question

a set of rules and practices, having substantial authoritative support, that the accounting profession recognizes as a general guide for financial reporting purposes rules based broader-Doing it the right way

answer

GAAP (generally accepted accounting principles)

question

a set of standards, issued by the IASB (international accounting standards board) that have been adopted by many countries outside the Unites States "principles based detailed can/can't do

answer

IFRS (International finance reporting standards)

question

has the ability to make a difference in a decision scenario (all factors that could affect a decision will be considered)

answer

relevance

question

accurately represents events that happened Depicts what occurred in the company (outside documents will be used to verify transactions whenever possible)

answer

faithful representation

question

results when different companies use the same accounting principles (

answer

comparability

question

information is accurate if we are able to prove that is is free of error (information that is free from error)

answer

verifiable

question

information that has a quality of ________ if it is presented in a clear and concise fashion

answer

understandability

question

means that a company uses the same accounting principles and methods from year to year (a company uses the same accounting principles from year to year)

answer

consistency

question

for accounting information to be relevant is must be presented quickly enough

answer

timely

question

states that every _____ can be separately identified and accounted for. No intermingling of personal and business transactions (economic events can be identified with a particular unit of accountability)

answer

economic entity assumption

question

requires that only those transactions that can be in money are included in the accounting records money basic unit (only transaction data that can be expressed in terms of money should be included in the accounting records.)

answer

monetary unit assumption

question

assumes business will remain in operation for the foreseeable future (the business will continue in operation long enough to carry out out its existing objectives)

answer

going concern assumption

question

time period states that the economic life of a business can be divided into artificial time periods (month, quarter, year) necessary to provide users with financial results on a timely basis calender year/fiscal year -annual financial statement (the economic life of a business can be divided into artificial time periods.)

answer

periodicity assumption

question

records transactions when events occur states that transactions are recorded in the periods in which the events occur

answer

accrual basis assumption

question

dictates that companies record assets at cost paid to acquire them continue to value assets at historical cost until sold cost is a faithful representation (assets should be recorded at their cost)

answer

cost principle

question

indicated that assets and liabilities should be reported at ______ it is the price received to sell an asset or settle a liability it is relevant

answer

fair value principle

question

requires that companies disclose all circumstances and events that would make a difference to financial statement users notes to the financial statement (circumstances and events that make a difference to financial statement users should be disclosed)

answer

full disclosure principle

question

an item is material when its size makes it likely to influence the decision of an investor or creditor (a company decides to expense capital items that cost less than $500 each)

answer

materiality constraint

question

accounting standard-setters weigh the cost that companies will incur to provide the information against the benefit that financial statements users will gain

answer

cost constraint

question

An organization that issues U.S. accounting standards The primary accounting standard-setting body in the United States

answer

FASB (financial accounting standards board)

question

presents a snapshot at a point in time. to improve understanding companies group similar assets and similar liabilities together reports the assets, liabilities, and stockholders equity at a specific date.

answer

balance sheet (classified balance sheet)

question

assets that a company expects to convert to cash or use up within one year or one operating cycle, whichever is longer.

answer

current assets

question

the average time it takes from the purchase of inventory to the collection of cash from customers (to purchase inventory, sell it on account and then collect cash from customers)

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operating cycle

question

investments of stocks and bonds of other corporations that are held for more than one year

answer

long term investments

question

assets with relatively long useful lives that are used in operation the business and are not intended for sale

answer

property plant equipment

question

allocating the cost of assets to an expense over a number of years

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depreciation

question

the amount allocated to expense in the current period -how much we transfer to the expense

answer

depreciation expense

question

total amount of depreciation expensed thus far in the asset's life

answer

accumulated deprecation

question

long-term assets which have no physical substance expected to use for a long period of time (patent, trademark)

answer

intangible assets

question

obligations that must be paid within the coming year Next billing cycle

answer

current liabilities

question

not paid within a year debts are expected to be paid after one year

answer

long term liabilities

question

consist of common stock and retained earnings

answer

stockholders equity

question

investments of assets in the business by the stockholders. the total amount paid in by stockholders for the shares they purchase.

answer

common stock

question

earnings kept for use in the business SHE=common stock+__

answer

retained earnings

question

cash, and other resources that are reasonable expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called

answer

current assets

question

expresses relationship among selected items of financial statements. relationship can be expresses in terms of... -percentage (115%) -rate (1.15) -proportion (1.15:1)

answer

ratio analysis

question

covering two years of the same company

answer

intracomapny comparisons

question

based on average ratios for a particular industry

answer

industry average comparisons

question

based on comparisons with a competitor in the same industry

answer

intercomapny comparisons

question

measures the income or operation success of a company for a given period of time. revenues-expenses=Net Income

answer

profitability ratios

question

measures the net income earned on each share of common stock

answer

EPS (earnings per share)

question

what is the equation for EPS? -ALL CAPS

answer

NI-PD/ACSO

question

measures short-term ability of company to pay its maturing obligations and meet unexpected needs for cash

answer

liquidity ratio

question

what is the equation for working capital? when working capital is positive, there is a greater likelihood that the company will pay its liabilities. -ALL CAPS

answer

CA-CL

question

measures how much in current assets is available to pay each dollar in current liabilities. Tells us about liquidity.

answer

current ratio

question

what is the equation for current ratio -ALL CAPS

answer

CA/CL

question

measures the ability of the company to survive over a long period of time. -repay interest and amount borrowed

answer

solvency ratios

question

measures the percentage of total financing provided by creditors rather than stockholders

answer

debt to total asset ratio

question

what is the equation for debts to total asset ratio? =ALL CAPS

answer

TL/TA

question

sole proprietorship partnership corporation

answer

forms of buisness organizations

question

Business owned by one person -simple to establish - ___ controlled -tax adv. over corporate form DISADVANTAGES - ___ personally liable for all business debts -financing may be difficult -transfer of ownership may be difficult

answer

sole proprietorship

question

business owned by two or more persons -simple to est. -shared control -broader skills and resources -tax advnt. over corporate form -no personal liability DISADVANTAGES -___ personally liable for all business debts -financing may be difficult -transfer of ownership may be difficult

answer

partnership

question

separate legal entity organized under state law ownership divided into shares of stock -limited (no personal) Flegal liability -easy to transfer ownership -greater capital raising potential -easier to raise funds DISADVANTAGES -unfavorable tax treatment

answer

corporation

question

assets= liabilities +stockholders equity

answer

the accounting equation

question

reports revenues and expenses for a specific period of time records the success or failure of the companys operations during the period is the purpose of the ____

answer

income statement

question

revenues exceed expenses (made more than you loss)

answer

net income

question

expenses exceed revenues (loss more than you made)

answer

net loss

question

statement shows amounts and reasons why _______ has increased or decreased or decreased during the period. time period is the same as that covered by the income statement. no dividends net income shown on the income stat. is added to the beg. balance of retained earn. in the ______.

answer

retained earnings statement

question

U.S. companies that are publicly traded must provide shareholders with an ______. includes -financial statements -managage discussion and analysis -notes to the financial statements -independent auditor's report

answer

the annual report

question

an independent CPA firm will perform an audit of the financial statements and issue an audit report. It states the ___ opinion as to the fairness of the presentation of the financial position and results of operations and their conformance with generally accepted accounting standards.

answer

auditor's report

question

the system of collecting and processing transaction data and communicating financial information to decision makers

answer

accounting transaction system

question

managers who plan, organize, and run a business include: Marketing managers, production supervisors, finance directors, and company officers. (officers and others who manage the business)

answer

internal users

question

an external user use accounting information to make decisions to buy, hold, or sell stock (is general electric earning satisfactory income)

answer

investors

question

an external user _____ such as suppliers and bankers use accounting information to evaluate the risks of selling on credit or lending money (will UA be able to pay its debts when it's due)

answer

creditors

question

helps to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals (passed by congress in 2002)

answer

SOX (sarbanes-Oxley act

question

keeps track of the results of each of the various business activities-financing, investing, and operating system of -collecting -processing transaction data -communicating financial information to decision makers more businesses use computerized accounting (EDP) systems

answer

accounting information system

question

amounts owed to creditors-in the form of debt and other obligations

answer

liabilities

question

payment to stockholders on a regular basis as long as there is sufficient cash to cover required payments to creditors

answer

dividends

question

resources owned by a business

answer

assets

question

an accounting professional who conducts an independent examination of a company's financial statements

answer

auditors

question

the increase in assets resulting from the sale of a product or service in the normal course of business.

answer

Revenues

question

the cost of assets consumed or services used in the process of generating revenues.

answer

Expenses

question

an individual who has met criteria and is thus allowed to perform audits of corporations.

answer

Certified public accountant

question

a list of accounts and their balances at a given time.

answer

trial balance

question

a system that records the two-sided effect of each transaction in appropriate accounts

answer

double entry system

question

The ability of a company to pay obligations that are expected to become due within the next year or operating cycle

answer

Liquidity

question

Measures of the operating success of a company for a given period of time.

answer

profitability ratios

question

debits are entered on the ___. if the greater sum is on the ___ the account as a debit balance

answer

left

question

credits are entered on the ___. if the greater sum is on the ___, the account has a credit balance.

answer

right

question

revenues-expenses

answer

net income

question

beg. retained earnings+Net income-Dividends=

answer

Ending Retained Earning

question

bankers and investors are considered?

answer

external users

question

is used to record the debit and credit effects on specific accounts from each transaction. -chronological record of transactions -shows the complete effect of a transaction in one location -helps prevent or locate errors b/c the amount of debits and credits for each entry can be readily compared (____ize transactions)

answer

journal

question

right to receive money in the future

answer

accounts receivable

question

the obligation to pay for these goods

answer

accounts payable

question

economic events that require recording in the financial statements -only activities that affect the accounting equations are recorded -may be external or internal

answer

transactions

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