Accounting 2301-Chap. 1-3 Terms Study Guide Questions With Answers.

Accounting - correct answer is a system that identifies, records, and communicates information that is relevant, reliable, and comparable about an organization's business activities. Internal Users of Info - correct answer use info to help businesses decide what they can do. External Users of Info - correct answer use financial info to determine how well a company is actually doing. Financial Accounting - correct answer provides users with financial statements (shareholders, lenders, etc.) Managerial Accounting - correct answer provides info needs for internal decision makers (officers, managers, etc.) Private sector - correct answer has largest amount of jobs Ethics - correct answer Beliefs that distinguish right from wrong; accepted standards of good behavior Guideline for Ethics - correct answer 1) Identify ethical concerns 2) Analyze options (consider all good and bad consequences) 3) Make ethical decision (choose best option after weighing all consequences) GAAP (Generally Accepted Accounting Principles) - correct answer concepts and rules that govern a financial accounting practice Securities and Exchange Commission - correct answer govt. agency that has legal authority to establish reporting requirements and set GAAP for companies that issue stock to the public. Financial Accounting Standards Board (FASB) - correct answer is the private group that sets both broad and specific principles (used by the U.S.) International Accounting Standards Board (IASB) - correct answer issues international standards that identify preferred accounting practices in other countries. More than 100 countries now require or permit companies to prepare financial reports following IRFS Standards. Principles of Accounting - correct answer Measurement (cost), Revenue recognition, Matching (expense recognition), and the full disclosure principles. Assumptions of Accounting - correct answer Going-concern assumption, monetary unit assumption, time period assumption, and business entity assumption. PAC 10 - correct answer Principles (P)=4+Assumptions (A)=4+Constraints (C)=2=10 Measurement (Cost) Principle - correct answer means that accounting info is based on actual cost Revenue Recognition Principle - correct answer provides guidance on when a company must recognize revenue Matching (Expense Recognition) Principle - correct answer prescribes that a company must record its expenses incurred to generate the revenue Full Disclosure Principle - correct answer requires a company to report the details behind financial statements that would impact users' decisions Going-Concern Assumption - correct answer means that accounting info reflects a presumption the business will continue operating Monetary Unit Assumption - correct answer means we can express transaction in money Time-Period Assumption - correct answer presumes that the life of a company can be divided into time periods, such as months and years Business Entity Assumption - correct answer means that a business is accounted for separately from its owner or other business entities Materiality Constraint - correct answer significant amounts resulting from error or omission can mislead knowledgable readers if they are not properly accounted for and reported Cost/Benefit Constraint - correct answer benefits of information should outweigh the cost of gathering and reporting Four Financial Statements - correct answer 1) Income Statement 2) Statement of Retained Earnings 3) Balance Sheet 4) Statement of Cash Flows Sole Proprietorship - correct answer one person; liability is the greatest because the business and owner are basically the same and if they're sued they can lose it all Partnership - correct answer share control and share liability=general partnership; limited partnership=put money into the partnership with limited liability but also limited control Limited Liability Partnerships [LLPs]: partners are only responsible for their own acts Limited Liability Companies [LLCs]: owners don't have any liability so it's important to look at their financial statements Corporation - correct answer shareholders don't have to pay if sued; incorporated by the state-can only do business in that state; limited liability; separate entity like an individual so they have to pay taxes on their own profits