Financial Accounting CH.1

what defines a liability

-A creditor's claims against the assets of a business -The company obligations to provide assets, products or services to others -An amount owed to a creditor

Identify the roles of the International Accounting Standards Board (IASB) and International Financial Reporting Standards (IFRS).

-The IASB issues IFRS to increase comparability of accounting reports between companies in different countries -IFRS are rules that foreign companies must follow in order to enter into the U.S. marketplace

why did congress pass Sarbanes-Oxley Act

-to require public companies to document and verify their internal controls -to help stop financial abuses at companies that issue their stock to the public

Describe the order in which a company prepares financial statements

1. Income statement 2. Statement of retained earnings 3. Balance sheet 4. Statement of cash flows

In every financial statement, there exists single and double underlines. Choose the statement below that describes what these are for and when to use them

A single-ruled line denotes an addition or subtraction and double underlines indicate the final totals

Given the following list of accounts, identify which are classified as liabilities

Accounts Payable Wages Payable Notes Payable Taxes Payable

Identify the correct definition of an asset:

An asset is something of value that a business owns or controls

Identify the main sections on a statement of cash flows

Cash flows from operating activities Cash flows from financing activities Cash flows from investing activities

The Dodd-Frank Act has two notable provisions:

Clawback and Whistleblower

Which list of accounts below, identifies only accounts that would appear on a balance sheet

Common Stock, Equipment, Accounts Payable

choose all of the ones that affect equity

Dividends Revenues Common Stock Expenses

Given the following list of accounts, identify which are classified as assets

Land Cash Accounts Receivable Building Supplies

choose the most accurate definition of dividends

Outflow of resources to stockholders

Which organization has the legal authority to create Generally Accepted Accounting Principles?

SEC

An income statement reports a company's net income or net loss during a period. Which of the following accounts would appear on an income statement?

Service Revenue Wages Expense Rent Expense Rent Revenue

Identify the items below that reflect the proper heading on a balance sheet

The name of the financial statement is listed after the name of the company The date line shows a specific date The company name is listed at the top of the heading

The correct definition of a balance sheet includes which of the following statements?

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

Which of the following statements best represents the reason for the accounting equation

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners

importance of accounting

accounting information helps users make business and financial decisions.

Equity is composed of

contributed capital and retained earnings

The constraint that states that information disclosed by the entity must have benefits to the user which are greater than the costs of providing it is called:

cost-benefit

Final totals in a financial statement are...

double underlined

The principle which states that a company should record expenses it incurred in the same period as the revenue it generated is known as the

expense recognition principle

users who do not directly run the organization and have limited access to accounting information are known as....

external users

what are the four accounting opportunities

financial, taxation, managerial, accounting related

The details behind the financial statement are often disclosed in the

footnotes to the statement

The principle that states that a company should report the details behind the financial statements which would impact users' decisions is called the

full disclosure principle

The revenue recognition principle states that revenue is recognized when:

goods and services are provided to customers

what section of cash flows would buying and selling long-term assets such as land and equipment

investing

a company that loans money to an organization is a....

lender

The area of accounting that serves the decision-making needs of internal users is referred to as

managerial accounting

In addition to the cost-benefit constraint, two other constraints include:

materiality and conservatism

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

measurement principle

All of the following are part of the FASB conceptual framework:

objectives, qualitative framework, elements, recognition and measurement

the three factors that must exist for a person to commit fraud

opportunity, rationalization, financial pressure

the majority of accounting opportunities are in the area of...

private accounting

recording transactions and events is known as

recordkeeping or bookkeeping

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

relevancy and faithful representation

Identify which of the following lists of accounts would belong on the statement of retained earnings

retained earnings and dividends

The four major types of transactions that affect equity in a business are

revenue accounts, expense accounts, dividends, common stock

The principle which says that revenue is recognized when goods or services are provided to customers at an amount expected to be received from the customer is known as the

revenue recognition principle

an owner of a corporation is know as a...

shareholder

the most accurate definition of owner investments

stock issuances