Post to General Ledger
    • 4. Prepare un-adjusted Trial Balance
    • 5. adjusted journal entry
    • 6. adjusted trial balance
  28. Summarizes all transactions related to a particular item over a period of time
    an account
  29. Who are external users?
    creditors, stock holders, future investors
  30. What is the basic accounting equation
    assets = liabilities + stockholders equity
  31. The only person authorized to give an opinion on financial statements
    CPA - Certified Personal Accountant
  32. Financial accounting information is provided only when the benefits of doing so exceed the costs
    cost constraint
  33. All economic events with a particular economic entity can be identified
    economic entity assumption
  34. In the absence of information to the contrary, a business entity will continue to operate indefinitely
    going concern assumption
  35. a unit or scale of measurement can be used to measure financial statement measurements
    monetary unit assumption
  36. The economic life of an enterprise can be divided artificial time periods for financial reporting
    periodicity assumption
  37. Credits are found on the ______ side and will decrease ____________ and increase __________
    • Right side
    • Decrease: assets, expense, or dividends
    • Increase: liability, stockholders, equity, or revenues
  38. Debits are found on the _______ side and will decrease __________ accounts and increase ___________ accounts
    • Left side
    • Decrease: liability, stockholders equity, or revenue
    • Increase: asset, expense, or dividend
  39. Transactions the firm conducts with a separate economic entity
    external transactions
  40. all accounts used to record the companys transactions
    general ledger
  41. Events that affect the financial position of the company but do not include an exchange with a separate economic entity
    Internal transactions
  42. the format used for recording business transactions
    journal entry
  43. A simplified form of a general ledger account with space at the top for the account title and two sides for recording debits and credits
  44. A list of all account and their balances as a particular date, showing that total debits equal total credits
    trial balance
  45. Record revenues when earned and expenses with related revenues
    accrual-basis accounting
  46. Incurred an expense and hasnt paid cash or recorded an obligation to pay
    accrued expense
  47. List of all accounts and their balances after we have updated account balances for adjusted entries
    adjusted trial balance
  48. Entries used to record events that occur during during the period but have not yet been recorded by the end of the period
    Adjusting entries
  49. Record revenues at the time cash is received and expenses at the time cash is paid
    cash-basis accounting
  50. Entries that transfer the balances of all temporary accounts to the balance of the retained earnings account
    closing entries
  51. Recognize expenses in the same period as the revenues they help to generate
    matching principal
  52. Record revenue in the period in which its earned
    revenue recognition principle
  53. When a company receives cash in advance from a customer for products or services to be provided in the future
    unearned revenues
Card Set:
Accounting test 1: chapters 1 2 and 3
2015-09-16 02:38:40
ACCT 2401 financial accounting lsc lonestar test

Financial accounting 1 2401 ACCT 2401
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