Accounting Ch.1
the objective of financial accounting is to
provide useful information for external decision makers
the involvement of accounting professionals and management in accounting scandals resulted in Congress passing the Sarbanes-Oxley Act. What is the purpose of the Sarbanes-Oxley Act?
-Require CEO accountability -Regulate auditors -Prevent conflicts of interests -Provide penalties for violators
while the Sarbanes-Oxley Act provides important support for the ethical foundation of accounting, ____________ are equally important
Accountants personal ethical standards
the form of business organization where an entity is legally separate from its owners and issues shares of stock is a:
Corporation
_____________ accounting maintains records of a company's operations and communicates information to external decision makers
Financial
who has the responsibility to apply accounting standards when communicating with investors and creditors?
Management
in 2002, the FASB and IASB singed the ________________________, formalizing their commitment to the convergence of U.S. and international accounting standards
Norwalk agreement
the basic _____________ is referred to as the fundamental model of business valuation
accounting equation
Resources owned by a company are called
assets
assets, liabilities, and stockholders equity appears on a __________
balance sheet
the financial statement that displays a firm's financial position on a particular date is the _______________
balance sheet
ending retained earnings is calculated as
beginning retained earnings + net income - dividends
the foundation upon which financial accounting is built is referred as the FASB __________________________.
conceptual framework
who has the responsibility for preparing statements in accordance with generally accepted accounting principals
corporate management
a distribution of net income to owners is called a
dividend
a code or moral system that provides criteria for evaluating right and wrong is referred to as
ethics
An ______________ is a cost of doing business that is necessary to produce _______
expense, revenue
the two main functions of __________ accounting are to 1. measure business activities and 2. to communicate the measurements to investors and creditors
financial
revenues and expenses appear on the _______
income statement
the financial statement that summarizes revenues and expenses for a period of time is the ____________
income statement
the 1933 and 1934 SEC acts were designed to restore
investor confidence in financial accounting
a balance sheet lists the assets, _________, and stockholders equity as of a specific date
liabilities
when expenses are greater than revenues, it is referred to as:
net loss
the statement of cash flows classifies items as:
operating, investing, financing
auditors examine financial statements to express a professional ___________ on the financial statements
opinions
the three most common forms of business organization are sole proprietorship, ______________, and ________________
partnership, corporation
the term "cooking the books" typically refers to the practice by some companies to
purposely provide misleading accounting information
what represents the net income earned by a corporation and not yet paid to shareholders?
retained earnings
net income equals:
revenues minus expenses
revenues are:
sales of goods or services to customers
a company reports a net loss if its revenues were _____ than its expenses
smaller
operating, investing, and financing statements appears on a ________________________
statement of cash flows
stockholders equity is
the owners claims to resources of the corporation
which external user groups likely would be interested in financial accounting information?
-current and prospective creditors -regulators -current and prospective investors -customers
which of the following appears on the statement of stockholders equity?
-dividends -beginning balance of retained earnings -net income
members of the FASB may include
-government agencies -accounting educators -financial analysts -accounting professionals
which of the following are attributes of FASB
-independence -private sector organization -full-time board members
What provides the most important support for the ethical foundation of accounting?
-legislation such as the Sarbanes-Oxley Act -Accountants ethical conduct
what appears on the statement of stockholders equity?
-net income -dividends -beginning balance of retained earnings
which of the following are operating activities?
-paying advertising expenses -Providing services to customers -Paying salaries to employees
an income statement reports:
-revenues -net income or loss -expenses
the ________________ financial reporting law sets forth accounting and disclosure requirements for initial public offerings of securities
1933 security act
the_____________________ financial reporting law mandates reporting requirements for companies whose stock is publicly trained
1934 securities and exchange act
the accounting equation is:
Assets = Liabilities + Stockholders' Equity
who serves as an independent intermediary to help ensure that management has appropriately applied GAAP in preparing the financial statements
Auditors
When accountants face an ethical dilemma, the first step in resolving the dilemma is to
Identify the ethical situation and the stakeholders
the organization that develops global accounting standards is the
International Accounting Standards Board
Accountants' primary information-related roles are to:
communicate measurements of companies activities to others measure companies activities
companies communicate information about their business activities primarily through
financial statements
the abbreviation GAAP stands for
generally accepted accounting principles
Who has the responsibility to apply accounting standards when communicating with investors and creditors?
management
____________ accounting deals with the concepts and methods used to provide information to an organizations internal users
managerial
the financial statement that provides information about cash receipts and cash disbursements for the period is the ________________
statement of cash flows
what is the purpose of the audit report?
to add credibility to the financial statements
