Accounting Midterm

Creditor

any person or business to whom a business owes money is a creditor

Accounting Equation

assets=Liabilities + Equity assets= Liabilities+ owners,capital-owner, withdrawal+revenues-expenses

going concern assumption

assumes that the entity will remain in operation for the foreseeable future

cost of goods sold

the cost of the merchandise inventory that the business has sold to customers

Account

the detailed record of all increased and decreases that have occurred in an individual asset, liability or equity

Perpetual Inventory System

An inventory system that keeps a running computerized record of merchandise inventory

Examples of transactions recorded in the general journal are:

Asset sales Depreciation Interest income and expense Stock sales

Generally Accepted Accounting Principles (GAAP)

Guidelines for accounting information, the main U.S. accounting rule book. Currently created and governed by FASB

Which is a disadvantage of an enterprise resource planning​ (ERP) system?

Implementation requires a large commitment of time and people

The two main inventory accounting systems are the

Periodic and perpetual

Bank Checks

Source document and input devices

Monetary unit assumption

The assumption that requires the items on the financial statements to be measured in terms of a monetary unit.

Which of the following is not an external user of a business's financial information? a. taxing authorities b. employee c. investors d. customers

b. employee

Managerial accounting

focuses on information for internal decision makers, such as the company's managers and employees

Accounts Payable

is increased with credit

Gross Profit Formula

net sales revenue- cost of goods sold

Reports

outputs

financial statements

outputs

Server

processing and storage

Software

processing and storage

Financial Accounting

provides information for external decision makers

The outputs of a computerized accounting information system are called

reports

Keyboard

source documents and input devices

bar code scanner

source documents and input devices

Cost Principle

states that acquired assets and services should be recorded at their actual costs (also called historical cost)

Accounting is the information system

that measure business activities, processes the information into reports, and communicates the results to decision makers

liability

a debt that the business owes: accounts payable, notes payable, accrued liability, unearned revenue

economic entity assumption

an economic (business) entity is an organization that stands apart as a separate economic unit.

Periodic Inventory Systems

an inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand

Certified Public Accountants (CPA)

are licensed professional accountants who serve the general public.

corporation

A business under state law that is a separate legal entity

Which account does a merchandiser use that a service company does not​ use? a. Cost of Goods Sold b. Sales Revenue c. merchandise inventory d. all of the above

D. All of the above

Sole Proprietorship

Business owned by a single owner

Which of the following requires accounting information to be​ complete, neutral, and free from material​ error? a. Going Concern Assumption b. Cost Principle c. Faithful Representation Concept D. Economic entity assumption

Faithful Representation Concept

Vendor

The individual or business from whom a company purchases goods

International Accounting Standards Board (IASB)

The private organization that oversees the creation and governance of International financial reporting standards (IFRS)

FASB

The private organization that oversees the creation and governance of accounting standards in the US. works with SEC and congressionally created groups like PUBLIC Company Accounting Oversight Board ( PCAOB) and private groups like the AICPA, IMA and International Accounting Standards Board (IASB)

Securities and Exchange Commission (SEC)

U.S. governmental agency that oversees the U.S. financial markets

Owner's Equity

can decrease through owner's withdrawals and or net loss. Owner's equity can increase through owner contributions and or net income

equity equation

capital, beginning+owner contribution+net income or -net loss- owner withdrawal= capital, ending

Which of the following is not a special​ journal?

cash receipts journal

Certified management accountants (CMA)

certified professionals who specialize in accounting and financial management knowledge, generally work for a single company

Which of the following benefits of an effective accounting information system provides safeguards for a​ business's assets and reduces the likelihood of fraud and​ errors?

control

current ration

current assets/current liabilities

Gross profit

excess of net sales revenue over cost of goods sold

Operating expenses

expenses, other than cost of goods sold, that are incurred in the entity's major ongoing operations