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244 Cards in this Set

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AICPA

American Institute ofCertified Public Accountants

_________ _________ firms offer professional accounting and related services for a fee tocompanies, other organizations, and individuals.

Public accounting

CPA

Certified PublicAccountant

Auditing is for

A business seeking a loan or attempting to have its securities traded on a stock exchange

ICMA

Institute of Certified Management Accountants

CMAs

Certified Management Accountants

CIA

Certified Internal Auditor

Financial accounting appears in ___________

financial statements

The external users of accounting information fall into six groups;

Owners and prospective owners.


Creditors and lenders.


Employees and their unions.


Customers.


Governmental units.


General public.

financial statements are _______ reports

formal

Type of report

GAAP

generally accepted accounting principles

deciding what amounts of capital (funds) are needed to run the businessand whether to secure these funds from owners (stockholders) or creditors is ____________ decisions

Financial

deciding how the total capital of a company is to be invested is __________ _________ decisions.

Resource allocation

deciding what products are to be produced, by what means, andwhen is _________ decisions

Production

setting selling prices and advertising budgets are ___________ decisions

Marketing

Setting what?

APB

Accounting Principles Board

FASB

Financial Accounting Standards Board

GASB

Governmental Accounting Standards Board

SEC

Securities and ExchangeCommission

AAA

American Accounting Association

The Financial Executives Institute members are primarily _________ _________-__________ executives

financial policy-making

Members are

MAP Committee

Management AccountingPractices Committee

A __________ is any business organization that exists as an economic unit

business entity

"Blank" that exists as an what?

Financial Accounting intended primarily for _________.

external use

________ provides information on a company's financial position, cash inflows and outflows, and the results of operations.

financial statements

Four Basic Financial Statements...:

The income statement.


The statement of retained earnings


The balance sheet


The statement of cash flows

________ present the profitability and strength of acompany.

Financial Statements

The ________ _________ reflects a company’s profitability

Income Statement

The ________ _________ shows the change in retained earnings between the beginning and end of a period (e.g. a month or a year).


Statement of Retained Earnings

The ______ ____ reflects a company’s solvency andfinancial position.

Balance Sheet

The _________ shows the cash inflows and outflows for a companyover a period of time.

statement of cash flows

_________ are the inflows of assets (such as cash) resulting from the sale of productsor the rendering of services to customers.

Revenues

__________ are the costs incurred to produce revenues.

Expenses

Net income=...

= Revenues – Expenses

net loss occurs when...

...When expenses exceed revenues

The _________ explains the changes in retained earnings between two balance sheet dates.

The statement of retained earnings

A ________ is a payment (usually of cash) to the owners of the business

dividend

The _________, sometimes called the statement of financial position,

balance sheet

__________ are things of value owned by the business.

Assets

________ are also called the resources of the business.

Assets

________ are amounts due from customers for services previously rendered

accounts receivable

_________ are the debts owed by a business

Liabilities

__________ ________ are amounts owed to suppliers for previous purchases

accounts payable

_________ are written promises to pay a specific sum of money

notes payable

__________ refers to The owners’ interest in a corporation

stockholders’ equity

___________ shows the amount of the owners’investment in the corporation.

Capital stock

__________ generally consists of the accumulated net income of the corporation minus dividends distributed to stockholders.

Retained earnings

statement of cash flows shows...

...shows the cash inflows and cash outflows

__________ shows the cash inflows and cash outflows from operating, investing, andfinancing activities.

statement of cash flows

__________ __________ generally include the cash effects of transactions and other events involving creditors and owners (stockholders).

Financing activities

_________ are all claims to, or interests in, assets

Equities

accounting equation...:

Assets A = Liabilities L + Stockholders’ Equity SE


(A = L + SE)

_________ is a business activity

transaction

_________ is any written or printed evidence of a business transaction

source document

__________ describes the essential facts of that transaction

source document

__________ concept (or accounting entity concept) is Data gathered in anaccounting system relates to a specific business unit or entity

Business entity

_________ _____________ concept is Economic activity that is initially recorded and reported in a common monetary unit of measure—the dollar in the United States

Money measurement

___________ concept (principle) Most of the amounts in an accountingsystem are the objective money prices determined in the exchange process.

Exchange-price (or cost)

Going-concern (continuity) concept is ..

... Unless strong evidence exists to the contrary,accountants assume that the business entity will continue operations into the indefinite future

__________ concept is an entity’s life can be subdivided into time periods

Periodicity (time periods)

5 Underlying assumptions or concepts are...

*Business entity concept (or accounting entity concept)


*Money measurement concept.


*Exchange-price (or cost) concept (principle).


*Going-concern (continuity) concept.


*Periodicity (time periods) concept.

_________ of _________ are a teaching tool.

summary of transactions

_______ of _______ shows the effects of transactions on theaccounting equation.

summary of transactions

__________ increases the amount of retained earnings

Revenues

Expenses and dividends decrease...

the amount of retained earnings

the equity ratio=

=Stockholders 'equity/Totalequities

Solvency is...

...Is the Ability to pay debts as they become due.

The Financial Executives Institute was established in...

...in 1931

Information important enough to influence the decision of an informed user of the financial statements should be published

... Full disclosure

Expenses that should be recognized as they are incurred to produce revenues is known as __________ recognition

Matching

Gains may be recorded only when realized, but losses should be recorded when they first become evident are __________ recognition.

Gain and loss

Revenues should be earned and realized before they are recorded...

Revenue recognition

Transfers of resources are recorded at prices agreed on by the parties at the time of the exchange...

Exchange-price (cost)

_________ decisions determines the location of a company's markets and how to reach them.

Marketing

The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the...
Income Statement
The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the...
Balance Sheet
Under the accrual basis of accounting, revenues are reported in the accounting period when the...
Service Or Goods Have Been Delivered

Under the accrual basis of accounting, expenses are reported in the accounting period when the _________ matches the _________ Or Is Used Up

Expense ; Revenues

Revenues minus expenses equals __________.
net income
Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________.
assets
Assets are usually reported on the balance sheet at which amount?
Cost
Obligations (amounts owed) are reported on the balance sheet and are referred to as __________.
liabilities
Liabilities often have the word __________ in their account title.
payable
Unearned Revenues is what type of account?
Liability
Accounting entries involve a minimum of how many accounts?
Two
The listing of all of the accounts available for use in a company's accounting system is known as the __________.
chart of accounts
Assets minus liabilities equals __________.
stockholders' equity or owner's equity(net assets if a nonprofit)
Which term is associated with "left" or "left-side"?
Debit
Which term is associated with "right" or "right-side"?
Credit
When cash is received, the account Cash will be...
Debited
When a company pays a bill, the account Cash will be...
Credited
What will usually cause an asset account to increase?
Debit
What will usually cause the liability account Accounts Payable to increase?
Credit
Entries to expenses such as Rent Expense are usually...
Debits
Entries to revenues accounts such as Service Revenues are usually...
Credits
Cash is always _________ when cash is received.
debited
Should the $500 entry to the Cash account be a debit?

Yes

Should the $500 entry to Mary Smith, Capital be a debit?

No

This owner's equity account should be ________, not debited.
credited
A company using the accrual method of accounting performed services on account in August. The services were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the company in September. Assuming that the company prepares monthly income statements, what will be the account debited for $2,000 in August?
Accounts Receivable
A company using the accrual method of accounting performed services on account in August. The services were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the company in September. Which account should the company credit for $2,000 in August?
Service Revenue
A company using the accrual method of accounting performed services on account in August. The services were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the company in September. In September when the company receives the $2,000 from the customer, which account should the company debit?
Cash
A company using the accrual method of accounting performed services on account in August. The services were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the company in September. In September when the company receives the $2,000 from the customer, which account should the company credit?
Accounts Receivable
To increase the balance in the following accounts, would you debit the account or would you credit the account? Accounts Payable
Credit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Cash
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Land
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Notes Payable
Credit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Accounts Receivable
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Mary Smith, Capital
Credit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Supplies
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Supplies Expense
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Prepaid Insurance
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Service Revenue
Credit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Mary Smith, Drawing
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Equipment
Debit
To increase the balance in the following accounts, would you debit the account or would you credit the account? Unearned Revenue
Credit
To decrease the balance in the following accounts, would you debit the account or would you credit the account? Accounts Payable

Debit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Cash

Credit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Land

Credit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Notes Payable

Debit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Accounts Receivable

Credit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Mary Smith, Capital

Debit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Supplies
Credit
To decrease the balance in the following accounts, would you debit the account or would you credit the account? Supplies Expense
Credit
To decrease the balance in the following accounts, would you debit the account or would you credit the account? Prepaid Insurance
Credit
To decrease the balance in the following accounts, would you debit the account or would you credit the account? Service Revenue

Debit

To decrease the balance in the following accounts, would you debit the account or would you credit the account? Mary Smith, Drawing
Credit
To decrease the balance in the following accounts, would you debit the account or would you credit the account? Equipment
Credit
To decrease the balance in the following accounts, would you debit the account or would you credit the account? Unearned Revenue

Debit

What is the normal balance for the following accounts? Accounts Payable
Credit
What is the normal balance for the following accounts? Cash
Debit
What is the normal balance for the following accounts? Land
Debit
What is the normal balance for the following accounts? Notes Payable
Credit
What is the normal balance for the following accounts? Accounts Receivable
Debit
What is the normal balance for the following accounts? Mary Smith, Capital
Credit
What is the normal balance for the following accounts? Supplies
Debit
What is the normal balance for the following accounts? Supplies Expense
Debit
What is the normal balance for the following accounts? Prepaid Insurance
Debit
What is the normal balance for the following accounts? Service Revenue
Credit
What is the normal balance for the following accounts? Mary Smith, Drawing
Debit
What is the normal balance for the following accounts? Equipment
Debit
What is the normal balance for the following accounts? Unearned Revenue
Credit
Generally when an expense is involved in a transaction, an expense will be...
Debited
Generally when revenues are involved in a transaction, a revenue account will be...
Credited
The accountant's word to indicate that an entry will be recorded on the left-side of an account is...
Debit
A contra-asset account such as Accumulated Depreciation will likely have which balance?
Credit
A contra-liability account such as Discount on Notes Payable will likely have which balance?
Debit
True/False: The chart of accounts is a listing of the accounts presently having balances in the general ledger.
False
True/False: Some accounting software will classify some accounts as "income" accounts, while accountants might refer to these accounts as "revenue" accounts.
True
True/False: The digits of the account numbers assigned to general ledger accounts often have significance. For example, an account number beginning with a "1" might signify that the account is an asset account, a "6" might signify an operating expense, etc.
True
The accounts shown in the chart of accounts can be broadly classified into two categories: balance sheet accounts and __________ accounts.
income statement
Every transaction will affect how many accounts?
Two Or More
In addition to the standard chart of accounts for a specific industry, you will likely want to expand and/or modify the chart of accounts to fit your business. One tool that would be helpful in determining the accounts for your company would be your company's __________ chart.
organization

Revenues – Expenses=

Net Income

The two main methods of bookkeeping and accounting are 1) the cash method, and 2) the __________method.

Accruel

__________-entry bookkeeping means that every transaction will affect two or more accounts.

Double

A __________ amount will appear on the left side of a T-account.

Debit

A listing of the balances in the accounts in order to determine whether debits are equal to credits is a __________ balance.

Trial

The listing of accounts that are available for posting transactions is the __________ of accounts.

Chart

When a check is written, a cash account should be __________.

Credited

Liability accounts will normally have __________ balances.

Credit

Revenue accounts will normally have __________ balances.

Credit

The bookkeeping or accounting equation is Assets = Liabilities + Owner's __________.

Equity

The book of original entry is the definition of a __________.
Journal
When a sale is made on credit, the seller will debit the asset account Accounts __________.
Receivable
Asset, __________, and stockholders' equity accounts are known as balance sheet accounts.
Liability
Large corporations should report revenues on their income statements when the __________.
Revenues Are Earned
The difference between the balance in a company's cash account and its bank statement is documented in the __________ of the bank statement.
reconciliation

Accrued expenses are likely to pertain to transactions that have __________ been paid.

Not Yet / Not

Deferred revenues likely involve cash amounts that have __________ been received.

Already

A __________ entry typically removes an accrual-type adjusting entry that had been recorded in the preceding accounting period.
reversing
Cash and Accounts Receivable are two examples of accounts that are reported on the classified balance sheet under the heading __________ assets.
current
A supplier of goods or services is known as a __________.

Vendor

The separation of duties is part of the internal __________ for safeguarding assets.
controls

Cash is an ________ account

Asset

Cash is on the ________ ______ of the financial statement

[Balance Sheet ]
2. Accounts Receivable is an ________ account
Asset
2. Accounts Receivable is on the ________ ______ of the financial statement
[Balance Sheet ]
Supplies is an ________ account
Asset
Supplies is on the ________ ______ of the financial statement
[Balance Sheet ]
Inventory is an ________ account
Asset
Inventory is on the ________ ______ of the financial statement
[Balance Sheet ]
5. Accounts Payable is an ________ account
Liability
5. Accounts Payable is on the ________ ______ of the financial statement
[Balance Sheet ]
6. Note Payable is an ________ account
Liability
6. Note Payable is on the ________ ______ of the financial statement
[Balance Sheet ]
Capital is an ________ _______ account
[Owner's equity ]
Capital is on the ________ ______ of the financial statement
[Balance Sheet ]
Rent is an ________ account
Expense
Rent is on the ________ ______ of the financial statement
[Income Statement ]
Utilities is an ________ account
Expense
Utilities is on the ________ ______ of the financial statement
[Income Statement ]
Sales is an ________ account
Revenue
Sales is on the ________ ______ of the financial statement
[Income Statement ]
Please give the proper order of preparation of the four main financial statements.
1. [Income Statement]2. [Statement of Retained Earnings]3. [Balance Sheet]4. [Statement of Cash Flows]
This characteristic requires accounting information to be free of measurement method bias.
Neutrality
This characteristic requires that information on economic activity corresponds to the actual underlying activity.
Representational faithfulness
Information has this characteristic when it reveals the relative success of users in predicting outcomes.
Feedback value
Information has this characteristic when depicts for users what it purports to represent.
Reliability
This characteristic requires that information be pertinent to a decision.
Relevance
Information has this characteristic when it reveals differences and similarities that are real and are not the result of differing accounting treatments.
Comparability
Information has this characteristic when it supports users’ abilities to anticipate outcomes of events.
Predictive value
This characteristic requires that accounting information be available when it is necessary to have for decision making.
Timeliness
This characteristic requires disclosure of all significant information in a way that aids understanding and is not misleading.
Completeness
Information has this characteristic when it can be significantly duplicated by independent measurers using the same methods.
Verifiability
In the United States, we typically have a low rate of inflation. Which accounting assumption or concept takes this into consideration as an important element of its relevance on financial accounting?
stable dollar
A Form 10-K gives a comprehensive summary of _____________.



a. a company's materiality


b. a company's performance


c. a company's structure


d. a company's employees

company's performance
Leon does his own accounting and feels confident in his foundational understanding of the accounting concepts, assumptions, and principles. He takes a closer look at his assets and decides he needs to reevaluate his gains/losses. He considers lowering the amount of losses and increasing the amount of gains, which would significantly change his asset position in his company. However, based on historical information, he will be overstating his assets and financial position. Which accounting concept tells Leon that he is unable to make this kind of decision?



a. Cost/Benefit


b. Conservatism


c. Matching


d. Revenue recognition

Conservatism
The accountant explained that as a multi-billion dollar business, the bank did not track the quantity of the pencils as an expense in terms of financial reporting; however, this fact did not change the reality that Sherry was stealing company merchandise. Based on the statement the accountant made to Sherry and your understanding of the concepts presented in this course, which accounting principle or objective best describes this situation?



a. Materiality principle


b. Matching principle


c. Principle of conservatism


d. Cost principle

Materiality principle
Generally Accepted Accounting Principles Methodology relies on:



a. literature focused research


b. a conceptual framework


c. thorough review of facts


d. question and answer sessions

literature focused research
The decision to disclose an event is based on?



a. generally accepted accounting principles


b. the timing of the event


c. the voluntary principle


d. materiality

materiality
In a principle based framework the different interpretations of a similar transaction could result in:



a. multiple financial statements


b. a financial statement audit


c. more exceptions than a rules-based system


d. extensive disclosures in the financial statements

extensive disclosures in the financial statements
A retailer had cash sales of $85,000 and sales on account of $26,000 for the year 2017. On December 31, 2017, they were still owed $14,000 from a few customers. How much will they report as revenue for the year 2017?



a. $85,000


b. $97,000


c. $111,000


d. $125,000

c. $111,000
The __________ ________ is the only financial statement which applies to a single point in time of a business's calendar year.
balance sheet
Which of the following transactions would be a financing activity on the statement of cash flows?



a. purchase of equipment financed by convertible bonds


b. interest received


c. interest paid on convertible bonds


d. purchase of treasury stock

d. purchase of treasury stock
After applying the temporal method a company must report any gains/losses on which financial statement?

a. statement of cash flow


b. statement of gains or losses


c. balance sheet


d. income statement

d. income statement
Which of the following is a financing activity that would impact a company's cash flow statement?

a. The company makes a sale on credit to a customer.


b. The company issues a discount on the sale of some of its products.


c. Company took out a loan from a bank.


d. The company makes a loan to one of its employees.

c. Company took out a loan from a bank.
When is the temporal method used?

a. when a foreign company wants to convert to U.S. dollars


b. when a company's functional currency is the U.S. dollar


c. when a company wants to show current market value of its assets


d. when a company operates in foreign country

b. when a company's functional currency is the U.S. dollar
net sales - cost of goods sold =
= gross margin
gross margin = net sales - ____ of ______ ______
cost of goods sold
gross margin = _____ _____ - cost of goods sold
net sales
gross sales - ( sales returns/allowances and sales discounts) =

Net Sales

Items that a business can use or exchange to produce products of the business are known as _______
assets
The trial balance reports $800 of supplies on hand but a physical count of supplies indicates only $300 on hand.
[Prepaid expense ]
The fourth month of a 12-month insurance policy has ended.
[Prepaid expense ]
Cash was received January 1 for a contract of future services to be provided and services were provided during the month of March.
[Unearned revenue ]
A year's worth of rent was received from a lessee on July 1 and year-end adjustments are recorded December 31.
[Unearned revenue ]
Machinery with a useful life of five years was used for a third year.
[Depreciation ]
The last seven days of the month are included in the payroll period that is paid on the 10th of the following month.
[Accrued expense ]
Attorney fees for services provided to a client in December are to be billed in January.
[Accrued revenue ]

True or False: Fixed Expenses do not change in total when there is a modest change in sales.

True
True or False: An example of a fixed expense would be a 5% sales commission.

False

True or False: Property taxes and rent are often fixed expenses.

True

True or False: Variable expenses change in total as volume changes.

True

True or False: An example of a variable expense is an office manager's monthly salary.

FALSE

True or False: A retailer's cost of goods sold is an example of a variable expense.

TRUE

True or False: Contribution margin is defined as sales (or revenues) minus variable expenses.
TRUE
True or False: Break-even point is the point where revenues equal the total of all expenses including the cost of goods sold.
TRUE
True or False: The break-even point in dollars of revenues is equal to the total of the fixed expenses divided by the contribution margin per unit.
FALSE
True or False: If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000.
TRUE
True or False: If a company has mixed expenses, the fixed component can be combined with the company's fixed expenses and the variable component can be combined with the company's variable expenses.
TRUE
True or False: Decreasing a company's fixed expenses should reduce the break-even point.

TRUE

True or False: The contribution margin per unit is the selling price per unit minus the fixed expenses per unit.

FALSE

True or False: Break-even analysis is useful for companies that sell products, but it is not useful for companies that provide services.

FALSE