question

The objective of ___________ is to provide products or services, that are valued in the market place, while providing employment opportunity, and doing all this at a profit.

answer

The objective of Business

question

the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions - the language of business

answer

Accounting (1 of 2 perspectives)

question

an information system (i.e. a process) that systematically identifies, collects, records, and communicates financial information related to business activities to various users

answer

Accounting (1 of 2 perspectives)

question

The _______ of Accounting: * All entities use Accounting to: - Evaluate performance of past activities - Control today's operations - Make decisions about resource allocation options related to future operating activities and future investments (.. or not!)

answer

The Role of Accounting

question

What is the Accounting equation?

answer

Assets = Liabilities + Owner's Equity

question

a type of accounting that provides information for external users outside of the business

answer

Financial Accounting

question

a type of accounting that provides information for internal users inside of the business

answer

Managerial Accounting

question

How is Retained Earnings calculated?

answer

Revenues - Expenses - Dividends

question

What does Owner's Equity consist of?

answer

Contributed Capital + Retained Earnings

question

the collection of terms and concepts that guide the manner in which financial accounting is practiced (but might as well say ALL bec. it even impacts managerial) - includes the principles, assumptions, and qualitative characteristics

answer

The Conceptual Framework

question

principle that record initially the activities of a company at cost

answer

Historic Cost Principle

question

principle that determine when to record and report revenue

answer

Revenue Recognition Principle

question

principle that reports expenses be reported in the same period as the revenue it generated

answer

Matching Principle

question

principle that avoids overstating assets or income in the preparation of financial statements

answer

Conservatism Principle

question

principle that reveal any information that makes a difference to financial statement users

answer

Full Disclosure Principle

question

Qualitative Characteristic - can be comprehended by someone with reasonable knowledge of business and finance

answer

Understandability

question

Qualitative Characteristic - capable of making a difference in a decision

answer

Relevance

question

Qualitative Characteristic - information is verifiable, representationally faithful, and neutral

answer

Reliability

question

Qualitative Characteristic - achieved when different companies use the same accounting methods

answer

Comparability

question

Qualitative Characteristic - application of the same accounting principle by a single company over time

answer

Consistency

question

Qualitative Characteristic - information which if omitted or misstated from financial statements could influence making a decision

answer

Materiality

question

1 of 4 Assumptions: *Definition: - financial activities of a business should be accounted for separately from the business's owners *Ramification: - clearer understanding of the financial information related only to the business

answer

Economic Entity

question

1 of 4 Assumptions: *Definiton: - organizations are to report their financial results and activities in monetary units (ex.: US Dollar, Euros, etc.) *Ramification: - all transactions in foreign currencies are converted to "home" currency

answer

Monetary Unit

question

1 of 4 Assumptions: *Definition: - divides the life of the organization into artificial time periods to report results (ex.: net income) over short periods of time *Ramification: - most businesses prepare monthly, quarterly, and annual financial statements

answer

Time Period

question

1 of 4 Assumptions: *Definition: - the company for which we are accounting will continue its operations indefinitely *Ramification: - entity can carry out its existing commitments

answer

Going Concern (Continuity)

question

Business Activities - ________ Activities: obtaining funds to start a business - ________ Activities: buying assets which are used to generate revenues - ________ Activities: operating the business to earn a profit

answer

1) Financing 2) Investing 3) Operating

question

investment by owners, investment by others, and loans from creditors

answer

Business Capital

question

shows a company's revenues and expenses over a specific period of time - equ.: revenue - expenses = net income/loss - net income/loss goes to the Statement of RE to compute ending RE - answers whether a company is making money or if they are profitable

answer

Income Statement (aka Statement of Earnings)

question

shows the changes in a company's RE over a specific period of time - equ.: beginning RE +/- net income/loss - dividends = ending RE - ending RE goes to the Balance Sheet

answer

Statement of Retained Earnings (RE)

question

shows a company's assets, liabilities, and owner's equity at a specific point in time - equ.: assets = liabilities + owner's equity - the balance in RE comes from the Statement of RE - the cash balance should agree with the ending cash balance on the Statement of Cash Flows - shows the current financial position

answer

Balance Sheet

question

shows a company's inflows and outflows of cash over a specific period of time - equ.: operating cash flows +/- investing cash flows +/- financing cash flows = net change in cash - the ending cash balance on the Statement of Cash Flows should agree with the balance in cash on the Balance Sheet - answers where does the company gets its cash, where does the cash go, and will there be enough cash to pay bills - used by creditors to assess the creditworthiness of a company

answer

Statement of Cash Flows

question

the details of cash inflows and outflows for a business are reported on a statement of cash flows in _______ activities, _______ activities, and _______ activities

answer

operating, investing, and financing activities

question

- Begin an accounting period with the Balance Sheet - During year, company earns Net Income/Loss, which is reported on Income Statement - Net Income increases Retained Earnings, which is shown on Statement of Retained Earnings - Ending

answer

Relationship Among the Financial Statements

question

the federal agency charged to protect investors and maintain the integrity of securities markets (stock markets)

answer

Securities and Exchange Commission (SEC)

question

a standard-setting body in the US that establishes (and improves) standards of financial accounting and reporting

answer

Financial Accounting Standards Board (FASB)

question

a professional organization of Certified Public Accountants which maintains a board that establishes rules that are often more technical and more specific to certain industries

answer

American Institute of CPAs (AICPA)

question

a board (similar to FASB) whose mission is to develop a single set of high-quality international standards requiring transparent and comparable information

answer

International Accounting Standards Board (IASB)

question

the accounting standards, rules, principles, and procedures that compromise authoritative practice for financial accounting - 30,000+ pages of rules for US financial accounting and reporting

answer

Generally Accepted Accounting Principles (GAAP)

question

-majority of all businesses (70%) - formation is simple and relatively inexpensive - owned by one person - less access to funding, depends on personal resources - owner is personally liable for the debts of business - can be formed or dissolved at the wishes of the owner - owner pays taxes at "personal tax" level - issues with transfer of business

answer

Sole Proprietorship

question

- general or limited - common for small businesses and professional practices - owned jointly by two or more individuals - greater access to funding, depends on partners (maybe banks) - partners are jointly responsible for the debt of the partnership - automatically dissolved when any partner leaves - partner pays taxes at "personal tax" level - issues with transfer of business

answer

Partnership

question

- organized under the laws of a particular state - owned by one or more persons called "stockholders" - most access to funding, broader sources (ex.: bonds, stockholders, etc.) - legally separated from owners, stockholders' liability limited to amount of investment - ownership can be easily transferred without affecting corporation - corporation pay taxes at business level and owners pay tax on dividends at personal level

answer

Corporation

question

- company that is not a corporation - made up of "members" with limited liability - taxed once at member level - States regulate these

answer

Limited Liability Company (LLC)

question

- States often require this for professional services - limits liability to "practice" wide events - taxed once at partner level - partnership

answer

Limited Liability Partnership (LLP)

question

Tax rates can be: 1) tax rate increases as tax base increases (ex.: Federal Income Tax) 2) tax rate stays the same as tax base increases (ex.: Sales Tax) 3) tax rate goes down as tax base increases (ex.: Social Security Taxes aka FICA)

answer

1) Progressive 2) Proportional (or flat taxes) 3) Regressive

question

tax rate on next dollar - important to help you determine "take home" amounts as income grows - will be the tax rate at the highest income level

answer

Marginal Tax Rate

question

total tax expense divided by taxable income - the ratio of the amount of taxes paid to the tax base (taxable income)

answer

Average Tax Rate

question

How is taxable income calculated for a corporation?

answer

Total Income - Total Expenses

question

a company's ________ identifies, records, summarizes, and communicates their various business transactions - can vary widely from manual pencil & paper systems to highly complex electronic systems

answer

Accounting Information System (AIS)

question

Normally a Debit or Credit? - asset - expense - dividend

answer

Debit

question

Normally a Debit or Credit? - liability - equity - revenue

answer

Credit

ACC 200 – NCSU McKittrick – Flashcards

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