question

Accounting

answer

An information system that measures, processes, and communicates financial information about an economic entity.

question

Accounting equation

answer

Assets equal liabilities plus stockholders, or owners' equity.

question

Assets

answer

The economic resources of a company that are expected to benefit future operations.

question

Liabilities

answer

A business's present obligations to pay cash, transfer assets, or provide services to other entities in the future.

question

Stockholders' equity

answer

The claims of the owners of a corporation to the assets of the business; calculated as Contributed Capital plus Retained Earnings. Also called shareholder's equity and owners' equity.

question

Ethics

answer

A code of conduct that addresses whether actions are right or wrong.

question

Due Care

answer

Competence and diligence in carrying out professional responsibilities.

question

Integrity

answer

Honesty, candidness, and the subordination of personal gain to service and the public trust.

question

Objectivity

answer

Impartiality and intellectual honesty.

question

Independence

answer

The avoidance of all relationships that impair or appear to impair an accountant's objectivity.

question

Fraudulent financial reporting

answer

The intentional preparation of misleading financial statements.

question

Certified Public Accountant (CPA)

answer

A public accountant who has met stringent state licensing requirements.

question

American Institute of Certified Public Accountants (AICPA)

answer

The professional association of certified public accountants

question

Financial Accounting

answer

The process of generating and comunicating accounting information in the form of financial statements to those outside the organization.

question

Financial statements

answer

The primary means of communicating important accounting information to users. They include the income statement, statement of retained earnings, balance sheet, and statement of cash flows.

question

Income statement

answer

A financial statement that summarizes the revenues earned and the expenses incurred by a business over an accounting period.

question

Statement of retained earnings

answer

A financial statement that shows the changes in retained earnings over an accounting period.

question

Balance Sheet

answer

The financial statement that shows a business's assets, liabilities, and stockholders' equity as of a specific date. Also called the Statement of Financial Position.

question

Statement of Cash Flows

answer

A financial statement that shows the inflows and outflows of cash from operating activities, investing activities, and financing activities over an accounting period.

question

Public Company Accounting Oversight Board (PCAOB)

answer

A governmental body created by the Sarbanes-Oxley Act to regulate the accounting profession.

question

Sarbanes-OxleyAct

answer

An act of Congress that regulates financial reporting in public corporations.

question

Management

answer

The people who have overall responsibility for operating a business and meeting its goals.

question

Management accounting

answer

The process of producing accounting information for internal use by managers.

question

Institute of Management Accountants (IMA)

answer

A professional organization made up primarily of management accountants

question

Management Information Systems

answer

The interconnected subsystems that provide the information needed to run a business.

question

Creditors

answer

Those who lend money or deliver goods and services before being paid.

question

Governmental Accounting Standards Board

answer

The board responsible for issuing accounting standards for state and local governments

question

Financial Accounting Standards Board (FASB)

answer

The most important body for developing rules on accounting practice; it issues Statements of Financial Accounting Standards.

question

International Accounting Standards Board

answer

An organization that encourages worldwide cooperation in the development of accounting principles; it has approved more than 40 international standards of accounting.

question

International Financial Reporting Standards (IFRS)

answer

Accounting standards set by the IASB that are used in many parts of the world, including Europe, and by foreign companies registered in the United States.

question

Internal Revenue Service (IRS)

answer

The agency that interprets and enforces the tax laws governing the assessment and collection of revenue for operating the federal government.

question

Corporate governance

answer

The oversight of a corporation's management and ethics by the board of directors.

question

Audit

answer

An examination of a companys financial statements in order to render an independent professional opinion about whether they have been presented fairly, in all material respects, in conformity with generally accepted accounting principles.

question

Expenses

answer

Decreases in stockholders' equity that result from operating a business.

question

Audit Commitee

answer

A subgroup of a corporation's board of directors that is charged with ensuring that the board will be objective in reviewing management's performance; it engages the company's independent auditors and reviews their work.

question

Business transactions

answer

Economic events that affect a business's financial position.

question

Bookkeeping

answer

The process of recording financial transactions and keeping financial records.

question

Cash flows

answer

The inflows and outflows of cash into and out of a business

question

Share of stock

answer

A unit of ownership in a business

question

Par Value

answer

An amount per share that is entered in the corporation's capital stock account; it is the minimum amount that can be reported as contributed capital.

question

Additional Paid in capital

answer

The amount over par value in a corporation's contributed capital.

question

Retained earnings

answer

Stockholders' equity that has been generated by business operations and kept for use in the business.

question

Articles of Incorporation

answer

An official document filed with and approved by a state that authorizes the incorporators to do business as a corporation.

question

Business

answer

An economic unit that aims to sell goods and services to customers at prices that will provide an adequate return to its owners.

question

Contributed Capital

answer

The part of the stockholder's equity that represents the amount invested in the business by the owners; who are also known as the stockholders.

question

Common stock

answer

The most common form of stock.

question

Corporation

answer

A business unit granted a state charter recognizing it as a seperate legal entity having its own rights, privileges, and liabilities distinct from those of its owners.

question

Dividends

answer

Distributions to stockholders of assets, usually cash, generated by past earnings.

question

Exchange Rate

answer

The value of currency in terms of another.

question

Investors

answer

Stockholders who have invested capital in a company and thus acquired part ownership in it.

question

Financial Analysis

answer

The evaluation and interpretation of financial statements and related performance measures.

question

Financial Ratios

answer

Financial analysis comparisons in which certain financial statement items are divided by one another to reveal their logical interrelationships.

question

Financing Activities

answer

Activities undertaken by management to obtain adequate funds to begin and to continue operating a business.

question

Investing activities

answer

Activities undertaken by management to spend capital in productive ways that will help a business achieve its objectives.

question

Liquidity

answer

Having enough cash available to pay debts when they are due.

question

Money measure

answer

The recording of all business transactions in terms of money.

question

Net assets

answer

Assets minus liabilities; stockholders' equity or owners' equity. Also called net worth.

question

Net Income

answer

The difference between revenues and expenses when revenues exceed expenses.

question

Net Loss

answer

The difference between expenses and revenues when expenses exceed revenues.

question

Partnership

answer

A business that is owned by two or more people and that is not incorporated.

question

Performance measures

answer

Indicators of whether managers are achieving business goals and whether business activities are well managed.

question

Profit margin

answer

The ratio or percentage of net income to revenues; calculated by dividing net income by revenues.

question

Profitability

answer

The ability earn enough income to attract and hold investment capital.

question

Revenues

answer

Increases in stockholders' equity that result from operating a business.

question

Securities and Exchange Commission (SEC)

answer

A governmental agency that regulates the issuing, buying, and selling of stocks. It has the legal power to set and enforce accounting practices for firms whose securities are sold to the general public.

question

Seperate entity

answer

A business that is treated as distinct from its creditors, customers, and owners.

question

Sole Proprietorship

answer

A business that is owned by one person and that is not incorporated

question

Generally Accepted Accounting Principles

answer

The conventions, rules, and procedures that define accepted accounting practice at a particular time.

question

International Financial Reporting Standards (IFRS)

answer

Accounting standards set by the IASB that are used in many parts of the world, including Europe, and by foreign companies registered in the United States.

question

Operating Activities

answer

Activities undertaken by management in the course of running a business.

Financial Accounting Chapter 1 Terms Test Questions – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards