ACCOUNTING 301 Chapter 1 Practice Concept Overview

If equity is $30,000 and liabilities are $19,000, then assets must equal:

$30,000 + $19,000= $49,000

Why is accounting important?

1. Accounting information impacts all of us. 2. Accounting information impacts businesses only. 3. Accounting is important only to those who are majoring in accounting.

Identify the type of activity by choosing the best answer for each question.Select each item listed below as being an identifying, recording, or a communicating activity.

1. Preparing and entering a listing of checks issued is categorized as a Recording activity. 2. Using a cash register to enter sales is categorized as a Recording activity. 3. Entering a list of the sales invoices for the company's recordkeeper is an Identifying activity. 4. Interpreting information from financial reports is a Communicating activity. 5. Preparing financial statements is a Communicating activity.

an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.

Accounting

During its first year of operations, Mario Lupo formed Lupo Company as a corporation and personally invested $15,000 in the business in exchange for common stock. Lupo Company also paid dividends of $2,000. The company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, the company's equity totaled:

Assets = Liabilities + Equity.Assets = Liabilities + [Common Stock + Revenues − Dividends − Expenses]Equity = [Common Stock of $15,000 + Revenues of $35,000 − Dividends of $2,000 − Expenses of $23,000]Equity = $25,000

A business is accounted for separately from other business entities and its owner.

Business entity assumption

Identify which items belong on the balance sheet.

Cash, accounts receivable, and common stock

Identify which items belong on the statement of retained earnings.

Dividends, beginning retained earnings, ending retained earnings

Happenings that affect the accounting equation

Events

A company records the expenses incurred to generate the revenue reported.

Expense recognition principle

The Board of Directors are

External Information Users.

Exchanges of value between two entities

External transactions

A company reports the details behind financial statements that would impact user's decisions.

Full-disclosure principle

Presumes that the business will continue operating in the future.

Going-concern assumption

Accounting certifications include:

IFRS CPA -Correct GAAP SEC

Which of the following is a proper reflection of the sequence of steps when deciding on the preferred course of action in making an ethical decision?

Identify ethical concerns; Analyze options; Make ethical decision.

The four basic financial statements are:

Income Statement, Statement of retained earnings, Balance sheet, and Statement of cash flows.

Exchanges within an entity

Internal transactions

includes opportunities in general accounting, cost accounting and internal auditing.

Managerial accounting

Accounting information is based on actual cost.

Measurement principle

In the fraud triangle, when a person feels an incentive to commit fraud, this is referred to as _______.

Pressure

the recording of transactions and events, either manually or electronically

Recordkeeping

Revenue is recognized when goods are provided to the customer at the amount expected to be received.

Revenue recognition principle

Identify which items belong on the income statement.

Revenue, expenses and net income

The organization that is primarily responsible for developing GAAP for use by all U.S. companies is the:

SEC IASB FASB-Correct IFRS

The organization that is responsible for issuing International Financial Reporting Standards is the:

SEC IASB Correct FASB IFRS

Tyler invests $2,000 cash in exchange for common stock, to begin a new company, Tyler's Tayloring. This transaction will:

The accounting equation must remain in balance. A $2,000 cash investment to begin the business will increase equity and increase assets.

On January 31, Jean Consulting Company receives a bill for that month's utilities in the amount of $500. Jean sets it aside because she does not plan to pay the bill until its due date of February 15. What effect, if any, does this event have on the company's accounting equation as of January 31?

The business must record this event, which would increase liabilities and decrease equity on January 31.

The life of the company can be divided into specific time periods.

Time period assumption

Transactions and events are expressed in units of money.

Transactions and events are expressed in units of money.

A marketing manager is

an Internal Information User.

A purchasing manager is

an Internal Information User.

A supplier is

an external information user.

Customers are classified as:

external information users.

Labor unions are

external information users.

The majority of accounting opportunities are in _____ accounting.

private