Acct I Ch 1 – Flashcards
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Asset
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is a resource, such as cash, land or buildings, that is owned by a company
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What would be found on a balance sheet?
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Assets, Liabilities, and Stockholders' Equity
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A(n)_____ is a cost of doing business that is necessary to earn______.
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expense; revenue
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Income Statement
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Revenues and expenses
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Statement of Cash Flows
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Operating, Investing, and Financing Activities
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Balance Sheet
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Assets, Liabilities, and Stockholders' Equity
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What are the financial statements?
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Income Statement, Balance Sheet, and Stockholders' Equity
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Dividend
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a distribution of net income to the stockholders of a corporation
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The purpose of a statement of cash flows is to provide information about the
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cash receipts and cash disbursements during a period
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Revenues
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are earned by selling goods and services to customers
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Monetary Unit Assumption
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states that financial statement elements should be measured in terms of the US dollar
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The two primary function of financial accounting are to
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measure business activities and communicate measurements to external parties
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What are the four basic assumptions underlying GAAP
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Economic Entity, Monetary Unit, Periodicity, and Going Concern
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Generally Accepted Accounting Principles
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are also known as GAAP
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Net Income
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Revenues-Expenses
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The classifications on the statement of cash flows are cash flows from
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financing activities, operating activities, and investing activities
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Managerial Accounting
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deals with the concepts and methods used to provide information to an organization's internal users
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The Accounting Equation
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Assets=Liabilities+Stockholders' Equity
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Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?
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Corporate Management
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Liabilities
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Amounts owed to creditors
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Shareholders' equity arises primarily from amounts invested by shareholders and amounts
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earned by the corporation
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What appears on the statement of stockholders' equity?
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Dividends, Net Income, and Beginning Balance of Retained Earnings
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Corporation
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A business organization that issues shares of stock to its investors
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Retained Earnings
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Profits earned by a company that have not been paid to stockholders Undistributed profits that have accumulated in the company over time
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What items are found on a balance sheet?
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Assets, Liabilities, Stockholders' Equity
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Assets
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are a company's resources
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Liabilities and Stockholders' Equity
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are claims to a company's resources
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Example of Economic Entity
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The requirement that the economic activities of a business owner should be separated from the activities of the business
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The financial statement that summarizes revenues and expenses for a period of time is an
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income statement
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The purpose of an income statement is to
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summarize the profit-generating activities that occurred during a particular reporting period
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The fundamental activities of a business are selling activities and marketing activities
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False
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The fundamental model of business is commonly referred to as
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the accounting equation
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Going Concern Assumption
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anticipates that a business will continue to operate indefinitely
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For accounting information to be relevant, what qualities must it posses?
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Confirmatory Value and Predictive Value
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Ethics
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is a term that refers to a code or moral system that provides criteria for evaluating right or wrong
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Which are assets?
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Inventory and Supply
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Which financial statement shows a firm's financial position on a particular date?
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Balance sheet
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Stockholders' equity is
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the owner's claims to resources of the corporation
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Periodicity Assumption
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allows the life of a company to be divided into artificial time periods to provide timely information
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The income statement is considered most useful for predicting
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future profitability
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Which of the following items are classified as financing activities on the statement of cash flows?
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Issue stock and Pay dividend
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Faithful representation requires information to have which of the following characteristics?
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Neutrality, Completeness, Freedom from Material Error
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Consistency
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The qualitative characteristic of using the same accounting method each period over time
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Financial Accounting Standards Board (FASB)
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The private sector organization that is currently responsible for setting accounting standards in the US
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Timeliness
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refers to information being available to users early enough to allow them to use it in the decision process
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The "Big 4" accounting firms
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Deloitte, Ernst & Young, PricewaterhouseCoopers, and KPMG
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Investing Activities
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involve the buying and selling of land, buildings, and equipment used in the business
