ACG2021 Exam # 1 vocab
revenue principle
deals with when to record (recognize) revenue or what amount of revenue to record
double entry accounting means that each transaction does what?
debits at least one account and credits another
SEC (Securities and Exchange Commission)
delegates responsibility for setting GAAP to the FASB
What is cash equivalent for financial accounting purposes?
dollar bills and checks, bank account balances, CDs, T-bills, and other highly liquid securities
cost
info should never be more costly than the benefit it offers outside users
Examples of deferred expenses
prepaid rent, supplies, insurance, advertising
What is the economic entity principle?
principle insists that we maintain a separate accounting record for sole proprietorships and partnerships from the transaction of the owner
What are examples of long term assets?
property, plant, and equipment, intangibles, Long term investments
What is the definition of financial accounting?
provide useful economic information about a business to help external parties make sound decisions about investments
time-period concept
the idea that accounting information should be reported at regular intervals
What are investing activities?
the inflows and outflows associated with the dealings of the company's long-term assets.
What are the enhancing qualitative characteristics as stated by the GAAP?
timeliness, comparability, verifiability, understandability
What is the role of an internal auditor?
to ensure that info produced by the accounting information system is accurate
Which marketable security is always current?
trading security
carrying value
value on the last balance sheet date (can be found in T account)
What is the historical cost principle?
we value assets (record them on our books) at historical cost - the price we initially paid for them (cash and non-cash property that was exchanged for the asset)
accrued expenses
when an expense is recorded before paying cash
accrued revenue
when cash is earned but not collected
Deferred expense
when cash is given before using the expense
Deferred revenue
when cash is taken before being earned
What is the accounting cycle?
1. Transaction occurs 2. Transaction is analyzed - Accounts and Amounts 3. Journal Entry 4. Post to Ledger 5. Trial Balance 6. Adjusting Entries 7. Adjusted Trial Balance 8. Prepare the Financial Statements 9. Closing Entries
For stock what percent of company would you need to buy to have influence?
20%
What are the fundamental qualitative characteristics under the GAAP?
Relevance and faithful representation
What is another name for the income statement?
Statement of Operations
What's another name for the statement of retained earnings?
The statement of changes in owner's equity
What type of account is accumulated depreciation?
contra asset ( is calculated into total asset)
Examples of deferred revenues
customer deposits, airline tickets, magazine subscriptions, (business's collection of) rent, unearned revenue
What is the proper order of liquidity for current assets?
Cash, marketable securities, accounts receivable, inventory, prepaid expenses, long-term assets (equipment, land, intangibles)
IASB
International Accounting Standards Board; the standard body that creates the IFRS
IFRS
International Financial Reporting Standards; guidelines for the financial accounting info prepared outside the US
What is another name for stockholder's equity?
Net Assets
What is the primary objective of accounting information?
Usefulness
What is insolvency?
When liabilities are greater than assets
transposition
accounting error; mixing up numbers when recording a transaction; to correct - divide by 9
What is the cost principle?
accounting information must be of more use than the cost incurred to create it to be worth creating
What accounts can be found in the balance sheet?
assets
What accounts can be found on the balance sheet?
assets liabilities and stockholder's equity
What accounts are not closed at the end of the period?
assets, liabilities, and equity
What are examples of current assets?
cash, short-term investments, accounts and notes recievable, inventory and prepaid expenses
materiality
information that is material must be able to make a difference in the decision making for external peeps; the point at which a decision made using the information would be different based upon the information being considered.
What is another name for short-term investments?
marketable securities
What are the constraints of accounting info?
materiality and cost
What are the sections on the statement of cash flows?
operating, investing and financing
What accounts are considered temporary and must be closed at the end of the period?
revenues, expenses, and dividends
What accounts can be found on the income statement?
revenues, expenses, net income
What accounts can be found in the income statement?
revenues, expenses, net income, dividends
Examples of accrued expenses
salaries, taxes, interest, rent
duality concept
same thing as double-entry accounting; each transaction increases one account and decreases another
Examples of accrued revenues
services performed, (business's collection of) rent, interest
What is another name for the balance sheet?
statement of financial position