Accounting 2100 Chapter 1

Financial accounting is for what type of users?

External users

Managerial accounting is for what type of users?

Internal users

What is accounting?

An information and measurement system that identifies, records, and communicates and organization’s business activities

What are ethics?

Beliefs that separate write from wrong, accepted standards of good and bad behavior

What are the three steps of ethical decision making?

identify ethical concerns, analyze options, make ethical decisions

What are assets?

Resources a company owns or controls, expected to yield future benefits

What are liabilities?

Creditor’s claims on assets

What is a payable?

A liability that promises a future outflow of resources

What is a receivable?

An asset that promises future inflow of resources

What do the terms “on account” or “on credit mean”?

Cash is received or paid at a future date

What is equity?

The owner’s claim on assets, equal to assets minus liabilities

What is the accounting equation conceptually?

The relation of assets, liabitilies, and equity

What is the accounting equation formula?

Assets = Liabilities + Equity

True of False: The accounting equation applies to all transactions and events, to all companies and organizations, and to all points in time

True

What are the two components of equity in the expanded accounting equation?

contributed capital and retained earnings

What is contributed capital in the expanded accounting equation?

common stock - dividends

What is retained earnings in the expanded accounting equation?

revenues - expenses

What is the order of reports on an income statement?

Revenues, expenses

What is not included in an income statement?

investments and dividends

Describe the two sides of a balance sheet

Left side has assets, right side has liabilities

What does a balance sheet show? (3 things)

The financial position of a company at a point in time, the equality of the accounting equation at a point in time, reports assets/liabilities/equity at a point in time

What is accounts payable?

payments owed to suppliers etc.