Intro to Accounting
Net assets
Also referred to as stockholders equity The difference between assets and liabilities; also referred to as stockholders' equity or owners' equity.
To understand how different transactions affect the financial statement and make sense of the information in the financial statement its important to understand what?
the mechanical operation of the bookkeeping process.
Which of the following statements are true regarding the objectives of general-purpose external financial reporting for government-sponsored entities engaged in activities that are not unique to government?
- They should be similar to those of nonbusiness organizations engaged in similar activities. - They should be similar to those of business enterprises engaged in similar activities.
An internal auditor: (Check all that apply).
- in some cases performs functions much like those performed by an independent (external) auditor, but perhaps on a smaller scale. - may be responsible for analyzing the operating efficiency of one of the company's divisions.
The Financial Accounting Standards Board (FASB) Accounting Standards Codification: (Check all that apply).
- represents a single source of U.S. generally accepted accounting principles (GAAP). - is updated with changes communicated through an Accounting Standards Update (Update or ASU).
Statement of changes in stockholders equity
- statement of stockholders equity -statement of equity statement of -changes in capital stock -statement of changes in retained earnings
Tax practitioners typically develop specialization in the taxation of which of the following? (Check all that apply).
-Trusts and estates -International tax law issues
List Current Liabilities as displayed on the balance sheet:
-accounts payable -other accrued liabilities - short term debt
Rearrange the following accounts or captions in the order in which they appear on the income statement: 1. Income from operations 2. Income taxes 3. Cost of goods sold 4. Gross profit
3,4,1,2
Example of Equity
A car or house owner refers to equity as the market value of the car or house less the loan or mortgage balance.
Accounts Payable
A liability representing an amount payable to another entity, usually because of the purchase of merchandise or services on credit.
Account
A record in which transactions affecting individual assets, liabilities, stockholders' equity, revenues, and expenses are recorded.
Liabilities (in other words)
Amounts owed to other entities (suppliers, creditors)
What formula should you use to find the stockholders equity?
Assets - Liabilities = Stockholders equity
Current Assets
Cash and those assets that are likely to be converted to cash or used to benefit the entity within one year of the balance sheet date.
transactions
Economic interchanges between entities that are accounted for and reflected in financial statements.
Transactions
Example a sale/purchase, or a receipt of cash by a borrower and the payment of cash be a lender. Transactions are summarized in accounts.
Which of the following are true regarding the Financial Accounting Standards Board (FASB) Accounting Standards Codification?
It made it easier to access and research authoritative accounting standards. It superseded the FASB's SFAS series and other divergent sources of U.S. generally accepted accounting principles (GAAP). It became effective in July 2009.
What does it mean when a balance sheet has been prepared for an organization?
It means that the organization's financial position at a point in time has been determined and summarized.
Net Assets and stockholder equity are express in the form of an equation:
Net Assets = stockholder equity
assets
Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Assets (in other words)
Represent resources that are owned
Equity
The ownership right associated with an asset. See stockholders' equity.
current Liabilities
Those liabilities due to be paid within one year of the balance sheet date.
True or false: The growing complexity of federal, state, municipal, and foreign income tax laws has led to a demand for professional accountants who are specialists in various aspects of taxation.
True
Example of what would be reported as "accounts receivable"
You purchase furniture and sign an agreement to pay the full amount by a specified date. The receipts of this agreement between you and the company can be reported as an Asset but in the "accountants receivable" category until the company receive the cash payment's be
A primary objective of financial reporting is to provide timely information about a firm's earnings and ______ (employee turnover/cash flow).
cash flow
A primary objective of financial reporting is to provide timely information about a firm's _____ (earnings/assets/liabilities) and cash flow.
earnings
Managerial accounting and cost accounting when compared to financial accounting:
have primarily an internal orientation, and the data are more likely to be used in a future-oriented way
An entity's earnings for a reporting period are reported on the:
income statement
Profit or Loss Statement
its another term for income statement
What is the principal purpose of the income statement
its to answer the question, Did the entiry operate at a profit for the period of time under consideration?
Whats another term used when referring to stockholders equity?
net worth
4. The Financial Accounting Standards Board (FASB) Accounting Standards Codification
represents a single source of U.S. generally accepted accounting principles (GAAP)
What information is needed in order to determine if the entity made a profit?
revenue - expenses = profit
The statutory authority to establish accounting principles for companies whose securities are publicly traded in the United States rests with the and Commission.
securities and exchange commission
A firm prepares comparative financial statement so that _____.
the users of the data can easily spot changes in the firm's financial position and in its results of operations
accounts payable + other accrued liabilities + short term debt =
total current liabilities
the bookkeeping/account process begins with:
transactions
Which of the following items are considered key elements of ethical behavior for a professional accountant?
- Maintaining independence, both in appearance and in fact. - Maintaining objectivity: being impartial and free from conflicts of interest. - Having competence by acquiring and maintaining the professional knowledge and skill to adequately perform the work assigned. - Maintaining integrity: being honest and forthright in one's dealings and communication with others. - Accepting an obligation to serve in the best interests of the employer, the client, and the public.
An unqualified, or "clean," independent auditor's opinion does which of the following?
- States that the named financial statements "present fairly, in all material respects" the financial position of the entity - States that the named financial statements "present fairly, in all material respects" the entity's results of operations for the period - Describes briefly the work that is involved in performing an audit
Which of the following statements is true regarding what each financial statement of an entity reports?
- The statement of cash flows reports the entity's cash flows during a period. - The balance sheet reports an entity's financial position at the end of a period. - The income statement reports an entity's earnings for a period.
Financial Statements are:
-Balance Sheet -Income Statement -Statement of cash flows -Statement of changes in stockholders equity
Generally accepted accounting principles and auditing standards require that the financial statements of an entity show what?
-Financial position at the end of the period - Earnings for the period -Cash flows during the period - Investments by and the distributions to owners (stockholders) during the period.
Name two principle sections of the balance sheet
1. Assets 2. Liabilities and Stockholders equity
Accrued Liabilities
Amounts that are owed by an entity on the balance sheet date.
Accounts receivable
An asset representing a claim against another entity, usually arising from selling goods or services on credit.
accounting equation
Assets = Liabilities + Stockholders' equity (A = L + SE). The fundamental relationship represented by the balance sheet and the foundation of the bookkeeping process.
In 2001, the ______ , (IASB/IASC/IFRS), which operates under the _______ , (IASB/IASC/IFRS) Foundation, was formed in a restructuring effort and has since assumed the responsibilities of the ______ (IASB/IASC/IFRS), which was disbanded at that time.
Blank 1: IASB Blank 2: IFRS Blank 3: IASC
Name tangible assets
Cash, merchandise inventory (things on the shelf in stores), equipment (used to keep the business going) cash register, laptop, printer, phone etc., accounts receivable
What are the four statements that is also classified as Income Statement:
- Income Statment - Statement of earnings -profit and loss statement -statement of operations
Cash represents:
- cash on hand -in the business bank accounts -or banks used (creditors)
Income Statement
-statement of earnings -profit and loss statenent -statement of operations
Is the building that occupied by a company listed as an asset and why?
The building is not shown as an asset unless the company owns the building. If the business owner doesnt own the property it will not be listed as an asset.
profit
The excess of revenues and gains over expenses and losses for a fiscal period; another term for net income.
Stockholders' Equity
The stockholders' claim in the assets of the entity. Sometimes called owners' equity or net assets; the difference between assets and liabilities.
Balance Sheet
a statement of financial position
What asset is not readily available as cash?
accounts receivable or temporary cash investments to earn interest
Financial reporting is primarily aimed at meeting the needs of:
external users of accounting information who do not otherwise have access to the firm's records.
The first known text to describe a comprehensive double-entry bookkeeping system was called the: Multiple choice question.
method of Venice System
The cash flow activities for an entity are reported for a(n) _____ of time.
period
Financial accounting generally refers to the:
process that results in the preparation and reporting of financial statements for an entity
An unqualified, or "clean" independent auditor's opinion:
states that the auditor's work requires the application of generally accepted auditing standards (GAAS).
Equipment as an asset represents
the cost to a business of the display such as cases, racks, shelving and other store equipment purchased and installed in the rented building in which it operates
Balance sheet
The financial statement that is a listing of the entity's assets, liabilities, and stockholders' equity at a point in time. Sometimes this statement is called the statement of financial position.
Income Statement
The financial statement that summarizes the entity's revenues, expenses, gains, and losses for a period of time and thereby reports the entity's results of operations for that period of time.
Accounts Payable ( in other words)
The supplier has a claim against the firm for the amount that Main Street inc has agreed to pay for the merchandise until the day it is paid for
1. Section 404 of the Sarbanes-Oxley Act of 2002 requires all SEC-regulated companies to include in their annual reports:
a report by management on the effectiveness of the company's internal control over financial reporting.
An unqualified, or, clean, independent auditor's opinion does which of the following?
States that it is the independent auditor's responsibility to express an opinion about the financial statements States that the named financial statements "present fairly, in all material respects" the entity's cash flows for the period Explains that the audit was conducted in accordance with the standards of the GAAP (United States)
5. Financial reporting is:
done for individual firms or entities.
Financial statements are primarily oriented toward the ____(external/internal) user and are primarily concerned with _____ (past/present/future) information.
external, past
Accrual accounting results in:
recognition of revenues when they are earned (at the point of sale) and recognition of expenses when they are incurred
balance sheet equation
Another term for accounting equation.
statement of financial position
Another term for balance sheet; a listing of the entity's assets, liabilities, and stockholders' equity at a point in time.
Net worth
Another term for net assets or stockholders' equity or owners' equity, but not as appropriate because the term worth may be misleading.
An unqualified, or, clean, independent auditor's opinion does which of the following?
Explains that the audit was conducted in accordance with the standards of the GAAP (United States) States that it is the independent auditor's responsibility to express an opinion about the financial statements States that the named financial statements "present fairly, in all material respects" the entity's cash flows for the period
The goal of the (IASB/IASC/IFRS) is to develop a single set of high-quality, understandable, enforceable, and globally accepted financial reporting standards.
IASB
Accumulated depreciation
The sum of the depreciation expense that has been recognized over time. Accumulated depreciation is a contra asset—an amount that is subtracted from the cost of the related asset on the balance sheet.
Example of creditors
The supplier can be classified as a creditor or the firm by supplying merchandise on an account
Example of Accounts payable
The suppliers shipped merchandise to main street inc and this merchandise will be paid at some point in the future.
The process that results in the preparation and reporting of financial statements for an entity is referred to as _______ (financial/managerial/tax) accounting.
financial accounting
Financial accounting when compared to managerial and cost accounting:
has primarily an external orientation and are based primarily on past historical cost data
Fill in the blank question. The consulting practices of several large auditing firms have been split off into separate entities in an effort to help achieve ____ (profitability/independence/control/liquidity) in fact and appearance.
independence
Depreciation in accounting
is the process of spreading the cost of an asset over its useful life to the entity-- it is not an attempt to recognize the economic loss in value of an asset because of its age or use.
A report by management on the effectiveness of the company's internal control over financial reporting is required for all Securities and Exchange Commission-regulated companies under:
section 404 of the Sarbanes-Oxley Act of 2002.
Equipment
the necessary items for a particular purpose of the business, its items that are used to keep the business going. Computers, telephone, cash register
2. An unqualified, or "clean," independent auditor's opinion does which of the following?
Describes briefly the work that is involved in performing an audit States that the named financial statements "present fairly, in all material respects" the entity's results of operations for the period States that the named financial statements "present fairly, in all material respects" the financial position of the entity
Liabilities
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.
Fill in the blank question. It is important to recognize that financial accounting information is developed at a ____ (cost/benefit) and that the ____ (cost/benefit) to the user of the information should exceed the cost of providing it.
cost, benefit
Statement of Earnings
Another term for income statement; it shows the revenues, expenses, gains, and losses for a period of time and thereby the entity's results of operations for that period of time
Example of Accumulated depreciation (business sense)
the items purchased loses it value over time. its the portion of the cost of the equipment that is estimated to have been used up in the process of operating the business. This cost is subtracted from the assets when determining the Total Asset Amount.
Accrued liabilities represent
amounts owed to various creditors, including any wages owed to employees for services provided to the business. through the balance sheet date
short term debt represents
amounts borrowed, probably from the banks that will be repaid within one year of the balance sheet date.
Statement of operations
another term for income statement
The process of identifying, measuring, and communicating an organization's economic information for the purpose of making decisions and informed judgments is called _______ (bookkeeping/accounting).
accounting
Long Term Debt represents
amounts borrowed from banks or others that will not be repaid within one year from the balance sheet date
Which of the following statements is true regarding the statement of cash flows?
- Cash received from the sale of long-term debt is a financing activity, and the activity is a source of cash. - Cash received from the sale of buildings or equipment is an investing activity, and the activity is a source of cash. - Depreciation expense is added back to net income in the operating activities section. - The increase in accounts payable for the year is a source of cash and is shown as an operating activity.
Which of the following items are normally included as key components of a corporation's annual report?
- The reporting firm's financial statements for the year - Management's discussion and analysis of the financial statements - Highlights for the year, including net revenues, diluted earnings per share, and return of stockholders' equity
The financial position of an entity is reported at a(n) ______ in time.
Point
Accounts Receivable represent
amounts due from customers who have purchased merchandise on credit and who have agreed to pay within a specified period or when billed by a business.
