Accounting-Module 1

dividends

are cash or other assets paid to the owners

liabilities

creditors' claims on assets

assets

resources owned by a company

revenue

the _____ recognition principle states that revenue is recognized when goods or services are provided to customers and at an amount expected to be received

assets

= liabilities + equity

-revenues -common stock -dividends -expenses

Given the accounts below, choose all of the ones that affect equity. (Check all answers that apply.) -revenues -common stock -dividends -expenses

business entity assumption

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

assets

are resources company owns or controls

= liabilities + (Common Stock - Dividends + Revenues - Expenses)

assets

equity

assets - liabilities =

accounts receivable

assets created by selling goods and services are

liabilities + contributed capital + retained earnings= liabilities + common stock - dividends + revenues - expenses

assets=

-contributed capital -retained earnings

equity is composed of ______ ______ and _______ ______

-lenders (creditors) -shareholders (investors) -external (independent) auditors -nonmanagerial and non executive employees and labor unions -regulators -voters and government officials -contributors to nonprofits -suppliers -customers

examples of external users in accounting:

-purchasing managers -human resource managers -production managers -distribution managers -marketing managers -service managers -research and development managers

examples of internal users are:

Generally Accepted Accounting Principles (GAAP)

financial accounting is governed by concepts and rules known as: -wants information to have relevance and faithful representation

managerial accounting

focus on the needs of internal users

financial accounting

focuses on the needs of external users

-relevance -faithful representation

generally accepted accounting principles (GAAP) wants information to have:

we live in an information age whereby accounting information impacts everyone

identify which of the following statements is correct as to why accounting is important

-identifying -recording -communicating

What are the functions of accounting?

internal users

____ _____ of accounting information directly manage the organization

external users

____ _____ of accounting information do not directly run the organization and have limited access to its accounting information

managerial accounting

____ includes opportunities in general accounting, cost accounting, and internal auditing

Financial Accounting Standards Board (FASB)

________ is given the task of setting GAAP from the Securities and Exchange Commission (SEC)

Expense recognition principle (matching principle)

a company records the expenses it incurred to generate the revenue reported -example is rent costs of office space

full disclosure principle

a company reports the details behind financial statements that would impact users decisions. those disclosure are often footnotes to the statement

-retained earnings -contributed capital

a corporations equity has two main parts. identify these two parts

balance sheet

a financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called an

visualization

a graphical presentation of data to help in understanding their significance is called data _____

data analytics

a process of analyzing data to identify meaningful relations and trends

analytics

a process of analyzing data to identify meaningful relations and trends is called data _____

measurement principle (cost principle)

accounting information is based on actual cost

Going Concern Assumption

accounting information presumes that the business will continue operating instead of being closed or sold

why does a business need accounting information

accounting records business transactions and communicates financial information

pressure

an employee that is having trouble paying his personal bills high exhibit the following fraud factor

- does not directly organization operations

an external user of accounting information: - uses internal reports -helps monitor costs and ensure quality -directly manages organization operations -does not directly run the organization

-credit checks -checking accounts -tax forms -payroll

our most common contact with accounting is through ______, ________, ________ ,________, and ________

equity

refers to the claims of the owners

dividends

resources paid to the stockholders

the concepts and rules that govern financial accounting practice

what are generally accepted accounting principles?

-measurement principle (cost principle) -revenue recognition principle -expense recognition principle (matching principle) -full disclosure principle

what are the four general accounting principles

-objectives -qualitative characteristics -recognition and measurement -elements

what are the parts of the FASB conceptual framework

-the accounts payable account will be increased -the business will pay or the supplies at a later time - a liability has been incurred

when supplies are purchased on credit it means that: -the accounts payable account will be increased -the business will pay or the supplies at a later time - a liability has been incurred -the business will be paying for the supplies right away

common stock, equipment, accounts payable

which accounts appear on a balance sheet

-retained earnings and dividends

which accounts would belong on the statement of retained earnings

-an amount owned -resources with expected future benefits -resources controlled by the business

which of the following statements below define an asset: -an amount owned -an amount owed to a creditor -resources with expected future benefits -resources controlled by the business -an amount owed to the owners

corporation

a business legally separate from its owners

-external users -internal users

People using accounting information are divided into two groups:

dividends

-outflows of cash or other assets paid to the owners of a corporation

balance sheet

-the statement reports the equality of the accounting equation at any point in time -the statement reports the financial position of a company at a point in time -the statement reports assets, liabilities, and equity at a point in time

business entity assumption

A business is accounted for separately from other business entities, including its owner.

-financial -managerial -taxation -accounting-related

Accounting has four areas of opportunities:

1. Income Statement 2. Statement of Retained Earnings 3. Balance Sheet 4. Statement of Cash Flows

Describe the order in which a company prepares financial statements

-increase cash by 4000; increase revenues by 4000

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation

-opportunity -pressure -rationalization

The fraud triangle shows three factors that push a person to commit fraud which are:

monetary unit assumption

Transactions and events are expressed in monetary, or money, units.

internal

is a CEO an internal or external user:

external

is a bank lender an external or internal user:

internal

is a executive employee an internal or external user

data visualization

is a graphical presentation of data to help people understand their significance

internal

is a marketing manager an internal or external user

external

is a shareholder an internal or external user:

receivable

is an asset that promises a future inflow of resources

accounting

is an information and measurement system that identifies, records, and communicates an organization's business activities

external

is the a regulator an internal or external user:

-increasing supplies, and increasing accounts payable

on 8/1, supplies costing 500 were purchased on credit. record this transaction in the accounting equation by:

revenue recognition principle

revenue is recognized when goods or services are provided to customers and at the amount expected to be received from the customer -the amount received is usually in cash, but it can also be a customer's promise to pay at a future date, called credit sales

- concepts

the FASB conceptual framework consists of all of the following except: -elements -qualitative characteristics -objectives -recognition and measurement -concepts

-objectives -qualitative characteristics -elements -measurement on measurement

the FASB conceptual framework consists of the following:

income statement

the ____ is the first financial statement to be prepared

measurement

the _____ principle states that accounting information is based on actual cost

liability

the accounts payable account is a____ account

income statement

the financial statement that reports the business earned a profit and also lists the revenues and expenses is called the

- measurement -full disclosure -revenue recognition -expense recognition

the four general accounting principles include:

time period assumption

the life of a company can be divided into time period, such as months and years

equity

the owner's claim on assets and is equal to assets minus liabilities -also called net assets or residual equity

equity

the owners claim on assets (the residual)

provide accounting information that serves external users

the primary objective of financial accounting is to

income statement

the statement reports revenues and expenses over a period of time

-opportunity, rationalization, pressure

the three factors that must exist for a person to commit fraud include _____, ______, and ______

statement of retained earning

this statement explains the changes in equity over a period of time

-supplies -cash

to record the purchase of supplies for cash, the correct entry into the accounting equation would include an increase to ______________ and a decrease to ______

-higher expenses result in lower total equity -if expenses increase, then total equity decreases

which of the following statements represents how expenses affect equity? -high expenses result in lower total equity -if expenses increase, then total equity decreases -if expenses decrease, then equity will decrease -if expenses increase, then total equity increases