Accounting Exam 1

What is the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments?

Who uses accounting?

Two types of users of accounting are?

reporting of financial statements of an entity

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

reviews and examines financial statements for entities

What is the result of an audit?

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

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?

specialist in various aspects of taxation

How was accounting developed? Early history.

What was the predecessor of today's American Institute of Certified Public Accountants- AICPA, first formal accounting standard?

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

the authoritative standard-setting body within the accounting profession

____ issues statements of Financial Accounting Standards (SFAS) that have established standards of accounting and reporting for particular issues, much as its predecessors did

______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

In managerial accounting/ cost accounting ____ operated as a governmental body to establish standards applicable to government contracts.

Auditing standards are established by the ____.

The ______ requires auditor to be independent of the client whose financial statements are being audited.

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

The United States Internal Revenue code specify the rules to be followed in determining an entity's income tax liability

standard-setting body responsible for the development of International financial Reporting Standards (IFRS), permitted or required by more than 100 countries

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

____and _______ have both published ethics codes. The code of Professional Conduct

What are several characteristics of ethical behavior required of a professional accountant?

What are the 7 conceptual statements from the foundation for accounting standards?

___ 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.

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.

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
flows.

Procedures that are used
to keep track of an entity’s financial transactions and to accumulate the
results of its operations.

Pronouncements of the
Financial Accounting Standards Board (FASB) that constitute generally
accepted accounting principles.

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.

An organization, individual, or group of
organizations or individuals for which accounting services are performed.

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.

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.)

The personal characteristic of honesty,
including being forthright in dealings and communications with others.

The ____ and  ________processes result in
an entity’s numerous transactions with other entities being reflected in the
financial statements.

Selection of alternative methods of reflecting
the effects of certain transactions

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

probable future economic benefits obtained or controlled by a particular explanation

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

the ownership right of the owners of the entity in the assets that remain after deducting the liabilities; also known as net worth

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.

- 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

represents the total amount invested in the
entity by the owners

distributions of earnings that have been made to the owners, so these reduce retained earnings

to identify the sources and uses of cash during
the year

_____ are the product of financial accounting and they represent a historical summary of transactions.

What are some of the limitations of financial statements?

What is the balance sheet equation?

What is the owners' equity expanded equation?

____ causes retained earnings to increase.

income statement preparation is made easier if____and ____ are accumulated separately

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).

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.

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

What are the two different adjustments?