ACG Test 1
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Created by:
CollegeChick on September 1, 2011
Description:
Ms. Thompson's Test on Chapters 1-3
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60 terms
Terms | Definitions |
|---|---|
 3 different financial statements | statement of cash flows balance sheet income statement |
| balance sheet is AKA | statement of financial position |
| What is the formula for computing the Statement of Retained Earnings? | Beginning retained earnings + Net income - dividends = ending retained earnings |
| What is the equation for the balance sheet | Assets = Liabilities + Owners' Equity |
| What is the extended formula for the balance sheet? | A = L + OE OE = CS AND RE RE = NI - dividends NI = revenue - expenses |
| What are assets? | Economic resources owned by an entity |
| What are liabilities? | things we'll be obligated to pay in the future debts representing negative future cash flows; it's the creditors' claims on the assets of the business |
| What are Owners' equities? | the owners' claims to the assets of the business & their overall financial interest in the company |
| How are liabilities listed on the balance sheet? | in the order they're expected to be paid. |
| Are assets on the balance sheet shown at their historical cost or current cost? | historical cost |
| How are assets organized on the balance sheet? | ordered from what's most liquid to what's less liquid cash accounts receivable buildings land |
| What are 2 things that increase Owners Equity? | investments by owners net income |
| What are 2 things that decrease Owners' Equity? | payments to the owners (paying dividends) net losses |
| What is common stock? | The amount stock owners have invested in the business; transferrable units of ownership in a corporation |
| How are all financial statements headed? | Business Name Name of Financial Statement Date or Range of Dates for Statement |
| What are disclosures? | Information given in financial statements to help others to interpret them; listed as notes, not a part of the statement. |
| Describe the balance sheet | describes where the enterprise stands at a specific date; a snapshot of the company |
| what are retained earnings? | profits gained above expenses |
| Accounting is known as the ___________ of business | language |
| What are characteristics of externally reported information? | means to an end, broader than financial statements, historical in nature, results from inexact/approximate measures, based on general purpose assumptions, usefulness enhanced via mgmt explanations |
| What is FASB? | -most authoritative source of GAAP -Financial Act Standards Board -Independent rule making body -has compiled all standards into Act Standards codification |
| What is the cornerstone of the act profession? | ethical behavior |
| Accounting is sometimes called the ____________ | language of business |
| Accounting is a) means to an end b) end in itself | means to an ends |
| What are the steps of the accounting process? | 1) Id. the economic events that can be recorded 2) accumulate the info into a readable format 3) give info to decision makers to improve their decisions 4) decisions impact future economic activities cycle then repeats |
| What are the types of act information? | Financial Managerial Tax |
| Describe Financial Act Information: | designed to assist investors and creditors in deciding where to place their investment resources |
| Describe managerial act information | involves development and interpretation of act info intended specifically to assist mgmt in operating the business |
| Describe tax act information | a specialized field within act that focuses on the preparation of income tax returns and tax planning strategies |
| What are the objectives of mgmt acct info? | Developed to help managers achieve the goals of the organization to evaluate the performance of mgrs responsible for decisions about directing resources. |
| What are GAAP? | Generally Accepted Acct Principles are the framework rules used in the US by all companies |
| Who sets the GAAP principles? | FASB |
| What is the SEC? | -Securities and Exchange Commision -has the authority to establish acct principles for companies reporting to it -is the watchdog of acct companies and has the power to enforce the rules -uses FASB rules |
| What is a balance sheet? | Statement of Financial Position, a snapshot of the company Shows the resources of a business and the claims against those resources |
| What are the characteristics of mgmt accounting? | intended for planning and control decisions -timely -provided to those who have decision making power -oriented toward the future -measures efficacy of resource usage -means to an end |
| What is the Sarbanes Oxley act of 2002? | Created the Public Company Accounting Oversight Board (PCAOB) bans auditors from providing non audit services for their audit clients bc these interfere w objectivity |
| What is the PCAOB? | a quasi govt boy charged with the oversight of the public acct profession Public Company Acct Oversight Board |
| What is the AICPA? | The American Inst. of Certified Public Accountants Licenses Public accountants provides members with resources to enable them to provide the best services AICPA's auditing standards board develops the standards by which private co. audits are performed |
| What are the objectives of external financial reporting? | Provide info useful in making investment and credit decisions; then Provide info useful in assessing the amt, timing and uncertainty of future cash flows, then provide info about economic resources, claims against those resources and changes in the balance of resources and claims |
| What are internal controls? | a process designed to provide reasonable assurance that the org. produces reliable financial reports, complies with laws and conducts operations efficiently and effectively. |
| What are the basic fx of an acct system? | interpret and record business transactions classify similar transactions so they appear on proper financial reports summarize info and communicate it to decision makers |
| What are the 3 primary financial statements? | balance sheet (statement of financial position) statement of cash flows income statement |
| What is an income statement? | measures the revenues earned and the expenses incurred to generate those revenues during a given period of time |
| What is the statement of cash flows? | Provides information about how a company receives its cash and where it spends cash during a given period of time |
| Where is profitability often measured? | on the income statement |
| The statement of financial position is AKA __________________ | balance sheet |
| What is the balance sheet formula? | Assets = Liabilites + Owners' Equity |
| What is the income statement formula? | Revenue - expenses = Net income |
| What is the cash flow statement formula? | beginning cash + cash inflows - cash outflows = ending cash |
| What is the formula for the statement of retained earnings? | Beginning Retained Earnings + Net Income - dividends = Ending retained earnings |
| What is the concept of the business entity? | the business entity is separate from the personal affairs of its owner |
| What is the stable dollar assumption? | we will only record acct info that can be expressed in monetary units |
| What is the cost principle? | acct info is based upon actual cost incurred (historical cost) |
| What is the Objectivity Principle? | acct info must be unbiased and based upon independent evidence |
| What is the going concern assumption? | states that the business entity is assumed to continue operations into the foreseeable future. |
| Where do investments by and payments to the owners go? | on the balance sheet |
| What are operating activities? (on statement of cash flows) | Include the cash effect of revenue and expense transactions. |
| What are Financing activities? (on statement of cash flows) | Include the cash effects of transactions with the owners and creditors |
| What are investing activities? (on statement of cash flows) | include the cash effects of purchasing and selling assets |
| What does liquid mean? | Having the ability to pay debts as they become due |
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