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