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ACC 201 First Exam
Chapters 1-4
82
Accounting
Undergraduate 2
09/29/2007

Additional Accounting Flashcards

 


 

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Term
Accounting
Definition
The process of identifying, measuring, and communicating economic information to various users.
Term
Management Accounting
Definition
The branch of accounting concerned with providing management with information to facilitate planning and control.
Term
Financial Accounting
Definition
The branch of account concerned with the preparation of financial statements for outsider use.
Term
Who uses accounting information?
Definition
External and Internal Users.

Internal Users-Company Management and Leadership teams

External Users-Stockholders and Potential Stockholders, Bondholders, Bankers, and other Creditors, as well as Government Agencies. (also suppliers of raw materials)
Term
What is the role of the Securities and Exchange Commission?
Definition
A regulatory agency that sets the rules under which financial statements must be prepared for corporations that sell their stock to the public on organized stock exchanges.
Term
What is the role of the Financial Accounting Standards Board (FASB)?
Definition
The group in the private sector with authority to set accounting standards in the United States.
Term
What is the role of the American Institure of Certified Public Accountants?
Definition
It is a professional organization for certified public accountants, advises the FASB.
Term
What is the International Accounting Standards Committee?
Definition
The organization formed to develop worldwide accounting standards.
Term
Sole Proprietorship
Definition
Form of organization with a single owner.

(Economic Entity Concept-the assumption that a single, identifiable unit must be accounted for in all situations.)
Term
Partnership
Definition
A business owned by two or more individuals; organization form often used by accounting firms and law firms.
Term
Corporation
Definition
A form of entity organized under the laws of a particular state; ownership evidenced by shares of stock.
Term
The Balance Sheet
Definition
The financial statement that summarizes the assets, liabilities, and owners equity of a company.

alt. term- statement of financial position

At all times Assets must equal Liabilities and Owners Equity.
Term
Income Statement
Definition
The financial statement that summarizes the revenues and expenses of a company for a period of time.

(Flow Statement)
Term
Statement of Retained Earnings
Definition
The financial statement that summarizes the income earned and dividends paid over the life of a business.

Beginning Balance
Add: Net Income for the period
Deduct: Dividends for the period
Ending Balance-Retained Earnings
Term
Statement of Cash Flows
Definition
The financial statement that summarizes an entity's cash reciepts and cash payments during the period from operating, investing, and financing activities.
Term
Who is interested in viewing a company's financial statements?
Definition
Internal and External Users
Term
Accounting Equation
Definition
Assets=Liabilities+Owners Equity
Term
Asset
Definition
A future economic benefit. i.e. cash, accounts recievable, prepaid insurance and rent, marketable securities
Term
Liability
Definition
An obligation of a business. i.e. accounts payable, salary and wages payable, income taxes payable, interest payable
Term
Equity
Definition
The owner's claim on the assets of an entity. Assets-Liabilities=Owners
Term
Generally Accepted Accounting Principles (GAAP)
Definition
The various methods, rules, practices, and otehr procedures that have evolved over time in response to teh need to regualte the preparation of financial statements.
Term
Economic Entity
Definition
The assumption that a single, identifiable, unit must be accounted for in all situations.
Term
Cost Principle
Definition
Assets recorded at the cost to acquire them.
Term
Going Concern
Definition
The assumption that an entity is not in teh process of liquidation and that it will continue infinitly.
Term
Monetary Unit
Definition
The yardstick used to measure amounts in financial statements; the dollar in the United States.
Term
Time Period
Definition
Artificial segment on the calendar, used as the basis for preparing financial statements.
Term
What are the objectives of financial reporting?
Definition
The primary objective of financial reporting is to provide economic information to permit users of the information to make informed decisions.

Secondary objectives include:

Reflect Prospective Cash Receipts to Investors and Creditors

Reflect Prospective Cash Flows to the Company

Reflect the Company's Resources and Claims to the Company
Term
Characteristics of Accounting Information
Definition
Understandable
Relevant
Reliable
Comparable
Consistant
Materiality
Conservative
Term
Understandability
Definition
The quality of accounting information that makes it comprehensible to those willing to spend the necessary tiem.

Financial Information should be comprehensible to those who are willing to spend the time to understand it.
Term
Relevance
Definition
The capacity of information to make a difference in a decision.
Term
Reliability
Definition
The quality that makes accounting information dependable in representing the events that it purports to represent.
Term
Comparability
Definition
The quality that allows a user to analyze two or more companies and look for similarities and differences.
Term
Consistency
Definition
The quality that allows a user to compare two or more accounting periods for a single company.
Term
Materiality
Definition
The magnitude of an accounting information omission or misstatement that will affect the judgement of someone relying on the information.
Term
Conservatism
Definition
The practice of using the least optimistic estimate when two estimates or amounts are about equally likely.
Term
Operating Cycle
Definition
The average time it takes for a retailer or manufacturer's inventory to turn to cash.
Term
What does a Classified Balance Sheet contain?
Definition
Current Assets
Investments
Property, Plant, and Equipment
Intangible Assets
Current Liabilities
Long-Term Liabilities (debt)
Stockholders (Owner's) Equity
Term
Current Assets
Definition
An asset that is expected to be realized in cash or sold or consumed during the operating cycle or within one year if the cycle is shorter than one year.
Term
Non-Current Assets
Definition
Investments
Property, Plant and Equipment
Intangibles (trademarks, copyrights, franchise rights, patents and goodwills)
Term
Current Liabilities
Definition
An obligation that will be satisfied within the next operating cycle or within one year if the cycle is shorter than one year.

i.e. A/P, Salaries and Wages Payable, Income Taxes Payable, Interest Payable
Term
Long-Term Liabilities
Definition
Notes Payable and Bonds Payable (depends on the date of maturity)
Term
What are the two sources of Stockholders Equity?
Definition
Contributed Capital (capital stock) Earned Capital (retained earnings)
Term
Liquidity
Definition
The ability of a company to pay its debts as they come due.
Term
Working Capital
Definition
Current Assets-Current Liabilities
Term
Current Ratio
Definition
Current Assets/Current Liabilities
Term
Single-Step Income Statement?
Definition
An income statement in which all expenses are added together and subtracted from all revenues.

(Primary Advantage is Simplicity)
Term
Multiple-Step Income Statement
Definition
An income statement that shows classifications of revenues and expenses as well as important subtotals.
Term
Gross Profit Ratio
Definition
Gross profit divided by net sales
Term
Profit Margin
Definition
Net Income/Sales
Term
What is indicated on the cash flow statement?
Definition
Effects on an entities cash flow by their operating activities, investing activities, and financing activities of the period.
Term
What is included in an entities annual report?
Definition
Financial Statements
Report of the Independent Auditors
Management Discussion and Analysis
Notes to the Consolidated Financial Statements
Term
What are the two types of accounting transactions?
Definition
Internal and External Events
Term
Internal Event
Definition
An event occuring entirely within an entity
Term
External Event
Definition
An event involving interaction between an entity and its environment
Term
What is the role of a source document?
Definition
A source document provides the evidence needed in an accounting system to record a transaction.

i.e. invoices (accounts payable and/or expenses), cash register tape (sales revenue), time cards (wages payable)
Term
Account
Definition
The basic unit for recording transactions
Term
Chart of Accounts
Definition
Numerical list of all of the accounts an entity uses.

Asset Accounts typically number 100-199, Liabilities 200-299, Equity from 300-399, Revenue from 400-499, and Expenses from 500-599
Term
General Journal
Definition
A book of original entry that requires that both the account being debited and the account being credited be listed along with the respective amounts.
Term
General Ledger
Definition
A book, file, hard drive, or other device containing all the accounts and their respective transactions and balances.
Term
Posting
Definition
Recording an entry in an account in the general ledger.
Term
T-account
Definition
A visual aid used by accountants to illustrate a journal entry's effect on the general ledger accounts. Debit amounts are entered on the left side of the "T" and credit amounts are entered on the right side.
Term
Debit
Definition
The accounting term that means an entry will be made on the left side of an account.
Term
Credit
Definition
To enter an amount on the right side of an account. Normal entries to revenue accounts are credits. Liabilities normally have credit balances.
Term
Debit Normal Balance, debit or credit?
Definition
Debit
Term
Liabilities Normal Balance, Debit or Credit?
Definition
Credit
Term
Owner's Equity Normal Balance, Debit or Credit?
Definition
Credit
Term
Revenues Normal Balance, Debit or Credit?
Definition
Credit
Term
Expenses Normal Balance, Debit or Credit?
Definition
Debit
Term
Dividends Normal Balance, Debit or Credit?
Definition
Debit
Term
What is it meant by "double-entry accounting" system?
Definition
A system of accounting in which every transaction is recorded with equal debits and credits and the accounting equation is kept in balance.
Term
What is a trial balance?
Definition
A list of each account and its balance, used to prove equality of debits and credits.
Term
Recognition
Definition
The process of recording an item in the financial statements as an asset, liability, revenue, expense, or the like.
Term
Historical Cost
Definition
The amount paid for an asset and used as a basis for recognizing it on teh balance sheet and carrying it on later balance sheets.
Term
Current Value
Definition
The amount of cash, or its equivalent, that could be recieved by selling an asset currently.
Term
Revenue Recognition Principle
Definition
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. (Accrual)
Term
Matching Principle
Definition
The principle that requires a company to match expenses with related revenues in order to report a company's profitability during a specified time interval.
Term
Cash Basis Accounting
Definition
A system of accounting in which revenues are recognized when cash is recieved and expenses when cash is paid.
Term
Accrual Basis Accounting
Definition
A system of accounting in which revenues are recognized when earned and expenses when incurred.
Term
Deferred Expense
Definition
Cash paid before expenses is incurred

Prepaid Rent
Term
Deferred Revenue
Definition
Cash recieved before revenue is earned

Rent Collected in Advance
Term
Accrued Liability
Definition
Expense incurred before cash is paid

Wages Payable
Term
Accrued Asset
Definition
Revenue is earned before cash is recieved

Rent Recievable
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