Accounting Basics and Purpose
The reason we have GAAP is to have standardized and uniformed accounting rules across all business to more easily measure business health. What does GAAP stand for?
Generally Accepted Accounting Principles
According to GAAP, why must businesses record their in specific time periods? (Ex: months, Quarters, Years)
To compare results and measure performance without having to wait until the business closed down
GAAP principles state that an item's value should be recorded at it's historical cost (the price paid when it was purchased). However, it should be recorded at its liquidation value (the value of it if you sold it immediately) if your businesses is (Blank)
Shutting down/going out of business
Enrolled Agents are certified to work for which government agency?
IRS (Internal Revenue Service)
This kind of account keeps track of money that your business OWES to other businesses
Accounts Payable
What I may pay for a company truck may be different to what someone else may pay. Since market value is harder to predict, companies record the value of goods purchased at the value when they were (blank) because it provides objective evidence for how much something was valued with evidence of a purchase
When they were first bought
$300,000 and once I make the purchase
An accounting entry that increases assets or decreases liabilities and appears on the left-hand side of documents is called a:
Debit
Like avoiding putting all of your eggs in one basket, this is the strategy of moving assets into different industries or businesses to avoid overexposure in one industry is known as...
Diversification
Recording every account entry twice, once as a credit entry and again as a debit entry is called this method of accounting:
Double Entry
Taking financial data and using it as actionable business intelligence helps business with the (Blank) making process
Decision Making
According to the matching principle If I buy inventory in April but don't sell them until June, when should I record the transaction?
June
Revenue that is recognized by a company but not yet recorded in the account is called:
Accrual
These are paid off to shareholders in the form of cash/stock/etc.
Dividends
Through standardized reporting, this accounting function helps businesses, investors and lenders minimize risk
Risk Assessment/Evaluation
True or false, if I have a pending lawsuit that can potentially impact my business's health should I disclose it in my financial records
True, if you know you have a lawsuit coming you have to disclose it
Taking money from my business to use for a personal family vacation is a violation of which GAAP Principle?
Business Entity
This is what CPA stands for, they provide auditing, tax help, and consulting services to people
Certified Public Accountant
Costs that remain constant and do not change are called:
Fixed Costs
What's the difference between an internal audit and external audit? AND Why may an investor be more likely to invest in a company that passes an external audit?
Internal is done "In-house" by accountants who work for he company, External is done by an outside company or government agency. External auditors have no reason to lie and can ensure statement integrity and verification
If you're an American business or operating your business in the United States, you must record the value of your assets, liabilities, and equity in what form of currency?
US Dollars
According to the revenue recognition principle, If I run a catering business and finish a job on December 20th but my client doesn't actually pay me until January 2nd, when should I record my service revenue?
December 20th
GAAP are the rules when accounting in the US, what is the name of the standardized rules when operating internationally?
IFRS
This is the master list of assets in the general ledger, equity, expenses, liabilities, and revenues
Chart of Accounts
Do accountants have an ethical responsibility to report irregularities to prevent future economic crises or potential fraud?
Yes