Accounting in Action

Flashcards from Accounting in Action lecture notes.

What are the Five Aspirations that guide Clif Bar?

Clif Bar is guided by what it calls its Five Aspirations— Sustaining Our Business, Our Brands, Our People, Our Community, and the Planet.

What did the employee stock ownership plan (ESOP) in 2010 give to Clif Bar employees?

This plan gives its employees 20% ownership of the company.

What are the three basic activities of accounting?

Accounting consists of three basic activities—it identifies, records, and communicates the economic events of an organization to interested users.

Who are the internal users of accounting information?

Internal users of accounting information are managers who plan, organize, and run the business.

Who are the external users of accounting information?

External users are individuals and organizations outside a company who want financial information about the company.

What are the most common types of external users?

The most common types of external users are investors and creditors.

What are ethics?

The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair, are ethics.

Why did Congress pass the Sarbanes-Oxley Act (SOX)?

Congress passed the Sarbanes-Oxley Act (SOX) to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals.

What are generally accepted accounting principles (GAAP)?

The accounting profession has developed standards that are generally accepted and universally practiced, called generally accepted accounting principles (GAAP).

What is the primary accounting standard-setting body in the United States?

The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB).

What is the Securities and Exchange Commission (SEC)?

The Securities and Exchange Commission (SEC) is the agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies.

What does the historical cost principle dictate?

The historical cost principle dictates that companies record assets at their cost.

What does the fair value principle state?

The fair value principle states that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability).

What does the monetary unit assumption require?

The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in money terms.

What does the economic entity assumption require?

The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

What are assets, liabilities, and owner’s equity?

Assets are resources a business owns. Liabilities are creditor claims against total assets, and owner’s equity is the ownership claim on total assets.

What are transactions?

Transactions (business transactions) are a business’s economic events recorded by accountants.

What does an income statement present?

An income statement presents the revenues and expenses and resulting net income or net loss for a specific period of time.

What does an owner’s equity statement summarize?

An owner’s equity statement summarizes the changes in owner’s equity for a specific period of time.

What does a balance sheet report?

A balance sheet reports the assets, liabilities, and owner’s equity at a specific date.

What does a statement of cash flows summarize?

A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

What is auditing?

In auditing, a certified public accountant (CPA) examines company financial statements and provides an opinion as to how accurately the financial statements present the company’s results and financial position.