Accounting Exam 2

Front 1

the Board of Directors

Back 1

elected by the shareholders to represent their interests, is responsible for maintaining the integrity of the company's financial reports.

Front 2

U.S. Securities and Exchange Commission (SEC)

Back 2

protects investors and maintains the integrity of the securities markets. Oversees the work of the FASB in setting GAAP, the Public Company Accounting Oversight Board, and the Stock Exchanges.

Front 3

The Public Company Accounting Oversight Board (PCAOB)

Back 3

Sets auditing standards for independent auditors of public companies.

Front 4

Unqualified (Clean) Audit Opinion

Back 4

Auditor's statement that the financial statements are fair presentations in all material respects in conformity with GAAP.

Front 5

Earnings Forecasts

Back 5

predictions of earnings for future accounting periods

Front 6

Institutional Investors

Back 6

managers of pension, mutual, endowment, and other funds that invest on the behalf of others.

Front 7

Private Investors

Back 7

include individuals who purchase shares in companies.

Front 8

Lenders (Creditors)

Back 8

include suppliers and financial institutions that lend money to companies.

Front 9

Cost-Benefit Constraint

Back 9

suggests that the benefits of accounting for and reporting information should outweigh the costs

Front 10

Relevant Information

Back 10

can influence a decision; It is timely and has predictive and/or feedback value.

Front 11

Reliable Information

Back 11

accurate, unbiased and verifiable information

Front 12

Consistent Information

Back 12

can be compared over time because similar accounting methods have been applied

Front 13

Comparable Information

Back 13

allows comparisons across business because similar accounting methods have been applied

Front 14

Material Amounts

Back 14

amounts that are large enough to influence a user's decision

Front 15

Conservatism

Back 15

suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses.

Front 16

Press Release

Back 16

a written public news announcement normally distributed to major new services.

Front 17

Form 10-K

Back 17

the annual report that publicly traded companies must file with the SEC

Front 18

Form 10-Q

Back 18

the quarterly report that publicly traded companies must file with the SEC

Front 19

Form 8-K

Back 19

used by publicly traded companies to disclose any material event not previously reported that is important to investors (e.g. auditor changes, mergers)

Front 20

Intangible Assets

Back 20

have no physical existence and a long life

Front 21

Par Value

Back 21

a legal amount per share established by the board of directors; it establishes the minimum amount a stockholder must contribute and has no relationship to the market price of the stock.

Front 22

Additional Paid-In Capital

Back 22

the amount of contributed capital less the par value of the stock

Front 23

Gross Profit (Gross Margin)

Back 23

Net sales less cost of goods sold

Front 24

Income from Operations (Operating Income)

Back 24

equals net sales less cost of goods sold and other operating expenses

Front 25

Income Before Income Taxes (Pretax Earnings)

Back 25

revenues minus all expenses except income tax expense

Front 26

Credit Card Discount

Back 26

the fee charged by the credit card company for services

Front 27

FOB (free on board) Shipping Point

Back 27

title changes hands at shipment and the buyer normally pays for shipping

Front 28

FOB Destination

Back 28

title changes hands on delivery and the seller normally pays for shipping

Front 29

Sales Discount

Back 29

a cash discount offered to encourage prompt payment of an account receivable

Front 30

Sales Returns and Allowances

Back 30

a reduction of sales revenues for return of or allowances for unsatisfactory goods

Front 31

Allowance Method

Back 31

bases bad debt expense on an estimate of uncollectible accounts

Front 32

Bad Debt Expense (doubtful accounts expense, uncollectible accounts expense, provision for uncollectible accounts)

Back 32

the expense associated with estimated uncollectible accounts receivable.

Front 33

Allowance for Doubtful Accounts (allowance for bad debts, allowance for uncollectible accounts)

Back 33

a contra-asset account containing the estimated uncollectible accounts receivable

Front 34

Percentage of Credit Sales Method

Back 34

bases bad debt expense on the historical percentage of credit sales that result in bad debts

Front 35

Aging of Accounts Receivable Method

Back 35

estimates uncollectible accounts based on the age of each account receivable

Front 36

Internal Controls

Back 36

are the processes by which a company safeguards its assets and provides reasonable assurance regarding the reliability of the company's financial reporting, the effectiveness and efficiency of its operations, and its compliance with applicable laws and regulations.

Front 37

Bank Statement

Back 37

a monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits, and a running bank balance

Front 38

Bank Reconciliation

Back 38

the process of comparing (reconciling) the ending cash balance in the company's records and the ending cash balance reported by the bank on the monthly bank statement.