Uark Accounting Concept Exam Ch.1

Assets

Resources a business uses to earn money (cash, land, equipment).

Liabilities

Obligations to creditors (accounts payable, loans).

Equity

Owners' claims (common stock, retained earnings).

Revenue

Increases in equity from operations (sales, fees earned).

Expense

Costs incurred to generate revenue.

Dividend

Distribution of earnings to stockholders (reduces equity).

Account

Detailed record of an element in the accounting equation.

Transaction

Economic event affecting assets, liabilities, or equity.

Financial Accounting

External users (investors, creditors, analysts).

Managerial Accounting

Internal users (managers, employees).

Nonprofit/Governmental

Focus on service, not profitability.

Asset Source

↑ Assets, ↑ Claims (e.g., borrow cash, issue stock).

Asset Use

↓ Assets, ↓ Claims (e.g., pay expenses, pay dividends).

Asset Exchange

One asset ↑, another ↓ (e.g., cash for land).

Claims Exchange

One claim ↑, another ↓ (e.g., convert debt to equity).

Balance Sheet

Assets = Liabilities + Equity (point in time).

Income Statement

Revenues - Expenses = Net Income (period).

Cash Flow Statement

Reports cash inflows/outflows (operating, investing, financing).

Statement of Stockholders' Equity

Changes in common stock & retained earnings.

Double-entry bookkeeping

Every transaction has 2+ sides.

Historical Cost Concept

Assets recorded at purchase price, not market value.

Going Concern Assumption

Business will continue operating.

Matching Concept

Match revenues with related expenses.

Closing Process

Transfer revenues, expenses, dividends → Retained Earnings.

CPA

Certified Public Accountant (audit, tax, consulting).

CMA

Certified Management Accountant (internal decision-making).

CIA

Certified Internal Auditor (controls & compliance).

What is the basic accounting equation?

Assets = Liabilities + Stockholders' Equity

Stockholders' Equity is made up of what two parts?

Common Stock + Retained Earnings

What are assets?

Resources a business uses to earn money.

What are liabilities?

Obligations a business has to its creditors.

What is stockholders' equity?

Owners' claims on the assets of a business.

What is revenue?

Increases in stockholders' equity from operations.

What is a dividend?

Distribution of earnings to stockholders (reduces equity).

What is a transaction?

An economic event that changes assets, liabilities, or equity.

Who uses financial accounting information?

External users (investors, creditors, analysts).

Who uses managerial accounting information?

Internal users (managers, employees, unions).

What type of organizations are not motivated by profit?

Not-for-profit entities (government, charities, religious groups).

What is an asset source transaction?

Increases assets and increases claims (e.g., issuing stock).

What is an asset use transaction?

Decreases assets and decreases claims (e.g., paying expenses).

What is an asset exchange transaction?

One asset increases, another decreases (e.g., cash for land).

What is a claims exchange transaction?

One claim increases, another decreases.

Which statement shows financial position at a point in time?

Balance Sheet.

Which statement shows revenues and expenses over a period of time?

Income Statement.

Which statement reports cash inflows and outflows?

Statement of Cash Flows.

Which statement shows changes in equity during a period?

Statement of Stockholders' Equity.

What does it mean when financial statements "articulate"?

They are interconnected (e.g., net income flows into retained earnings).

What is the historical cost concept?

Assets are recorded at purchase price, not market value.

What is the going concern assumption?

Business is assumed to continue operating.

What is the matching concept?

Revenues are matched with related expenses.

What is the closing process?

Temporary accounts (revenues, expenses, dividends) are closed to Retained Earnings.

Which career requires a CPA license?

Certified Public Accountant (CPA).

What does a CMA specialize in?

Management accounting for internal decision-making.

What does a CIA focus on?

Internal auditing and controls.