Intro. To Accounting and Business Test: chapters1-3 – Flashcards
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Managerial accounting
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The area of accounting concerned with providing internal users with information
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Supplier
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User which is NOT considered an internal user of accounting information
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Manager
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User which is NOT considered an external user of accounting information
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Business entity concept is important because
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It limits economic data in the accounting system to data directly related to the activities of the business.
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False statement about GAAP
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GAAP allows a company's management to record and report data as it sees fit.
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FASB
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Financial accounting standards board that primarily developes the accounting principles in the United States.
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Cost concept
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Accounting records will show assets recorded at the exchange price or cost.
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Liabilities
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Rights of creditors
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Assets
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Resources owned by the business
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Stockholder's equity
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Rights of owners
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Paying amount on account reduces
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The amount owed on a liability
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Balance sheet
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Includes assets, liabilities, and stockholder's equity
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Balance sheet
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Used to record the financial position based on the accounting equation. Assets =liabilities - stockholder's equity
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Income statement
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Summary of the revenue in a month or year
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Corporations refer to Total owner's equity as
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Total stockholder's equity
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Account that never requires adjusting entry
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Cash
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Accrued revenues
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Have been earned but have not been received or recorded in the books
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Cash basis of accounting (true statement)
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Revenues are reported in the period in which cash is received, and expenses are reported when cash is paid out
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Prepaid expenses
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An advance payment of cash
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Adjusting entry for accrued revenues
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Is the same journal entry as recording revenue on account.
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When recording an adjusting entry for unearned revenues
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A revenue account is debited
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The adjusted trial balance is prepared
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After adjusting entries are posted but before financial statements are prepared
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After the adjusted trial balance is balanced, it can be used to prepare
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The income statement, retained earnings statement, and classified balance sheet
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If the adjustment for prepaid insurance was omitted
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The adjusted trial balance would not be unequal.
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Transaction that doesn't affect stockholder's equity
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A sale on account
