Equations
What is the accounting equation?
Assets = Liabilities + Stockholders Equity
What are the two types of users in accounting?
External and Internal Users
What are ethics?
Beliefs that separate right from wrong
How many accounting principles are there?
4
What period does the balance sheet report?
Reports the financial position on a specific date
How do you find net income?
Net Income = Revenues - Expenses
What are external and internal users?
External- Do NOT directly run the organization and have limited access to its accounting information
Internal- Directly manage the organization
What are three factors in the fraud triangle?
Opportunity, Rationalization, & Pressure
Which principle is based on actual cost?
Measurement (Cost) Principle
Who was the Generally Accepted Accounting Principles (GAAP) formulated by?
How do you find retained earnings?
Beg. Retained Earnings + Net Income - Dividends = End. Retained Earnings
Does financial accounting focus on external users or internal users?
External Users
What is the three step process for making ethical decisions?
1. Identify ethical concerns
2. Analyze options
3. Make ethical decision
Using the expense recognition principle, when does the company record the expense?
When it is incurred to generate the revenue reported
What order are assets and liabilities listed in the balance sheet?
Liquidity
What is the return on assets equation?
Return on Assets = Net Income/Avg. Total Assets
Give an example of external and internal users.
(look at picture)
What are internal controls?
Procedures to protect assets, ensure reliable accounting, promote efficiency, and uphold company policies
What does the revenue recognition principle state?
Revenue is recognized when goods or services are provided to the customers and at the amount expected to be received from the customer
What is a distribution of a corporation's earning to a stockholder?
Dividend