ACG2021 Exam # 1 vocab

revenue principle

deals with when to record (recognize) revenue or what amount of revenue to record

double entry accounting means that each transaction does what?

debits at least one account and credits another

SEC (Securities and Exchange Commission)

delegates responsibility for setting GAAP to the FASB

What is cash equivalent for financial accounting purposes?

dollar bills and checks, bank account balances, CDs, T-bills, and other highly liquid securities

cost

info should never be more costly than the benefit it offers outside users

Examples of deferred expenses

prepaid rent, supplies, insurance, advertising

What is the economic entity principle?

principle insists that we maintain a separate accounting record for sole proprietorships and partnerships from the transaction of the owner

What are examples of long term assets?

property, plant, and equipment, intangibles, Long term investments

What is the definition of financial accounting?

provide useful economic information about a business to help external parties make sound decisions about investments

time-period concept

the idea that accounting information should be reported at regular intervals

What are investing activities?

the inflows and outflows associated with the dealings of the company's long-term assets.

What are the enhancing qualitative characteristics as stated by the GAAP?

timeliness, comparability, verifiability, understandability

What is the role of an internal auditor?

to ensure that info produced by the accounting information system is accurate

Which marketable security is always current?

trading security

carrying value

value on the last balance sheet date (can be found in T account)

What is the historical cost principle?

we value assets (record them on our books) at historical cost - the price we initially paid for them (cash and non-cash property that was exchanged for the asset)

accrued expenses

when an expense is recorded before paying cash

accrued revenue

when cash is earned but not collected

Deferred expense

when cash is given before using the expense

Deferred revenue

when cash is taken before being earned

What is the accounting cycle?

1. Transaction occurs 2. Transaction is analyzed - Accounts and Amounts 3. Journal Entry 4. Post to Ledger 5. Trial Balance 6. Adjusting Entries 7. Adjusted Trial Balance 8. Prepare the Financial Statements 9. Closing Entries

For stock what percent of company would you need to buy to have influence?

20%

What are the fundamental qualitative characteristics under the GAAP?

Relevance and faithful representation

What is another name for the income statement?

Statement of Operations

What's another name for the statement of retained earnings?

The statement of changes in owner's equity

What type of account is accumulated depreciation?

contra asset ( is calculated into total asset)

Examples of deferred revenues

customer deposits, airline tickets, magazine subscriptions, (business's collection of) rent, unearned revenue

What is the proper order of liquidity for current assets?

Cash, marketable securities, accounts receivable, inventory, prepaid expenses, long-term assets (equipment, land, intangibles)

IASB

International Accounting Standards Board; the standard body that creates the IFRS

IFRS

International Financial Reporting Standards; guidelines for the financial accounting info prepared outside the US

What is another name for stockholder's equity?

Net Assets

What is the primary objective of accounting information?

Usefulness

What is insolvency?

When liabilities are greater than assets

transposition

accounting error; mixing up numbers when recording a transaction; to correct - divide by 9

What is the cost principle?

accounting information must be of more use than the cost incurred to create it to be worth creating

What accounts can be found in the balance sheet?

assets

What accounts can be found on the balance sheet?

assets liabilities and stockholder's equity

What accounts are not closed at the end of the period?

assets, liabilities, and equity

What are examples of current assets?

cash, short-term investments, accounts and notes recievable, inventory and prepaid expenses

materiality

information that is material must be able to make a difference in the decision making for external peeps; the point at which a decision made using the information would be different based upon the information being considered.

What is another name for short-term investments?

marketable securities

What are the constraints of accounting info?

materiality and cost

What are the sections on the statement of cash flows?

operating, investing and financing

What accounts are considered temporary and must be closed at the end of the period?

revenues, expenses, and dividends

What accounts can be found on the income statement?

revenues, expenses, net income

What accounts can be found in the income statement?

revenues, expenses, net income, dividends

Examples of accrued expenses

salaries, taxes, interest, rent

duality concept

same thing as double-entry accounting; each transaction increases one account and decreases another

Examples of accrued revenues

services performed, (business's collection of) rent, interest

What is another name for the balance sheet?

statement of financial position