Chapter 1 - What is Accounting?

What are the three services public accountants usually offer?

Auditing, tax accounting, management advisory services

True or False: People, companies, or government agencies to whom a business owes money are known as customers.

False. Creditors

True or False: The results of accounting process is communicated to users of accounting information.

True

Which of the following statements is correct about the SEC: a) The SEC can suspend trading of a company's shares on the stock exchange b) The SEC has the final say on financial accounting issues faced by publicly traded companies. c) The SEC oversees financial information of both publicly and privately traded entities.

a and b

The process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to interested parties is known as __________.

accounting

An accounting system is designed to do what three things?

accumulate data about a firm's financial affairs, classify the data in a meaningful way, and summarize it in financial statements

The review of financial statements to assess their fairness and adherence to generally accepted accounting principles in known as ______.

auditing

Because accounting is used to communicate financial information, it is often called the "language of _________."

business

An accountant who has passes the Uniform CPA examination and who has fulfilled the experience of the state of practice in known as a:

certified public accountant (CPAs)

Which type of business entity has an indefinite life?

corporation

An entity whose purpose is to produce a profit for its owners is known as a(n) ________ entity.

economic

It is important to recognize that a business is a(n) _______, meaning it has its own separate identity.

entity

What are two activities that an accountant is responsible for?

establishing the record and procedures that make up the accounting system and supervises the operation of the system

Keeping financial records and preparing financial reports as part of the staff of federal, state, or local governmental units is known as ____________ accounting.

governmental

Many accounting firms offer management advisory services that help clients by offering _______ ___________ _______ and _______ ________ ___________.

improve information systems and improve business performance.

What does Tax accounting involve?

involves compliance with internal revenue service (IRS) and planning to reduce IRS liabilities

What does Management advisory services involve?

involves helping clients improve their information systems or their business performance

What does Auditing involve?

involves the review of financial statements to assess their fairness and adherence to generally accepted financial statements

Under this type of partnership, partners have liability for their own actions and the actions of those under their control. This type of partnership is called a:

limited liability partnership

Sometimes referred to as private accounting, __________ accounting involves working for a single business or entity.

managerial

A business entity owned by two or more people, whose structure is dissolved when one or more of the owners leave the entity is called a ________.

partnership

Some of the activities performed by managerial accountants include ________ __________ ________, __________ ___ ____, and _________ _________ _______.

preparing financial statements, preparing tax forms, preparing internal reports

The Sarbanes-Oxley Act includes which of the following provisions: a) prohibits the destruction or creation of documents to impede a federal investigation b) allows accounting firms to assign a partner to a client for an indefinite amount of time c) allows accounting firms to audit and provide management advisory services

prohibits the destruction or creation of documents to impede a federal investigation

What is an Accounting Clerk responsible for?

responsible for record keeping for part of the accounting sytem

What is a Bookkeeper responsible for?

responsible for recording business transactions

Maria Lopez owns a sole proprietorship. Based on the _________ _________ assumption, she does not use her business checking account to pay her own personal bills.

separate entity

A non-profit organization, such as a city, public school, or public hospital, is known as a(n) ________ entity.

social

A business entity owned by one person, and whose debts are the legal responsibility of the owner is called a:

sole proprietorship

A ________ is an owner of a corporation.

stockholder

What is an Accountant responsible for?

supervise other accounting positions and prepare financial statements

Tax accounting involves what two things?

tax compliance and tax planning