Accounting 101 || All Questions Answered Correctly.
What is accounting? Know the definition.
1 correct answers the action or process of keeping financial accounts
"language of business"
information system
Know the definitions of revenues and expenses
1 correct answers Revenue: inflows of assets resulting from the sale of goods and services;
increase in retained earnings from delivering goods or services to customers or clients
Expenses: outflows of assets resulting from the sales of goods and services; decrease in retained
earnings that results from operations the cost of doing business; opposite of revenues
Know the internal and external users
1 correct answers Internal User: managerial accounting; manager or someone else inside a
company who has access to private, internal knowledge about the company and can use this
knowledge to make financial decisions about the business. I.E. managerial and cost accountants
External users: financial accounting; a person outside of an organization who does not directly
run its operations and uses financial or accounting information about that company to make
decisions. It's someone who doesn't manage or work for the company but uses its financial
information
who is responsible for GAAP (accounting principles)
1 correct answers FASB: financial account standards board
GAAP: professional frameworks for measurement and disclosure of financial information
Accounting Equation
1 correct answers ASSETS = LIABILITIES + SHAREHOLDER'S EQUITY
The International Accounting Standards Board is responsible for developing a single set of
worldwide accounting standards (IFRS)
1 correct answers sets global financial reporting standards
These standards will help companies to reduce accounting costs, make it easier to acquire foreign
companies, and facilitate comparisons between foreign companies.
1 correct answers
Know the primary objective of financial reporting
1 correct answers Provide information for decision makers outside the entity, such as investors,
creditors, government agencies and the public
What makes information relevant?
1 correct answers must be able to make a difference in a decision
, must be material and important enough
requires that the financial accounting information should be such that the users need it and it is
expected to affect their decision
Assets are recorded at historical/ original cost because it is objective and verifiable
1 correct answers historical cost: should be recorded at their actual cost, measured by the date of
purchase as the amount of the cash paid plus the dollar value of all non cash consideration also
given exchange
Financial information should be understandable to whom
1 correct answers those willing to spend the necessary time to understand it
Balance Sheet
1 correct answers Assets: cash, petty cash, temporary investments, accounts receivable,
inventory, supplies, prepaid insurance, land, land improvements, buildings, equipment, goodwill,
bonds issue costs, ect.
Liabilities
notes payable, accounts payable, salaries payable, wages payable, interest payable, other accrued
expenses payable, customers deposits, income taxes payable, warranty liability, lawsuits payable,
unearned revenues, bonds, ect.
Owner's (Stockholder's)
Equity
common stock, preferred stock, paid-in capital in excess of par value, paid-in capital from
treasury stock, retained earnings, accumulated other comprehensive income
1Income Statement- revenues minus expenses equal net income correct answers revenues minus
expenses equal net income
Net income=
1 correct answers revenues-expenses
Know the order of statement preparation
1 correct answers 1. income
2. statement of retained earnings
3. balance sheet
4. statement of cash flows
Define and know the account types
2 correct answers ASSETS
cash: money and any medium of exchange
-bank balance
-coins
What is accounting? Know the definition.
1 correct answers the action or process of keeping financial accounts
"language of business"
information system
Know the definitions of revenues and expenses
1 correct answers Revenue: inflows of assets resulting from the sale of goods and services;
increase in retained earnings from delivering goods or services to customers or clients
Expenses: outflows of assets resulting from the sales of goods and services; decrease in retained
earnings that results from operations the cost of doing business; opposite of revenues
Know the internal and external users
1 correct answers Internal User: managerial accounting; manager or someone else inside a
company who has access to private, internal knowledge about the company and can use this
knowledge to make financial decisions about the business. I.E. managerial and cost accountants
External users: financial accounting; a person outside of an organization who does not directly
run its operations and uses financial or accounting information about that company to make
decisions. It's someone who doesn't manage or work for the company but uses its financial
information
who is responsible for GAAP (accounting principles)
1 correct answers FASB: financial account standards board
GAAP: professional frameworks for measurement and disclosure of financial information
Accounting Equation
1 correct answers ASSETS = LIABILITIES + SHAREHOLDER'S EQUITY
The International Accounting Standards Board is responsible for developing a single set of
worldwide accounting standards (IFRS)
1 correct answers sets global financial reporting standards
These standards will help companies to reduce accounting costs, make it easier to acquire foreign
companies, and facilitate comparisons between foreign companies.
1 correct answers
Know the primary objective of financial reporting
1 correct answers Provide information for decision makers outside the entity, such as investors,
creditors, government agencies and the public
What makes information relevant?
1 correct answers must be able to make a difference in a decision
, must be material and important enough
requires that the financial accounting information should be such that the users need it and it is
expected to affect their decision
Assets are recorded at historical/ original cost because it is objective and verifiable
1 correct answers historical cost: should be recorded at their actual cost, measured by the date of
purchase as the amount of the cash paid plus the dollar value of all non cash consideration also
given exchange
Financial information should be understandable to whom
1 correct answers those willing to spend the necessary time to understand it
Balance Sheet
1 correct answers Assets: cash, petty cash, temporary investments, accounts receivable,
inventory, supplies, prepaid insurance, land, land improvements, buildings, equipment, goodwill,
bonds issue costs, ect.
Liabilities
notes payable, accounts payable, salaries payable, wages payable, interest payable, other accrued
expenses payable, customers deposits, income taxes payable, warranty liability, lawsuits payable,
unearned revenues, bonds, ect.
Owner's (Stockholder's)
Equity
common stock, preferred stock, paid-in capital in excess of par value, paid-in capital from
treasury stock, retained earnings, accumulated other comprehensive income
1Income Statement- revenues minus expenses equal net income correct answers revenues minus
expenses equal net income
Net income=
1 correct answers revenues-expenses
Know the order of statement preparation
1 correct answers 1. income
2. statement of retained earnings
3. balance sheet
4. statement of cash flows
Define and know the account types
2 correct answers ASSETS
cash: money and any medium of exchange
-bank balance
-coins
