Accy 201 Ch. 1

What is social responsibility?

A concern for the impact of one's actions on society as a whole

What is a corporation?

A legal entity separate and distinct from its owners

What is the opportunity component of the fraud triangle?

A person thinks that there is a way to commit fraud without much chance of getting caught.

Which of the following the is the correct sequence for the heading for ABC Company's 2013 balance sheet?

ABC Company, Balance Sheet, 12/31/13

A business transaction

An exchange of value between two entities

Net assets

Another name for equity

Accounts receivable

Assets created by selling goods ands services on credit

What does an income statement not report?

Assets owned by a business

Accounting Equation

Assets= Liabilities + Equity

Accounts payable appear on which statement?

Balance sheet

To include the personal assets of a business's owner in the record's and reports of the business would be in conflict with the:

Business entity principle

Businesses cannot take this form

Common stock

Liabilities

Creditors' claims on the assets of a company

Expenses

Decreases in retained earnings that represent costs of assets or services that are used to earn revenues

Why are ethics crucial to accounting?

For accounting information to be useful, it must be trusted and therefore the result of ethical decision.

Technological advancement

Has freed accounting professionals to concentrate more on the analysis and interpretation of information

Rent expense that is paid with cash appears on which statement?

Income statement

Revenues

Increases in retained earnings from a company's earnings activties

Generally Accepted Accounting Principles:

Intend to make information on the financial statements relevant, reliable, and comparable

Net income

Is the excess of revenues over expenses

Balance Sheet

Lists the types and amounts of assets, liabilities, and equity of a business as of a specific date

The area of accounting aimed at serving the decision-making needs of internal users is:

Managerial accounting

Which accounting principle dictates when expenses are recognized?

Matching principle

What is the Going-concern principle?

Principle prescribing that financial statements reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue.

Objectivity Principle

Principle that states that information is supported by independent, unbiased evidence

Internal users of accounting information include:

Production managers

Assets

Resources owned or controlled by a company that are expected to yield benefits

What elements are found on a balance sheet?

Retained earnings

What elements are found on the income sheet?

Salaries Expense

What is an asset?

Something the company owns

Ethical behavior requires:

That an auditor's pay not depend on the figures in the client's reports

What is the objectivity principle?

The accounting guideline prescribing that financial statement information be supported by independent, unbiased evidence other than someone's belief or opinion

Cost Principle

The accounting principle that requires information to be based on actual cost and requires assets and services to be recorded initially at the amount of cash or cash equivalent given exchange

Equity

The difference between a company's assets and its liabilities

Dividend

The distribution of assets to stockholders

Statement of cash flows

The financial statement that describes where a company's cash came from and how it was spend during the period

Income statement

The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses

Statement of Retained Earnings

The financial statement that shows the beginning and ending retained earnings balances and the effects of net income (loss) and a dividends for the period

Revenue Recognition Principle

The principle that requires revenue to be recognized at the time it is earned, allows the inflow of assets associated with revenue to be in a form other than cash, and measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services

What is the FASB?

The private board that currently has the authority to establish US generally accepted accounting principles

Which accounting assumption assumes that all accounting can be reported monthly or yearly?

Time Period Assumption

Primary purpose of accounting

To identify, record, and communicate business transactions

The primary objective of financial accounting is

To provide financial statements to help external users analyze and interpret an organization's activities

Revenue is properly recognized:

Upon the completion of the sale or when services have been performed and the business obtains the right to collect sale price

Wages Payable

When employees have not yet been paid for their work