Accounting Exam 1

  1. What is the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments?
  2. Who uses accounting?
    • management
    • investors/ shareholders
    • creditors/ suppliers
    • employees
    • SEC
  3. Two types of users of accounting are?
    • external-investors, creditors, stakeholders
    • internal- employees within the company, directly involved
  4. reporting of financial statements of an entity
    financial accounting - external
  5. is concerned with the use of economic and financial information to plan and control many activities of the entity and to support the management decision-making process
    managerial accounting/ cost accounting
  6. reviews and examines financial statements for entities
    Auditing-Public Accounting
  7. What is the result of an audit?
    independent auditor's report
  8. hired by organizations with many plant locations or activities involving many financial transactions; much like those of the external auditor/ public accountant but on a smaller scale
    Internal Auditing
  9. colleges and universities, hospitals, and voluntary health and welfare organizations require the same accounting functions to be performed as do other accounting entities uses what accounting?
    governmental and not-for-profit accounting
  10. specialist in various aspects of taxation
    income tax accounting
  11. How was accounting developed? Early history.
    Auditing evolved as a response to the needs of absentee owners of large corporations who had entrusted their money to the hands of managers they could not directly control.
  12. What was the predecessor of today's American Institute of Certified Public Accountants- AICPA, first formal accounting standard?
    American Institute of Accountants (AIA)
  13. unit of the federal government that is responsible for establishing regulations and assuring full disclosure to investors about companies and their securities that are traded in interstate commerce
    Securities and Exchange Commission (SEC)
  14. the authoritative standard-setting body within the accounting profession
    Financial Accounting Standards Board (FASB)
  15. ____ issues statements of Financial Accounting Standards (SFAS) that have established standards of accounting and reporting for particular issues, much as its predecessors did
    Financial Accounting Standards Board FASB
  16. ______created a five member Public Company Accounting Oversight Board (PCAOB), which has the authority to set and enforce auditing, attestation, quality control, and ethics standards for public companies
    The Sarbanes-Oxley Act (SOX)
  17. In managerial accounting/ cost accounting ____ operated as a governmental body to establish standards applicable to government contracts.
    Cost Accounting Standards Board (CASB)
  18. Auditing standards are established by the ____.
    Auditing Standards Board
  19. The ______ requires auditor to be independent of the client whose financial statements are being audited.
    Auditing Standards Board
  20. Established to develop guidelines for financial accounting and reporting by state and municipal entites, thus providing investors and tax payers with a better means of comparing financial data of issuers of state and municipal securities
    Governmental and not-for-profit accounting
  21. The United States Internal Revenue code specify the rules to be followed in determining an entity's income tax liability
    income tax accounting
  22. standard-setting body responsible for the development of International financial Reporting Standards (IFRS), permitted or required by more than 100 countries
    International Accounting Standards Board
  23. is seeking methods of providing comparability between nations often referred to as harmonization, involves both the elimination of inferior accounting methods that continue to exist today in many areas of the world
    International Accounting Standards Board (IASB)
  24. ____and _______ have both published ethics codes. The code of Professional Conduct
    The American Institute of Certified Public Accountants (AICPA) and the Institute of Management Accountants (IMA)
  25. What are several characteristics of ethical behavior required of a professional accountant?
    integrity, objectivity, independence, and competence
  26. What are the 7 conceptual statements from the foundation for accounting standards?
    • 1. objectives- service external users to help them make decisions
    • 2. Quality- relevant and reliable
    • 3. Financial reports
    • 4.Define objectives of non business entity
    • 5. How financial reports should be measured
    • 6. replaced 3
    • 7. Cash Flow
  27. ___ provide that financial information should be useful to investor and creditor concerns about the cash flows of the enterprise, the resources and obligations of the enterprise, and the profit of the enterprise.
    Highlights of Concepts Statement No. 1-objectives of financial planning
  28. Accounting that recognizes revenues and expenses as they occur, even though cash receipts from revenues and cash disbursements related to expenses may occur before or after the event that causes revenue or expense recognition.
    Accrual accounting
  29. The process of examining the financial
    statements of an entity by an independent third party with the objective of
    expressing an opinion about operations, changes in financial position, and cash
  30. Procedures that are used
    to keep track of an entity’s financial transactions and to accumulate the
    results of its operations.
  31. Pronouncements of the
    Financial Accounting Standards Board (FASB) that constitute generally
    accepted accounting principles.
    Statements of Financial Accounting Standards (SFAS)
  32. Accounting that is
    concerned with the use of economic and financial information to plan and
    control the activities of an entity and to support the management
    decision-making process.
    managerial accounting
  33. An organization, individual, or group of
    organizations or individuals for which accounting services are performed.
  34. A unit of the federal government that is
    responsible for establishing regulations and ensuring that full disclosure is
    made to investors about large companies and their securities traded in
    interstate commerce.
    Securities and Exchange Commission (SEC)
  35. Pronouncements of the
    Financial Accounting Standards Board and its predecessors that constitute
    appropriate accounting for various business transactions (principles used
    for reporting financial position and results of operations to investors
    and creditors.)
    Generally accepted accounting principles
  36. The personal characteristic of honesty,
    including being forthright in dealings and communications with others.
  37. The ____ and  ________processes result in
    an entity’s numerous transactions with other entities being reflected in the
    financial statements.
    bookkeeping and accounting
  38. Selection of alternative methods of reflecting
    the effects of certain transactions
  39. a listing of the organization’s assets, liabilities, and owners’ equity at a point in time; snapshot of organization’s financial position at a specific
    point in time
    balance sheet
  40. probable future economic benefits obtained or controlled by a particular explanation
  41. 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; amounts owed to other entities
  42. the ownership right of the owners of the entity in the assets that remain after deducting the liabilities; also known as net worth
    owners' equity
  43. 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.
    income statement
  44. - the financial statement that summarizes the changes during a fiscal period in capital stock, additional paid-in capital, retained earnings, and other elements of owners’ equity
    Statement of Changes in Owners' Equity
  45. represents the total amount invested in the
    entity by the owners
    paid in capital
  46. distributions of earnings that have been made to the owners, so these reduce retained earnings
  47. to identify the sources and uses of cash during
    the year
    statement of cash flows
  48. _____ are the product of financial accounting and they represent a historical summary of transactions.
    Financial statement
  49. What are some of the limitations of financial statements?
    Qualitative factors, current values, the impact of inflation, and opportunity cost are not usually reflected in financial statements.

    •  -Financial statements involve estimates
    • -Comparability between firms may not be appropriate
    • -Financial statements are not adjusted to show the impact of
    • inflation
    • -Financial statements do not reflect opportunity cost
  50. What is the balance sheet equation?
    Assets= Liabilities + Owners' Equity
  51. What is the owners' equity expanded equation?
    OE = Paid-in Capital + Retained Earnings + Retained Earnings(beginning) + Revenue - Expenses
  52. ____ causes retained earnings to increase.
    Net income
  53. income statement preparation is made easier if____and ____ are accumulated separately
    revenues and expenses
  54. adjusting entries as changes in account balances
    needed to improve the accuracy of financial statements (i.e., to match revenues
    and expenses, and to adjust assets and liabilities).
  55. transactions
    for which cash has not yet been received or paid, but the effect of which must
    be recorded in the accounts (at the end of the accounting period) to accomplish
    a matching of revenues and expenses and accurate financial statements.
  56. the initial
    recording of a transaction, although a true reflection of the transaction at
    the time, does not result in assigning revenues to the period in which they
    were earned or expenses to the period in which they were incurred. As a result,
    and amount must be reclassified from one account to another (at the end of the
    accounting period) to reflect the appropriate balance in each account
  57. What are the two different adjustments?
    accruals and reclassifications
Card Set
Accounting Exam 1
Accounting Exam 1