General/Intro Accounting (FALL25)

What is the primary purpose of accounting?

To provide financial information about a business's operations and condition to users.

What is the definition of accounting?

A system to gather, record, and report a business's financial information.

Why is accounting called the "language of business"?

It explains how economic events affect a company.

What does SEC stand for?

Securities and Exchange Commission; regulates public company reporting.

What does GAAP stand for?

Generally Accepted Accounting Principles; U.S. accounting rules.

Who sets U.S. GAAP?

The Financial Accounting Standards Board (FASB).

What is the ASC in accounting?

Accounting Standards Codification; single source of authoritative U.S. GAAP.

What does AICPA stand for?

American Institute of Certified Public Accountants.

What does AAA stand for?

American Accounting Association.

What does IMA stand for?

Institute of Management Accountants.

What does FEI stand for?

Financial Executives International.

Who issues IFRS?

The IASB (International Accounting Standards Board).

What does IFRS stand for?

International Financial Reporting Standards.

What is the CPB credential?

Certified Public Bookkeeper (NACPB).

What is NACPB?

National Association of Certified Public Bookkeepers.

What is the CB credential?

Certified Bookkeeper (AIPB).

What is AIPB?

American Institute of Professional Bookkeepers.

What does CPA stand for?

Certified Public Accountant; licensed by state boards.

What does IRS stand for?

Internal Revenue Service; enforces U.S. tax law.

What does CFE stand for?

Certified Fraud Examiner.

What is SOX?

Sarbanes-Oxley Act (2002); strengthens public company reporting.

What is the PCAOB?

Public Company Accounting Oversight Board; sets auditing standards and inspects firms.

What does CMA stand for?

Certified Management Accountant (IMA).

What does CIA stand for?

Certified Internal Auditor (IIA).

What is NASBA?

National Association of State Boards of Accountancy.

What is BLS?

Bureau of Labor Statistics; publishes employment outlook.

What are inbound logistics?

Bringing in inputs; info systems improve supplier/inventory efficiency.

What are operations in the value chain?

Activities that convert inputs to outputs; process efficiency/innovation.

What are outbound logistics?

Delivering product to customers; real-time inventory helps.

What are sales/marketing functions?

Attracting buyers; data-driven targeting and product design.

What is post-sale service?

Support that maintains/enhances product value (web/mobile support).

Who are owners as users of accounting info and what do they decide?

They assess profitability/condition to invest, grow, or exit.

What do managers need from accounting info?

Detailed performance to set prices, inventory, and staffing.

What do creditors evaluate with accounting info?

Profitability, debt, and collateral to set lending terms.

How do government agencies use accounting info?

To assess taxes and compliance (e.g., IRS).

What are the six steps of the accounting process?

Analyzing, Recording, Classifying, Summarizing, Reporting, Interpreting.

What happens in the Analyzing step?

Assess events and their effects on accounts.

What happens in the Recording step?

Enter financial info into the system (mostly digital).

What happens in the Classifying step?

Group similar items into accounts/categories.

What happens in the Summarizing step?

Aggregate many events for the period.

What happens in the Reporting step?

Communicate results via financial statements.

What happens in the Interpreting step?

Explain meaning/importance (e.g., ratio analysis).

What is the SEC's role versus GAAP?

SEC oversees public companies and requires GAAP; supports FASB to set rules.

What are the key FASB due process steps?

Agenda → Preliminary Views → Public hearings → Exposure Draft → Accounting Standards Update.

Do U.S. domestic companies use IFRS or GAAP?

GAAP (IFRS is issued by IASB and used outside the U.S.).

What is a sole proprietorship?

One owner; unlimited liability; full control.

What is a partnership?

Two or more owners; shared risks; potential disagreements; partners liable.

What is a corporation?

Owned by stockholders; limited liability; often professional management.

How are businesses classified by activity?

Service, Merchandising, and Manufacturing.

What is a service business?

Provides services (e.g., physician, consultant).

What is a merchandising business?

Buys goods to resell (e.g., grocery, pharmacy).

What is a manufacturing business?

Makes products (e.g., auto, furniture).

What is the accounting equation?

Assets = Liabilities + Owner's Equity.

What are two alternate forms of the accounting equation?

Assets − Liabilities = Owner's Equity; Assets − Owner's Equity = Liabilities.

What does the left vs. right side of the equation represent?

Left: Assets; Right: sources (Liabilities + Owner's Equity).

What is an asset?

Resources owned providing future benefits (cash, A/R, equipment).

What is a liability?

Obligations owed (A/P, notes payable).

What is owner's equity?

Residual claim of owners on assets.

What are tangible assets?

Physical items: buildings, equipment, inventory.

What are intangible assets?

Nonphysical rights: patents, trademarks, copyrights.

What is accounts receivable?

Amounts owed by customers (credit sales).

What is accounts payable?

Amounts owed to suppliers; typically due ~30 days.

What is a note payable?

Formal written promise to pay; often longer-term.

When is revenue recognized?

When earned from goods/services (cash or on account).

What is an expense?

Cost of doing business that reduces equity (rent, wages, utilities).

What are withdrawals (drawing)?

Owner takes assets for personal use; reduces equity.

What is the matching concept?

Record expenses in the same period as related revenues.

What is the time period concept?

Report for defined periods (month, quarter, year).

What is a fiscal year?

A 12-month accounting period (often calendar year).

What is the effect when the owner invests cash?

Cash ↑ (Asset) and Capital ↑ (Owner's Equity).

What is the effect of buying an asset with cash?

One Asset ↑; Cash ↓; total assets unchanged.

What is the effect of buying on account?

Asset ↑; Liability ↑.

What is the effect of paying a liability?

Cash ↓; Liability ↓.

What is the effect of earning revenue for cash?

Cash ↑; Revenue ↑ (Equity ↑).

What is the effect of earning revenue on account?

Accounts Receivable ↑; Revenue ↑ (Equity ↑).

What happens when collecting prior A/R?

Cash ↑; A/R ↓; no new revenue.

What is the effect of paying an expense with cash?

Cash ↓; Expense ↑ (Equity ↓).

What is the effect of incurring an expense unpaid?

Liability ↑; Expense ↑ (Equity ↓).

How is prepaid insurance recorded?

Prepaid Insurance ↑ (Asset); Cash ↓.

What is the effect of paying salaries?

Cash ↓; Salaries Expense ↑ (Equity ↓).

What is a compound entry example?

Supplies ↑; Cash ↓; A/P ↑ (partial payment scenario).

What rule applies to every transaction?

At least two accounts are affected; the equation must stay balanced.

Does single-entry accounting exist in practice?

No; accounting uses double-entry (debits=credits).

In what order are the financial statements prepared?

1) Income Statement 2) Statement of Owner's Equity 3) Balance Sheet.

What does the Income Statement show?

Revenues − Expenses = Net Income for a period.

What does the Statement of Owner's Equity show?

Beg. Capital + Investments + Net Income − Withdrawals = End Capital.

What does the Balance Sheet present?

Snapshot: Assets = Liabilities + Owner's Equity on a date.

What should statement headings include?

Company name; statement title; period/date.

What do single vs double underlines mean?

Single = subtotal; Double = final total.

How are items ordered on a balance sheet?

Assets by liquidity; liabilities current → long-term.

What is a Chart of Accounts?

List of all accounts with reference numbers.

What are typical COA number ranges?

1=Assets; 2=Liabilities; 3=Owner's Equity; 4=Revenue; 5-9=Expenses.

What is the business entity concept?

Keep business and personal finances separate.

How do owner withdrawals affect equity?

They decrease Owner's Equity (temporary reduction).

What are the three questions for transaction analysis?

What happened? Which accounts? How does the equation change?

What are the parts of a T-account?

Title; Debit (left); Credit (right).

What do debit and credit mean in accounting?

Debit = left; Credit = right (directional).

What are footings in a T-account?

Totals of the debit or credit side.

How do you find a T-account balance?

Difference between footings; shown on side with larger footing.

What is the normal balance of Assets?

Debit (increase with debit; decrease with credit).