COV - Chapter 1: Accounting in Business

An information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.

Accounting

Why is accounting important?

Accounting information impacts all of us.

Identify which items belong on the statement of balance sheet. -Accounts receivable, net income, and dividends. -Revenue, expenses and net income. -Cash, accounts receivable, and common stock. -Dividends, beginning retained earnings, ending retained earnings.

Cash, accounts receivable, and common stock.

Interpreting information from financial reports.

Communicating

Preparing financial statements for creditors.

Communicating

Identify which items belong on the statement of retained earnings. -Accounts receivable, net income, and dividends. -Revenue, expenses and net income. -Cash, accounts receivable, and common stock. -Dividends, beginning retained earnings, ending retained earnings.

Dividends, beginning retained earnings, ending retained earnings.

A company records the expenses incurred to generate the revenue reported.

Expense Recognition Principle

Customers Suppliers Labor Union

External Information User

Item #2: Exchanges of value between two entities.

External Transactions

Which of the following is a proper reflection of the sequence of steps when deciding on the preferred course of action in making an ethical decision?

Identify ethical concerns; Analyze options; Make ethical decision.

Entering a list of the sales invoices, including the prices and quantities, for the company's recordkeeper.

Identifying

The four basic financial statements are:

Income Statement, Statement of retained earnings, Balance sheet, and Statement of cash flows.

Tyler invests $2,000 cash in exchange for common stock, to begin a new company, Tyler's Tayloring. This transaction will:

Increase equity by $2,000.

Purchasing Manager Marketing Manager

Internal Information User

Item #3: Exchanges within an entity.

Internal Transactions

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

Managerial Accounting

Accounting information is based on actual cost.

Measurement Principle

Transactions and events are expressed in units of money.

Monetary Unit Assumption

In the fraud triangle, when a person feels an incentive to commit fraud, this is referred to as ____.

Pressure

Preparing and entering a list of checks issued.

Recording

Using a cash register to enter sales.

Recording

The recording of transactions and events only, either manually or electronically.

Recordkeeping

Revenue is recognized when goods are provided to the customer at the amount expected to be received.

Revenue Recognition Principle

Identify which items belong on the income statement. -Accounts receivable, net income, and dividends. -Revenue, expenses and net income. -Cash, accounts receivable, and common stock. -Dividends, beginning retained earnings, ending retained earnings.

Revenue, expenses and net income

On January 31, Jean Consulting Company receives a bill for that month's utilities in the amount of $500. Jean sets it aside because she does not plan to pay the bill until its due date of February 15. What effect, if any, does this event have on the company's accounting equation as of January 31?

The business must record this event, which would increase liabilities and decrease equity on January 31.

During its first year of operations, Mario Lupo formed Lupo Company as a corporation and personally invested $15,000 in the business in exchange for common stock. Lupo Company also paid dividends of $2,000. The company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, the company's equity totaled:

$25,000 Assets = Liabilities + Equity Assets = Liabilities + Equity ( Contributed Capital + Retained Earnings) Assets = Liabilities + Equity ( +Contributed Capital + Retained Earnings) (+ Common Stock (- Dividends + Revenues - Expenses)

If equity is $30,000 and liabilities are $19,000, then assets must equal:

$49,000 Assets = Liabilities + Equity

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

Business Entity Assumption

Accounting certifications include:

CPA; Accounting certifications include the CPA certification, which stands for Certified Public Accountant. The other choices are not accounting certifications. Instead, they stand for the following. IFRS is a designation for International Financial Reporting Standards. Financial accounting practice is governed by concepts and rules known as generally accepted accounting principles (GAAP). The Securities and Exchange Commission (SEC) is the government agency that has the legal authority to set GAAP.

Identify which items belong on the statement of statement of cash flows. -Accounts receivable, net income, and dividends. -Revenue, expenses and net income. -Cash, accounts receivable, and common stock. -Dividends, beginning retained earnings, ending retained earnings.

Cash flows from investing, operating and financing activities.

Item #1: Happenings that affect the accounting equation.

Events

The organization that is primarily responsible for developing GAAP for use by all U.S. companies is the:

FASB; Financial Accounting Standards Board

A company reports the details behind financial statements that would impact user's decisions.

Full-Disclosure Principle

Presumes that the business will continue operating in the future.

Going-Concern Assumption

The organization that is responsible for issuing International Financial Reporting Standards is the:

IASB; International Accounting Standards Board

The life of the company can be divided into specific time periods.

Time Period Assumption

The majority of accounting opportunities are in ____ accounting.

private