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accounting 1 Exam Questions Answered
Step By Step
what two concerns of investors and creditors are summarized by the term "cash flow prospects?" - ANSWER return of investment and return on investment
three financial statements used to communicate financial accounting info to interested external parties - ANSWER balance sheet (statement of finical position), income statement, and statement of cash flow
accounting system: - ANSWER the personnel, procedures, devices and records used by an entity to develop accounting info and communicate this information to decision makers
External users of accounting information - ANSWER are individuals and other enterprises that have a current or potential financial interest in the reporting enterprise, but that are not involved in the day-to-day operations of that enterprise. External users of financial information may include the following: owners, creditors, potential investors, labor unions, governmental agencies, suppliers, customers, trade associations, and the general public.
There are three basic financial statements that we will study in this course. - ANSWER these three include the balance sheet, income statement, and statement of cash flows.
balance sheet - ANSWER the balance sheet is often referred to as the statement of financial position because it shows the resources of a business and the claims against those resources.
The income statement - ANSWER is often referred to as the statement of operations.
This financial statement - ANSWER measures the revenues earned by a company during a period of time and the expenses incurred to generate those revenues.
Examples of internal users of accounting information include - ANSWER board of directors, CEOs, CFOs, vice-presidents of information services, human resources, and ethics, business unit managers, plant managers, store managers, and line supervisors.
characteristics of management accounting info - ANSWER a means to an end
timeliness
identify decision maker
measure of efficiency and effectiveness
oriented towards the future
The most authoritative source of generally accepted accounting principles is (GAAP) - ANSWER the Financial Accounting Standards Board (FASB
financial accounting - ANSWER info describing the financial resources, obligations, and activities of an economic entity. used primarily by investors and creditors to help them assess the entities financial position, results of operation, and its ability to generate cash flow
management accounting - ANSWER development and interpretation of accounting info intended specifically to aid management
tax accounting - ANSWER specialized field within the accounting profession.
The going-concern assumption states that the business entity is assumed to continue operations into the foreseeable future.
The objectivity principle states that accounting information must be unbiased and based upon independent evidence.
The stable-dollar assumption tells us that we will only record accounting information that can be expressed in monetary units, usually dollars in the United States.
Liabilities - ANSWER Liabilities represent the claims of creditors on an entity's assets. Liabilities include accounts payable (amounts owed to creditors for assets purchased on account), taxes payable, and wages payable (amounts owed to our employees at the end of the accounting period).
Owners Equity - ANSWER Owners' equity represents the owners' claims on the assets of the business.
The equities of an entity include investments by owners, withdrawals by owners, and earnings retained by the business. Investments by owners and net income increase owners' equity. Payments to owners and net losses decrease owners' equity.
A proprietorship - ANSWER A proprietorship is a business owned by just one individual.
A partnership - ANSWER A partnership is owned by two or more individuals. Some partnerships have several thousand partners.
A corporation - ANSWER A corporation is owned by individuals who normally are not active in the day-to-day operations of that business. For example, you may become an owner of IBM by purchasing shares of stock on the New York Stock Exchange. While you are a part owner, you do not necessarily work for IBM nor are you active in the operations of the company.
creditors and investors have two major concerns about the operations and financial position of any company: - ANSWER Liquidity, profitability. First, the company must be liquid, that is, it must be able to pay all bills when due.
Second, the company must be profitable in the long-run. Unprofitable companies drain the cash position of the company, causing concern on the part of creditors and investors.
an account- - ANSWER An account is an individual record showing increases and decreases in the balance. Think of a checkbook as an account. In it, cash receipts and disbursements are maintained, in chronological order, as well as the current account balance.
The entire group of accounts for a particular business is called the ledger.
