ACC110 Exam 1
Corporation
A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock
Corporation
A business organized as a separate legal entity under state law having ownership divided into shares of stock
Proprietorship
A business owned by one person
Partnership
A business owned by two or more persons associated as partners
Dividend
A distribution by a corporation to its stockholders
Income statement
A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time
Balance sheet
A financial statement that reports the assets, liabilities, and stockholders equity at a specific date
Statement of cash flows
A financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time
Retained earnings statement
A financial statement that summarizes the changes in retained earnings for a specific period of time
Securities and Exchange Commission
A governmental agency that overseas US financial markets and accounting standard-setting bodies
Bookkeeping
A part of accounting that's involves only the recording of economic events
Financial Accounting Standards Board
A private organization that establishes generally accepted accounting principles in the United States
IFRS and GAAP
A trial balance is the same under which two agencies?
Different amounts are credited and debited
A trial balance will not balance if:
Assets, dividends, and expenses
Accounts that normally have debit balances are:
Fair value principle
An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an assets of settle a liability)
Historical cost principle
An accounting principle that states that companies should record assets at their cost
International Accounting Standards Board
An accounting standard-setting body that issues standards adopted by many countries outside of the U.S.
Monetary unit assumption
An assumption stating that companies include in e accounting records only transaction data that can be expressed in terms of money
Economic entity assumption
An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities
Assets = liabilities + stockholders equity
Basic accounting equation
Economic entity assumption
Combining the activities of Kellogg and General Mills would violate the
Generally Accepted Accounting Principles
Common standards that indicate how to report economic events
True
Congress passed the Sarbanes-Oxley Act to reduce unethical behavior and decrease the likelihood of future corporate scandals.
Liabilities
Creditor claims against total assets
Increase, decrease
Debits _____ assets and ______ liabilities
Transfers journal entries to ledger accounts
Define posting
Equity, decreases
Dividends is a ________ and ________ stockholders' equity
Don't record
Do you or do you not record the discussion of a product design with a potential customer in the accounting records?
Record
Do you or do you not record the payment of rent in your accounting records?
Record
Do you record or do you not record the purchase of a computer in your accounting records?
Right or wrong, honest or dishonest, and fair or not fair
Ethics are the standards of conduct by which one's actions are judged as:
Assets = liabilities + common stock + revenue - expenses - dividends
Expanded accounting equation
Financial Accounting Standards Board
FASB
Revelance
Financial information that is capable of making a difference in a decision
Generally Accepted Accounting Principles
GAAP
International Accounting Standards Board
IASB
International Financial Reporting Standards
IFRS
Principle-based and less rules-based than GAAP
IFRS is considered to be more:
International Financial Reporting Standards
International accounting standards set by the International Accounting Standards Board
Sarbanes-Oxley Act
Law passed by Congress intended to reduce unethical corporate behavior
Revenues exceed expenses
Net income will result during a time period when:
Faithful representation
Numbers and descriptions match what really existed or happened - they are factual
Expense, decrease
Rent Expense is a ________ and ______ stockholders' equity
Assets
Resources a business owns
Securities and Exchange Commission
SEC
Sarbanes-Oxley Act
SOX
Expense, decreases
Salaries and Wages expense is a ____ and ____ stockholders' equity
Revenue, increase
Service revenue is a ______ and _____ stockholders' equity
Common stock
Term used to describe the total amount paid in by stockholders for the shares they purchase
Internal control standards of US publicly traded companies
The Sabarnes- Oxley Act determines:
Net loss
The amount by which expenses exceed revenues
Expenses
The cost of assets consumed or services used in the process of earning revenue
False
The cost principle dictates that companies record assets at their cost. In later periods, however, the fair value of the asset must be used if fair value is higher than its cost.
Transactions
The economic events of a business that are recorded by accountants
Financial accounting
The field of accounting that provides economic and financial information for investors, creditors, and other external users
Managerial accounting
The field of accounting that provides internal reports to help users make decisions about their companies
Revenues
The gross income in stockholders equity resulting from business activities entered into for the purpose of earning income
Accounting
The information system that identifies, records, and communicates the economic events of an organization to interested users
Stockholders equity
The ownership claim on a corporations total assets
True
The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board.
Convergence
The process of reducing the differences between US GAAP and IFRS
Ethics
The standards of conduct by which one's actions are judged as right or wrong , honest or dishonest, fair or not fair
True
The three steps in the accounting process are identification, recording, and communication.
False (investors and creditors)
The two most common types of external users are investors and company officers.
Mergers and acquisition activity, financial markets, and multinational corporations
What are some reasons that a single set of high quality international accounting standards would be beneficial?
IFRS uses more fair value measurements than GAAP
What is one difference between IFRS and GAAP
Balance sheet
Which of the financial statements is prepared as of a specific date?
IFRS and GAAP
Which two agencies use the same process for recording transactions?
dividend
a distribution by a corporation to its stockholders on a pro rata (equal) basis
three-column form of account
a form with columns for debit, credit, balance amounts in an account
simple entry
a journal entry that involves only two accounts
compound entry
a journal entry that involves three or more accounts
general ledger
a ledger that contains all asset, liability, and stockholders' equity accounts
chart of accounts
a list of accounts and the account numbers that identify their location in the ledger
trial balance
a list of accounts and their balances at a given time
account
a record of increases and decreases in specific asset, liability, or stockholders' equity items
double entry system
a system that records in appropriate accounts the dual effect of each transaction
normal balance
an account balance on the side where an increase in the account is recorded
journal
an accounting record in which transactions are inititally recorded in chronological order
common stock
issued in exchange for the owners' investment paid in to corporation
retained earnings
net income that is kept (retained) in the business
T-account
the basic form of an account
journalizing
the entering of transaction data in journal
ledger
the entire group of accounts maintained by a company
debit
the left side of the account
general journal
the most basic form of journal
posting
the procedure of transferring journal entries to the ledger accounts
credit
the right side of an account