Chapter 1 Review

  1. Define Accounting
    Accounting is an information and measurement system that identifies, records, and communicates; relevant, reliable , and comparable information 
  2. Define Record/Book Keeping
    recording of transactions and events
  3. Define Financial Accounting
    Financial Accounting serves external users by providing them with general-purpose financial statements. 
  4. Define Managerial Accounting
    Managerial Accounting serves internal users with reporting to help make decisions
  5. Name 3 Internal and External Users of Accounting

    • 1.Accounting employees
    • 2.Managers
    • 3.Controllers
    • 4. Auditors
    • 5. Sales Staff


    • 1. Lenders
    • 2. Consumers
    • 3. External Auditors
    • 4. Governments
    • 5. Share Holders
  6. Define Assets
    Assets are resources a company owns or controls to yield future benefits.

    Equiptment, Buildings, Land, Cash
  7. Define Recievables
    Receivables refer to an asset that promises a future inflow of resources. A company that provides a service or product on credit is said to have an accounts receivable from that customer. 
  8. Define Liabilities
    Liabilities are creditors claims on assets reflect companies obligations to provide assets products or services to others.
  9. Define Payable
    Payable refers to a liability that promises a future out flow of resources

    Wages, AP, Notes Payable, Taxes Payable
  10.  Define Equity
    Equity is an owners claim on assets. 

    Equity= Assets - Liabilities
  11. What is GAAP
    Generally Accepted Accounting Principles

    are concepts and rules for ethical accounting
  12. SEC
    Securities and Exchange Commissions

    is a government agency that has the legal authority to set GAAP
  13. FASB
    Financial Accounting Standards

    This is a local private board that sets both broad ans specific principles
  14. IASB
    International Accounting Standards Board

    is an independent group that issues IFRS
  15. IFRS
    International Financial Reporting Standards

    Identify international preferred accounting practices
  16. 4 Principles
    • 1. Measurement Principle AKA Cost Principle
    •         Based on actual cost
    • 2. Revenue Recognition
    •         States when a company must  
    •          recognize when revenue is incurred

    • 3.Expense Recognition AKA Matching
    •        Principle
    •        States when an expense is incurred

    • 4. Full Disclosure Principle
    •        State that a Company must report
    •        details behind financial statements  
    •        that would impact users decisions.
  17. 4 Assumptions
    1. Going Concern Assumption

    •      Assumes that a business will continue    
    •      and report at cost

    • 2. Monetary Unit Assumption
    •     Assumes that we can express
    •     transactions and events in a monetary or
    •     monetary or money units

    • 3. Time Period Assumption
    •     Assumes that a life of a company can be
    •     broken into time periods

    4. Business Entity Assumptions

    •    Assumes that a business is accounted for  
    •    seperatly from other entities
  18. Income Statement 
    IS describes a companies revenues and expenses along with the resulting net income or loss over a period of time due to earnings and activities
  19. Statement of Owners Equity
    Explains Changes in Equity from net income or loss and from any owner investments and withdraws over a period of time
  20. Balance Sheet
    Describes a company's financial position (types and amounts of assets liabilities and equity) at a point in time. 
  21. Statement of Cash Flow
    Identifies cash inflows receipts and cash outflows , and payments over a period of time. 
  22. Liabilities=
    Equity - Assets
  23. Equity =
    Assets - Liabilities
  24. Breakdown of Equity includes
    +Owner capital - Owner Withdraws + Revenues - Expenses

    Assets = Liabilities + Owner capital - Owner Withdraws + Revenues - Expenses
Card Set
Chapter 1 Review
Chapter 1 Review- Fundamental Accounting Basics and Formulas