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69 Cards in this Set
- Front
- Back
Define Accounting |
An information system that provides useful information to people who make rational investment, credit, and similar decisions to help them reach better decisions |
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Which statements best describe accounting? |
A. Provides quantitative information about economic entities that is intended to be useful in making economic decisions. B. Is not an end in itself but a method of communication. C. An information system that measures, processes, and communicates financial information about an economic entity. |
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The federal agency that has the duty of collecting federal income taxes and otherwise enforcing the income tax laws is called the... |
Internal Revenue Service (IRS) |
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What term is described by "The area of accounting principally concerned with reporting to external users?" |
Financial Accounting |
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A type of accounting designed to help managers identify, measure, and control operating costs |
Cost accounting |
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A type of accounting principally concerned with budgeting, planning, and controlling costs |
managerial accounting |
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T/F All business activities which are legal are in fact thereby ethical acivities |
false. Just because it is legal doesn't make it ethical. |
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A sole proprietorship is... |
owned by one individual |
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A partnership is a... |
Owned by two or more individuals |
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A corporation is... |
Owned by one or more entities who own shares of stock in the business |
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What type of entity is legally considered completely separate from its owners? |
A corporation |
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What types of entity do accountants consider completely separate from its owners? |
Corporations, sole proprietorship, and partnerships |
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The chief accounting officer of a business is a |
Controller |
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Generally accepted accounting rules |
1. Are the broad rules adopted by the accounting profession as guides in measuring, recording, and reporting the financial affairs and activities of a business. 2. Consists of several concepts, principals and procedures. 3. Are not natural laws in the sense of physics and chemistry. 4. Has evolved with the aid of many groups including the American Institute of Certified Public Accountants, the Financial Accounting Standards board, the American Accounting Association, and the Securities and Exchange Commission. |
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The publications of the FASB that establish generally accepted accounting standards are called |
Statements of Financial Accounting Standards |
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Which organization has the primary responsibility today for developing and issuing rules on accounting practice? |
The Financial Accounting Standards Board(FASB) |
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A committee that attempts to create harmony among the accounting practices of different countries by identifying preferred practices and encouraging their adoption throughout the world |
International Accounting Standards Committee (IASC) |
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The accounting principle that requires the financial statements to present information based on costs incurred in a transaction is |
Historical Cost Principles |
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Requires every business to be accounted for separately and distinctly from its owner or owners |
Entity Concept Principle |
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Requires Accountants to prepare financial statements under the assumption that the business will continue operating instead of being put up for sale or closed |
Going-concern principle |
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Requires that uncertainty regarding valuation of assets or magnitude of revenue should be resolved by understatement of the asset of the magnitude of the revenue |
conservatism principle |
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The part of accounting that records transactions and other events, either manually or with computers |
Bookkeeping |
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The process of developing formal plans for future business and government activities, which then serve as the basis for evaluating actual accomplishments |
Budgeting |
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Evaluates the record-keeping processes but also assess whether managers throughout the organization are following established operating procedures. |
Internal auditing |
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Define Tax accounting |
The field of accounting that includes preparing tax returns and planning future transactions to minimize the amount of tax that has to be paid. |
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Define management advisory services |
The activity where accountants provide advice to managers |
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Define Cash Flow |
Statements that describe where a business's cash came from and where it went |
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Define Financial position |
Statements that help users understand the financial status of the business. |
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Define Retained Earnings |
Statements that show the retained earnings balance at the beginning of the accounting period, the increase/decrease that resulted from a net income/net loss that resulted from a net income/net loss, the decrease that resulted from dividends, and the balance at the end of the period. |
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Define stable-monetary-unit assumption |
The accounting assumption that a monetary unit does not change over time |
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Define full disclosure principle |
The accounting principle that requires financial statements to contain all relevant information about the operations and financial position of the entity |
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Define matching principle |
Requires that expenses incurred be matched with the revenue earned within the accounting period |
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Define materiality |
The idea that the requirements of an accounting principle may be ignored if the effect on the financial statements is unimportant to their users |
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Define Principal of note |
The amount the signer of a promissory note agrees to pay back when it matures, not including the interest |
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Define creditors |
Individuals or organizations that a company owes money to |
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Define debtors |
Individuals or companies that owes money to a company |
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Define stockholders |
Owners of the company; also called shareholders |
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Define amounts receivable |
Amounts owed to a business by its customers for goods or services sold to them on credit |
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Define Assets |
The properties or economic resources owned by the business |
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Accounts payable |
Liabilities resulting from the purchase of goods or services on credit |
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Expenses |
The using up of assets or increases in liabilities as a result of the major or central operations of a profit-oriented business |
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Contributed capital or Paid-in capital |
A category of stockholders equity that represents the amount of investments in the corporation by its stockholders |
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Common stock or Capital Stock |
The name given to a corporation's stock when it issues only one kind of class or stock |
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The difference between a company's assets and liabilities; the residual interest in the assets of an entity that remain after deducting the liabilities |
Shareholder's equity or Net assets or Stockholder's equity |
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What is the accounting equation |
Assets = Liabilities + Capital/Owner's equity |
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The income statement |
Is a financial statement showing revenue earned by a business, the expenses incurred in earnings the revenues, and the resulting net income or net loss for a period |
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The heading of the financial statement should include |
1. The name of the entity 2. The title of the statement 3. The date of, or period covered by, the statement |
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An account is |
1. A record traditionally used to record individual transactions 2. A record used to summarize all increases and decreases in a particular asset, liability, owner's equity, revenue, or expense 3. The basic storage unit for accounting data |
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Accounts receivable is what kind of account |
Assets account |
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Notes payable and unearned revenue are what kind of account? |
Liability accounts |
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Legal fees earned is what kind of account |
Revenue account |
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Cash, accounts receivable, and equipment are all considered what? |
Assets |
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Accounts payable is considered what? |
A liability |
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A prepaid expense account is considered to be a... |
Asset |
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The major revenue account for a merchandising firm is a |
Sales revenue account |
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Define revenue |
1. Revenue is the amount charged to customers for goods or services sold to them 2. Revenue accounts are increased by crediting them 3. Revenue is recorded when a sale is made on credit |
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Long term assets held for use in production or sale of other assets or services |
Plant and equipment |
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Current assets |
Cash or other assets that are reasonably expected to be realized in cash or to be sold or consumed within one year or one operating cycle of the business |
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Intangible assets |
Economic benefits or resources without physical substance, the value of which stems from the privileges or rights that accrue to their owner |
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Accrued expenses |
Expenses incurred during an accounting period but that, prior to end-of-period adjustments, remain unrecorded becuase payment is not due |
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How is fixtures and equipment normally classified? |
Long-term asset |
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How is mortgage payable normally classified? |
long-term liability |
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What is a patent normally classified as? |
Intangible |
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Net income is defined as? |
The net increase in owner's equity resulting from the operations of the company |
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An expense is |
An outflow of assets or an incurrance of liabilities from delivering or producing goods, giving services, or carrying out other activities that are an entity's ongoing or central operation |
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Revenue is |
An inflow of assets or a settlement of liabilities from delivering or producing goods, giving services, or carrying out other activities that are an entity's ongoing or central operations |
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The correct way to date an income statement is |
For the time period |
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What is the difference between income statements and the balance sheet? |
An income statement is prepared for a period of time and balance sheets are for a specific point in time |
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Because some totals carry over ti another financial statement, it is important to prepare them in the following order |
Income statement, statement of retained earning, balance sheet, statement of cash flows |