Accounting Midterm
Creditor
any person or business to whom a business owes money is a creditor
Accounting Equation
assets=Liabilities + Equity assets= Liabilities+ owners,capital-owner, withdrawal+revenues-expenses
going concern assumption
assumes that the entity will remain in operation for the foreseeable future
cost of goods sold
the cost of the merchandise inventory that the business has sold to customers
Account
the detailed record of all increased and decreases that have occurred in an individual asset, liability or equity
Perpetual Inventory System
An inventory system that keeps a running computerized record of merchandise inventory
Examples of transactions recorded in the general journal are:
Asset sales Depreciation Interest income and expense Stock sales
Generally Accepted Accounting Principles (GAAP)
Guidelines for accounting information, the main U.S. accounting rule book. Currently created and governed by FASB
Which is a disadvantage of an enterprise resource planning (ERP) system?
Implementation requires a large commitment of time and people
The two main inventory accounting systems are the
Periodic and perpetual
Bank Checks
Source document and input devices
Monetary unit assumption
The assumption that requires the items on the financial statements to be measured in terms of a monetary unit.
Which of the following is not an external user of a business's financial information? a. taxing authorities b. employee c. investors d. customers
b. employee
Managerial accounting
focuses on information for internal decision makers, such as the company's managers and employees
Accounts Payable
is increased with credit
Gross Profit Formula
net sales revenue- cost of goods sold
Reports
outputs
financial statements
outputs
Server
processing and storage
Software
processing and storage
Financial Accounting
provides information for external decision makers
The outputs of a computerized accounting information system are called
reports
Keyboard
source documents and input devices
bar code scanner
source documents and input devices
Cost Principle
states that acquired assets and services should be recorded at their actual costs (also called historical cost)
Accounting is the information system
that measure business activities, processes the information into reports, and communicates the results to decision makers
liability
a debt that the business owes: accounts payable, notes payable, accrued liability, unearned revenue
economic entity assumption
an economic (business) entity is an organization that stands apart as a separate economic unit.
Periodic Inventory Systems
an inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand
Certified Public Accountants (CPA)
are licensed professional accountants who serve the general public.
corporation
A business under state law that is a separate legal entity
Which account does a merchandiser use that a service company does not use? a. Cost of Goods Sold b. Sales Revenue c. merchandise inventory d. all of the above
D. All of the above
Sole Proprietorship
Business owned by a single owner
Which of the following requires accounting information to be complete, neutral, and free from material error? a. Going Concern Assumption b. Cost Principle c. Faithful Representation Concept D. Economic entity assumption
Faithful Representation Concept
Vendor
The individual or business from whom a company purchases goods
International Accounting Standards Board (IASB)
The private organization that oversees the creation and governance of International financial reporting standards (IFRS)
FASB
The private organization that oversees the creation and governance of accounting standards in the US. works with SEC and congressionally created groups like PUBLIC Company Accounting Oversight Board ( PCAOB) and private groups like the AICPA, IMA and International Accounting Standards Board (IASB)
Securities and Exchange Commission (SEC)
U.S. governmental agency that oversees the U.S. financial markets
Owner's Equity
can decrease through owner's withdrawals and or net loss. Owner's equity can increase through owner contributions and or net income
equity equation
capital, beginning+owner contribution+net income or -net loss- owner withdrawal= capital, ending
Which of the following is not a special journal?
cash receipts journal
Certified management accountants (CMA)
certified professionals who specialize in accounting and financial management knowledge, generally work for a single company
Which of the following benefits of an effective accounting information system provides safeguards for a business's assets and reduces the likelihood of fraud and errors?
control
current ration
current assets/current liabilities
Gross profit
excess of net sales revenue over cost of goods sold
Operating expenses
expenses, other than cost of goods sold, that are incurred in the entity's major ongoing operations