Accounting 102 CH.1 - CH.4

What is the definition of Accounting?

• Is an information system that reports on the economic activities and financial condition of a business or other organization.

What are ways accounting benefits society?

• Helps us allocate resources

• Tracking costs, comparing to budgets, identifying strengths and weaknesses - areas to explore and areas that need improvement.

• Providing a level of trust and consistency

What are Financial Accounting examples?

• Investors

• Creditors

• Brokers

What are Managerial Accounting examples?

• Managers

• Employees

• Unions

What are Nonprofit Accounting examples?

• Benefactors and Beneficiaries

• Legislators

• Citizens

True or False:

Accountants establish measurement and reporting rules that businesses use to facilitate communication.

• True

What does (GAAP) stand for?

• Generally Accepted Accounting Principles

What does (FASB) stand for?

• Financial Accounting Standards Board

What is Public Accounting?

• Certified Public Accountant (CPA)

• Examples:

  • Audit

  • Tax

  • Consulting

What is Private Acounting?

• Certified Management Accountant (CMA)

• Certified Internal Auditor (CIA)

Financial Accounting reports disclose the financial activities of particular individuals or organizations described as ___________

• Reporting Entities

  • Individuals

  • Businesses

  • Organizations

What is the Accounting Equation?

• ASSETS = LIABILITIES + (STOCKHOLDERS) EQUITY

What are Assets?

• What you OWN

What are Liabilities?

• What you OWE

What are Stockholders Equity?

• What is LEFT

What are Creditors sourced as?

• Liabilities

What are Investors sourced as?

• Stockholders Equity

What are Operations sourced as?

• Profits increase Assets

Commitments made to investors are described in certificates called?

• Common Stock

Increases to stockholders equity from earnings are called?

• Retained Earnings

The distribution of assets generated through earnings is called?

• Dividend

Assets are known as?

• Cash

• Equipment

• Buildings

• Land

Liabilities are known as?

• Accounts Payable

• Notes Payable

• Loans

Stockholders’ (owner’s) Equity are known as?

• Increases from net income

• Decreases if you have net loss

• Decreases by distribution to owners

  • Dividends

  • Owner Distributions

Typically report business activity occurring over a span of time is called?

• Accounting Period

An _____ ____ is an economic occurrence that changes an enterprise’s assets, liabilities, or stockholders’ equity?

• Accounting Event

A _____ is a particular kind of event that involves transferring something of value between two entities.

• Transaction

True or False:

Every Transaction in accounting must ALWAYS be in BALANCE!!

• True

The complete collection of a company’s accounts is called?

• The General Ledger

Accounting information is normally presented to external users in four general-purpose ____ ____?

• Financial Statements

The financial statements and the order they are prepared:

1. Income Statement

2. Statement of Changes in Stockholder’s Equity

3. Balance Sheet

4. Statement of Cash Flows

What is the Matching Concept?

• The Income Statement matches revenues (benefits) with the expenses (sacrifices) that were incurred to generate revenue.

If revenues exceed expenses, the difference is called ___ ___. If expenses exceed revenues, the difference is called ___ ___?

• Net Income

• Net Loss

The ____________ explains the effects of transaction on stockholders’ equity during the accounting period?

• Statement of Changes in Stockholders’ Equity

The _____ draws its name from the accounting equation. Total assets balance with (equal) liabilities ply stockholders’ equity.

• Balance Sheet

The process of transferring information from the revenue, expenses, and dividend (_______) accounts to the Retained Earnings account is called _____-

• Temporary

• Closing

Since the Retained Earnings carries forward from one accounting period to the next, it is considered a?

• Permanent Account