Principles of Accounting 1 - Chapter 1

What are the four big accounting firms?

EY, KPMG, PwC, Deloitte

What are external users of accounting information?

External Users of accounting information are people who do not directly run the organization and have limited access to its accounting information.

Who sets GAAP principles in the United States?

FASB

What does FASB stand for?

Financial Accounting Standards Board

What is involved in the communication process of financial information?

Financial Statements

Who uses financial accounting information?

Financial accounting serves external users by providing them with general-purpose financial statements.

What are the three activities conducted by organizations?

Financing, Investing, Operations

What is included in a companies annual report?

Four financial statements, auditors report, and other important information

Financial accounting must follow what rules in the United States?

GAAP

What does GAAP stand for?

Generally Accepted Accounting Principles

Who sets IFRS standards?

IASB

What is the international standards for financial accounting?

IFRS

What are the three components of ethical decision making?

Identify ethical concern, Analyze options, Make ethical decisions

What are the three mains parts of accounting?

Identifying, recording, and communicating

What are the four different kind of statements?

Income Statement, Statement of Retained Earnings, Balance Sheet, and Cash Flow Statement

What are internal users of accounting information?

Internal Users of accounting information directly manage organization operations.

What are the two main users of accounting information?

Internal and external users

Who are the main users of accounting information?

Internal and external users

What does IASB stand for?

International Accounting Standards Board

What does IFRS stand for?

International Financial Reporting Standards

What is managerial accounting?

Managerial Accounting serves the decision-making needs of internal users. Internal reports are designed for the unique needs of managerial or executive employees, such as the chief executive officer (CEO).

What are the three components of the fraud triangle?

Opportunity. A person must be able to commit fraud with a low risk of getting caught. Pressure, or incentive. A person must feel pressure or have incentive to commit fraud. Rationalization, or attitude. A person justifies fraud or does not see its criminal nature

How is FOA calculated?

Return on Assets = income / invested assets

Define ethics

beliefs that separate right from wrong. They are accepted standards of good and bad behavior.

What entity is both an economic entity and a legal entity?

corporations

What type of accounting do external users use?

financial accounting

What are the four areas of opportunity in accounting?

financial, managerial, taxation, and accounting-related

Who uses managerial accounting?

internal users

Who might external users of accounting information include?

investors, government or regulators, creditors, and auditors

What is the SOX act?

law passed by congress that requires documentation and verification of internal controls and emphasizes effective internal controls. Management must issue a report stating that internal controls are effective.

What type of accounting do internal users use?

managerial accounting

What are the six main GAAP principles?

objectivity principle, cost principle, going concern principle, monetary unit assumption, business entity assumption, revenue recognition principle.

Where are the majority of opportunities in accounting?

private accounting

What is another name for Income Statement?

profit and loss statement

What entities are economic entities?

sole proprietorship, partnership, and corporation

What is another name for Balance Sheet?

statement of financial position

What does stockholders' equity represent?

that we are dealing with a corporation

What is the going concern principle?

the assume a business will be in business for a long time if not indefinitely

What is the revenue recognition principle?

the principle that states that you must recognize revenue when its earned and realized or its realizable

What is the cost (historical cost) principle?

the principle that states you must record transactions at cost and leave them that way.

What is the objectivity principle?

the principle that states you must record transactions objectively

What are the main forms of business?

Sole proprietorship, Partnership, and Corporation

What is the monetary unit assumption?

The assumption that states you must use the same monetary unit and stable currency

What is the business entity assumption?

The assumption that you will use or continue to use the same type of business entity

What does a CPA provide the opportunity?

To become an auditor

What is the Dodd-Frank Act?

Wall Street Reform and Consumer Protection Act, or Dodd-Frank, has two notable provisions: Clawback Mandates recovery (clawback) of excess incentive compensation. Whistleblower SEC pays whistleblowers 10% to 30% of sanctions exceeding $1 million.

Define accounting

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

What is the definition of account according to the textbook?

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

What is the definition of accounting given by our professor?

an information system that identifies, records, and communicates financial information to interested users.

What are the three main components of a balance sheet?

assets, liabilities, and stockholders' equity

What is another name for an annual report?

10-K statement

What other organization has influence on GAAP?

AICPA

What does AICPA stand for?

American Institute of Certified Public Accountants

What is the accounting equation?

Assets = Liabilities + Stockholders' Equity

What is involved in the recording process of financial information?

Bookkeeping

Who might internal users of accounting information include?

CEO, CFO, and Managers

What are the most common certifications for accountants?

CPA (Certified Public Accountant), CIA (Certified Internal Auditor), CMA (Certificate in Management Accounting), CB (Certified Bookkeeper), CPP (Certified Payroll Professional), CFE (Certified Fraud Examiner), CrF (Certified Forensic Accountant)