ACCT Chapters 1-3

Included in heading of statement of stockholder's equity of Xoff Inc.

"Statement of Stockholder's equity" "For the year ended Dec 31, 2018" "Xoff Inc."

Four basic assumptions underlying GAAP

-Economic Entity Assumption -Going Concern Assumption -Periodicity Assumption -Monetary Unit Assumption

Steps for analyzing the effect of transactions

1. Determine one account in the accounting eqn that will increase/decrease 2. Determine a second account in the account eqn that will increase/decrease 3. Confirm that assets = liabilities + stockholder's equity

Steps for measuring transactions

1. Use a source document to identify accounts affected 2. Analyze the impact of the transaction on the accounting equation 3. Assess whether the transaction results in a debit or credit to account balances 4. Record the transaction in a journal 5. Post the transaction to the general ledger

If a transaction decreases cash by $100, the balance sheet will balance if

A liability decreased AND another asset is increased

Asset

A resources, such as cash, land, buildings, that is owned by company

The type of information included in an account

Account title and columns of increases/decreases

The fundamental model of business valuation is commonly referred as the

Accounting equation

Management discussion and Analysis and note disclosures to financial statements are included in

Annual report

Accounting Equation

Assets = Liabilities + Stockholder's Equity

what is the correct order of items on the balance sheet

Assets > Liabilities > stockholder's equity

The purpose of a trial balance

Assist in preparing financial assistants, assist in preparing adjusting entries, ensure debits = credits

which of the following services may be provided by public accounting firms

Audit, tax, consulting

The financial statement that posts the firm's financial position on a particular day

Balance Sheet

The result of a single transaction had both cash and notes payable increase

Borrowing cash and signing a promissory note

London Corp issues 1000 shares of stocks for $20 per share.

Cash and Common Stock increase

Deferred Revenue

Cash received from customers for services to be performed in FUTURE

If the same accounting principles and methods are used for similar events by two different companies, this enhances

Comparability

users of financial information contribute financial resources to company

Creditors

Which of the following external user groups would likely be interested in financial accounting info

Current and prospective creditors, regulators, customers, current and prospective investors

Managerial Accounting

Deals with the concepts and methods used to provide info to organization's internal users

Larkin Company pays $300 for utilities per month

Debit utilities expense, credit cash

Heading of a Balance Sheet

December 31, 2018, Name of Business, and "Balance Sheet"

Suppliers

Determine the ability to pay for goods

Appears on statement of stockholder's equity

Dividends, net income, beginning balance of retained earnings

A balance sheet is a list of all accounts and their balances showing that debts = credits

False

Dividends paid to shareholders are recorded on income statement as an expense

False

Private sector organizations that is currently responsible for setting accounting standards in the U.S.

Financial Accounting Standards Board

Members of FASB include

Financial analysists, govt agencies, accounting professionals, accounting educators

Generally Accepted Accounting Principles

GAAP

Steps applied in ethical decision making

Identify ethical issues > Specify Alternatives > Evaluate courses of actions > make decision

Four financial statements to provide information to external users

Income Statement, balance sheet, statement of stockholder's equity, statement of cash flows

Effect on stockholder's equity for services performed on account

Increase

Attributes of FASB

Independence, private sector organization, and full-time board members

the two external users of financial accounting information that contribute financial resources to a company are

Investors and Creditors

Investing activities

Involve buying and selling of land, buildings, and equipment used in business

External Transaction

Involves an exchange between the company and separate economic entity

Operating Activities

Involves purchasing goods from suppliers, designing and manufacturing products, and selling products to customers

Knowledge and skills an accounting professional should possess:

Leadership, ability to work in teams, technical accounting knowledge, presentation skills

The primary functions of accounting are:

Measure a company's activities and communicate to decision makers

Included with the annual report to help evaluated a firm's financial performance and financial health

Note Disclosures

Reported on balance sheet as liabilities

Notes payables AND wages and salaries payable

Big 4 Accounting Firms

PWC, Deloitte, Ernst & Young, KPMG

Which of the following are operating activities

Paying advertising expenses, paying salaries to employees, and providing service to customers

Retained Earnings

Profits earned by company that have not been paid to stockholders

An income Statement reports

Revenue, expenses, and net income/loss

Income Statement

Revenues and Expenses

The types of accounts which affect retained earnings

Revenues, Expenses, Dividends

Business organizations that have unlimited liability

Sole Proprietorship and Partnership

Financial statement shows the sources of changes in various stockholders' equity

Statement of stockholder's equity

Which of the following are assets

Supplies and Inventory, equipment

An account that is used informally for analysis instead of drawing a formal general ledger account is referred to as

T-Account

Heading of income statement should include

Title of financial statement, the accounting period covered by the statement, the name of the business

Debit goes on left hand side and credit goes on right hand side

True

Understandability

Users of financial statements should have a reasonable understanding of business and economic activities

Which of the following are internal transactions

Using supplies purchased and paid last month AND Earning Revenues after cash is received in advance from customers

General ledger

a collection of accounts used to keep track of increases and decreases in financial position elements

A separate _____ is maintained for each financial position element.

account

Accounts receivable are

assets in the balance sheet

Balance Sheet

assets, liabilities, stockholders equity

Ending Retained Earnings Equation

beginning retained earnings + net income - dividends

The purpose of a statement of cash flows is to provide info about

cash receipts and cash disbursements during a period

Accountants' primary information-related roles are to:

communicate measurements of companies' activities AND measure companies' activities

The qualitative characteristic of using the same accounting method each period over time

consistency

predictive value

consistently increasing income helps forecast the company's ability to generate future cash

A business organization that issues a share of stock to its investors

corporation

Verifiability

cost of an item can be traced to objective evidence of a transaction, such as sales receipt, cancelled check, bank statement

Competitors

decide market share and profitability

Regulators

decide on social welfare

Managers

decide production and expansion

Creditors

decide whether to lend money

Investors

decide whether to purchase stock

Effect of dividends on retained earnings

decrease

A distribution of net income to the stockholder's of a corporation

dividend

The two sources of stockholder's equity are:

earned by the corporation AND paid in from shareholders

All economic events can be identified with a particular economic

entity

Salaries paid to employees for the month is a ______ account that appears on the ________

expense, income statement

A______ is a cost of doing business that is necessary to produce_______

expense, revenue

To be useful for decision making, information should possess the primary qualities of relevance and

faithful representation

1933 Securities Act and 1934 Securities Exchange Act were designed to restore investors' confidence in

financial accounting

Financial statement that summarizes revenues and expenses for a period of time

income statement

Information that best explains companies' stock price performance is reported on

income statement

A chronological record of all economic events affecting a firm are recorded in a

journal

Any amount owed to the creditor is reported in the balance sheet as

liability

consistency

means of achieving overriding goal

Accounting assumption states that financial statement elements should be measured in terms of U.S. dollar

monetary unit

Faithful representation requires information to have

neutrality, completeness, and free from material error

The statement of stockholder's equity is

one of four required financial statements

Statement of Cash Flows

operating, investing, and financing activities

comparability

overriding goal of financial information

The __________ assumption allows the life of a company to be divided into artificial time periods to provide timely info

periodicity

confirmatory value

positive income is consistent with effectiveness of management

The process of transferring information from the journal to the ledger is

posting

Career choices in accounting include

public and private accounting

Timeliness

refers to information being available to users early enough to allow them to use it in the decision process

Revenues are:

sales of goods or services to customers

Three most common forms of business organization

sole proprietorship, partnership, and corporation

the owners' claims to resources of company are:

stockholder's equity

Financial Accounting should provide information that:

tells about economic resources, claims to resources, and changes in resources, helps to predict cash flows, and is useful to investors and creditors in making decisions

ethics

term that refers to code or moral system to determine right or wrong