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Accounting 101
A, L & SE
Financial Statements
GAAP
Miscellaneous
100
What do we do with information in accounting? (3 steps)
Analyze, Record and Report
100
This is what you own. Give 3 examples.
What is an asset? Examples vary.
100
What is the purpose of a Financial Statement? What are the 3 items that are found at the very top of a Financial Statement?
To report the results of a business. 1) Name of business, 2) Name of the financial statement and 3) Statement date
100
This is what GAAP stands for
What are generally accepted accounting principles?
100
This is the equation used to calculate the ending Retained Earnings.
What is Beginning RE + NI (or -NL) - Dividends = End RE
200
This is the purpose of accounting
To provide information for decision makers
200
A bank loan would be listed under this category on the balance sheet.
What is a Liability?
200
What does the Balance Sheet report?
Asset = Liabilities + Stockholder's Equity at a point in time. It is a "snapshot" of the financial position of a business.
200
This GAAP says reader's should be informed of any necessary facts to properly interpret the F/S's.
What is Adequate Disclosure?
200
In addition to an owner, these people also have claims against a company's assets. (These are people like suppliers you owe $ to)
Who are creditors?
300
These represent the types of business organizations that use accounting.
What are 1)sole proprietorships, 2)partnerships and 3)corporations?
300
Give an example of something that would increase SE and something that would decrease SE.
Increases: - Investments of cash or other assets by owners (stockholders) - Earnings (Net Income) from profitable operation of the business Decreases: - Payments of cash or transfer of assets to owners - Losses (Net Loss) from unprofitable operation of the bussiness
300
Tell me what the Income Statement reports.
Revenue - Expenses = Net Income over a period of time. It shows how profitable a business was over an specific period of time.
300
This GAAP states that accounting for a business needs to be kept separate from the personal affairs of the owner.
What is the Business Entity Concept?
300
The difference between return on investment and return of investment. (You can use an example to explain)
Return OF investment - simply the repayment of your earlier investment Return ON investment - what you make on top of your investment Example: I invested $5,000 into Apple in exchange for 50 shares of stock. When I sold my shares I received $5,500. The return OF investment is $5,000, the amount I originally invested. The return ON investment is the $500, the amount I profited.
400
Explain the difference between Managerial Accounting and Financial Accounting.
FA - used to describe financial resources (assets), obligations (liabilities), & transactions of a business. MA - the interpretation and analysis of this information by internal users such as managers or supervisors.
400
A business paid off its debt of $4,000 to a creditor. What is the effect of the transaction on the accounting equation?
Decrease an asset & decrease a liability.
400
What are the 3 activities of the statement of cash flows?
Operating activities, investing activities and financing activities.
400
This GAAP says to record everything at historic cost.
What is the Cost Principle?
400
Measures taken by management specifically intended to make a business look as strong as possible in its balance sheet, income statement and statement of cash flows.
What is window dressing?
500
This involves testing business records and procedures for accuracy.
What is auditing?
500
The term used to explain how quickly a company can convert assets into cash.
What is liquidity?
500
How does the net income of a business effect its balance sheet.
Net Income increases Retained Earnings.
500
This GAAP says to record revenues when earned, regardless of when cash is exchanged.
What is the Realization Principle?
500
This represents the usual length of a fiscal period.
What is one year?