Accounting Midterm Exam – Flashcards
Unlock all answers in this set
Unlock answersquestion
Income Statement Equation
answer
Revenue - Expenses
question
Balance Sheet Equation
answer
Assets = Liabilities + Stockholders' Equity
question
Cashflow Statement
answer
Statement that shows cash going in and out. Shows cashflow from operating activities, investing, and financing activities.
question
Short-term Assets
answer
Cash, Accounts Receivable, Inventory, Supplies, etc.
question
Long-term Assets
answer
Equipment, Buildings, Machines, Land, etc.
question
Financial Statements
answer
Income Statement, Retained Earnings, Balance Sheet, and Cashflow Statement.
question
Sole Proprietorship
answer
Advantages: Easy to form, easy to manage, one taxation Disadvantages: Unlimited liability, difficult to transfer ownership, and limited to access capital.
question
Partnership
answer
Advantages: Easy to form, easy to manage, one taxation Disadvantages: Unlimited liability (more limited than sole proprietorship), difficult to transfer ownership, and limited to access capital.
question
Corporation
answer
Advantages: Easy access to capital markets, professional management, limited liability, and unlimited life. Disadvantages: Double taxation and misuse of resources
question
Insider Trading
answer
Someone from the Management or Board of Directors leaks information to stockholders' before the information hits the market.
question
SEC (Security Exchange Commissions)
answer
Overlooks corporations in the NYSE, NASDAQ, AE, etc.
question
FASB (Financial Accounting Standard Board)
answer
Made up of 7 members and 161 "statements" issued each year. Created in 1973
question
IASB (International Accounting Standard Board)
answer
27 countries with members. 105 countries use this set of rules.
question
Sarbanes/Oxley Act (Sox)
answer
Congress passed this act in 2004 which enabled people the right to sue corporations for falsifying accounting statements.
question
Accounting Principles
answer
Going Concern, Time Period, Cost Concept, and Full Disclosure.
question
Relevant Information
answer
Information that is timely, predictive value, and gives feedback.
question
Reliable Information
answer
Information that is truthful, neutral, and has verifiability.
question
Current Assets
answer
Assets converted into cash within one year or operating cycle. Examples: Cash and Cash Equivalent, Short Term Investment (Marketable Securities), Accounts Receivable, Inventories, Prepaid Insurance, Supplies, etc.
question
Long Term Investments
answer
Buying another companies stock or bonds, and waiting at least one year before selling. (3-year and over 3-years)
question
Property, Plant, and Equipment
answer
Land, Buildings, Equipment, and Furniture.
question
Intangible Assets
answer
Goodwill, Trademark, Copyright, and Franchise.
question
Current Liabilities
answer
Anything that you owe that must be paid within one year. Examples: Accounts Payable, Rent Payable, Salaries and Wages Payable, Taxes Payable, and Notes Payable.
question
Long Term Liabilities (Debt)
answer
Anything that must be paid in 1+ years. Example: Bonds Payable
question
Stockholders' Equity
answer
Common Stock, Preferred Stock, and Retained Earnings.
question
Working Capital
answer
Current Assets - Current Liabilities
question
Current Ratio
answer
Current Assets / Current Liabilities
question
Debt to Total Assets
answer
Total Liabilities / Total Assets
question
Earnings Per Share (EPS)
answer
Net Income / # of Common Shares Outstanding
question
Accounting Cycle
answer
Record Business Transactions (Record to Journal), Post to Ledger, Trial Balance, Adjusting Entries, Adjusted Trial Balance, Prepare Financial Statements, Closing Entries, and Reversing Entries.
question
T-Account
answer
Shorthand representation of a general ledger account.
question
Debit Side
answer
Left side of any account.
question
Credit Side
answer
Right side of any account.
question
Cash Basis
answer
All revenue and expenses must be in cash.
question
Deferral
answer
Cash received or paid first. Example: Paid 3-year subscription $3,000 in cash
question
Accrual
answer
Activity precedes cash. Example: Received rent 2-months advance
