ACC110 Exam 1

Corporation

A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock

Corporation

A business organized as a separate legal entity under state law having ownership divided into shares of stock

Proprietorship

A business owned by one person

Partnership

A business owned by two or more persons associated as partners

Dividend

A distribution by a corporation to its stockholders

Income statement

A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time

Balance sheet

A financial statement that reports the assets, liabilities, and stockholders equity at a specific date

Statement of cash flows

A financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time

Retained earnings statement

A financial statement that summarizes the changes in retained earnings for a specific period of time

Securities and Exchange Commission

A governmental agency that overseas US financial markets and accounting standard-setting bodies

Bookkeeping

A part of accounting that's involves only the recording of economic events

Financial Accounting Standards Board

A private organization that establishes generally accepted accounting principles in the United States

IFRS and GAAP

A trial balance is the same under which two agencies?

Different amounts are credited and debited

A trial balance will not balance if:

Assets, dividends, and expenses

Accounts that normally have debit balances are:

Fair value principle

An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an assets of settle a liability)

Historical cost principle

An accounting principle that states that companies should record assets at their cost

International Accounting Standards Board

An accounting standard-setting body that issues standards adopted by many countries outside of the U.S.

Monetary unit assumption

An assumption stating that companies include in e accounting records only transaction data that can be expressed in terms of money

Economic entity assumption

An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities

Assets = liabilities + stockholders equity

Basic accounting equation

Economic entity assumption

Combining the activities of Kellogg and General Mills would violate the

Generally Accepted Accounting Principles

Common standards that indicate how to report economic events

True

Congress passed the Sarbanes-Oxley Act to reduce unethical behavior and decrease the likelihood of future corporate scandals.

Liabilities

Creditor claims against total assets

Increase, decrease

Debits _____ assets and ______ liabilities

Transfers journal entries to ledger accounts

Define posting

Equity, decreases

Dividends is a ________ and ________ stockholders' equity

Don't record

Do you or do you not record the discussion of a product design with a potential customer in the accounting records?

Record

Do you or do you not record the payment of rent in your accounting records?

Record

Do you record or do you not record the purchase of a computer in your accounting records?

Right or wrong, honest or dishonest, and fair or not fair

Ethics are the standards of conduct by which one's actions are judged as:

Assets = liabilities + common stock + revenue - expenses - dividends

Expanded accounting equation

Financial Accounting Standards Board

FASB

Revelance

Financial information that is capable of making a difference in a decision

Generally Accepted Accounting Principles

GAAP

International Accounting Standards Board

IASB

International Financial Reporting Standards

IFRS

Principle-based and less rules-based than GAAP

IFRS is considered to be more:

International Financial Reporting Standards

International accounting standards set by the International Accounting Standards Board

Sarbanes-Oxley Act

Law passed by Congress intended to reduce unethical corporate behavior

Revenues exceed expenses

Net income will result during a time period when:

Faithful representation

Numbers and descriptions match what really existed or happened - they are factual

Expense, decrease

Rent Expense is a ________ and ______ stockholders' equity

Assets

Resources a business owns

Securities and Exchange Commission

SEC

Sarbanes-Oxley Act

SOX

Expense, decreases

Salaries and Wages expense is a ____ and ____ stockholders' equity

Revenue, increase

Service revenue is a ______ and _____ stockholders' equity

Common stock

Term used to describe the total amount paid in by stockholders for the shares they purchase

Internal control standards of US publicly traded companies

The Sabarnes- Oxley Act determines:

Net loss

The amount by which expenses exceed revenues

Expenses

The cost of assets consumed or services used in the process of earning revenue

False

The cost principle dictates that companies record assets at their cost. In later periods, however, the fair value of the asset must be used if fair value is higher than its cost.

Transactions

The economic events of a business that are recorded by accountants

Financial accounting

The field of accounting that provides economic and financial information for investors, creditors, and other external users

Managerial accounting

The field of accounting that provides internal reports to help users make decisions about their companies

Revenues

The gross income in stockholders equity resulting from business activities entered into for the purpose of earning income

Accounting

The information system that identifies, records, and communicates the economic events of an organization to interested users

Stockholders equity

The ownership claim on a corporations total assets

True

The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board.

Convergence

The process of reducing the differences between US GAAP and IFRS

Ethics

The standards of conduct by which one's actions are judged as right or wrong , honest or dishonest, fair or not fair

True

The three steps in the accounting process are identification, recording, and communication.

False (investors and creditors)

The two most common types of external users are investors and company officers.

Mergers and acquisition activity, financial markets, and multinational corporations

What are some reasons that a single set of high quality international accounting standards would be beneficial?

IFRS uses more fair value measurements than GAAP

What is one difference between IFRS and GAAP

Balance sheet

Which of the financial statements is prepared as of a specific date?

IFRS and GAAP

Which two agencies use the same process for recording transactions?

dividend

a distribution by a corporation to its stockholders on a pro rata (equal) basis

three-column form of account

a form with columns for debit, credit, balance amounts in an account

simple entry

a journal entry that involves only two accounts

compound entry

a journal entry that involves three or more accounts

general ledger

a ledger that contains all asset, liability, and stockholders' equity accounts

chart of accounts

a list of accounts and the account numbers that identify their location in the ledger

trial balance

a list of accounts and their balances at a given time

account

a record of increases and decreases in specific asset, liability, or stockholders' equity items

double entry system

a system that records in appropriate accounts the dual effect of each transaction

normal balance

an account balance on the side where an increase in the account is recorded

journal

an accounting record in which transactions are inititally recorded in chronological order

common stock

issued in exchange for the owners' investment paid in to corporation

retained earnings

net income that is kept (retained) in the business

T-account

the basic form of an account

journalizing

the entering of transaction data in journal

ledger

the entire group of accounts maintained by a company

debit

the left side of the account

general journal

the most basic form of journal

posting

the procedure of transferring journal entries to the ledger accounts

credit

the right side of an account