Exam (elaborations)
Intro To Financial Accounting Exam 1 Questions and Answers
- Course
- Accounting
- Institution
- Accounting
Intro To Financial Accounting Exam 1 Questions and Answers
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Intro To Financial Accounting Exam 1Questions and Answers
Accounting consists of three basic activities - Answer-Identifies, records, communicates
Who uses Accounting Data - Answer-External Users: Creditors and Investors
Recent Financial Scandals - Answer-Enron, WorldCom, HealthSouth, AIG
Sarbanes-Oxley Act of (SOX). - Answer-Added new criminal charges for accounting
scandals
Financial Statements - Answer-Balance Sheet
Income Statement
Statement of Stock Holder's Equity
Statement of Cash Flows
Note Disclosure
Generally Accepted Accounting Principles (GAAP) - Answer-Standards generally
accepted and universally practiced
Standard Setting Bodies - Answer-Financial Accounting Standards Board (FASB)
(SEC)
International Accounting Standards Board
(IASB)
Historical Cost Principle - Answer-dictates that companies record assets at their cost.
Fair Value Principle - Answer-states that assets and liabilities should be reported at a
fair value
Monetary Unit Assumption - Answer-companies include in accounting records only
transaction data expressed in money.
Economic Entity Assumption - Answer-Requires that activities of the entity be kept
separate and distinct from activities of the owner
Combining activities of Kellogg and General Mills would violate? - Answer-Economic
Entity Assumption
Corporation - Answer-Ownership divided into shares of stock
Accounting Equation - Answer-Assets= Liabilities + Stockholder's Equity
, Assets - Answer-Resources a business owns
Provide future service or benefits
Cash, Supplies, Equipment
Liabilities - Answer-Claims against assets (Debts and Obligations)
Creditors- Party to whom money is owed
Accounts Payable, Notes Payable
Stockholder's Equity - Answer-Ownership claim on total Assets
Referred to as residual Equity
Common Stock and Retained Earnings
Dividends - Answer-distribution of cash or other assets to stockholders. They reduce
retained earnings but are not an expense.
Expense - Answer-are the cost of assets consumed or services used in the process of
earning revenue.
Transactions - Answer-Economic events recorded by accountants
Income Statement - Answer-Reports Profitability of the company
List Revenues first, followed by expenses
Shows net income or net loss
Retained Earnings statement - Answer-Reports changes in retained earnings for same
period as income statement
Balance Sheet - Answer-Reports the assets, liabilities, and stockholders' equity at a
specific date.
Is a snapshot of the company's financial condition at a specific moment in time
Statement or Cashflows - Answer-Where did the cash come from
What was it used for
What was the change in balance
The Account - Answer-Record of increases and decreases in a specific asset, liability,
equity, revenue, or expense
Double Entry System - Answer-Debit one account, credit the other
Debits must equal Credits
Debits > Credits - Answer-Account will have a debit balance
Credits>Debits - Answer-Account will have a credit balance
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