Accounting and Economic Inequality Review

These flashcards cover key concepts from the lecture notes on accounting principles and economic inequality, enabling students to review essential information for their exam.

What is accounting primarily concerned with?

Tracking and reporting of all financial transactions where asset value either changes or is exchanged.

What does GAAP stand for?

Generally Acceptable Accounting Standards.

What does L.I.F.O stand for in accounting?

Last-In, First-Out, a method where assets are recorded at their original purchase price.

What is E.I.F.O?

First-In, First-Out, an inventory valuation method where the oldest inventory is sold first.

What is the purpose of full disclosure in accounting?

To prevent hiding potential liabilities and ensure transparency in financial reporting.

What assumption does the 'going concern' principle make?

That a business will continue operating as normal and not liquidate its assets.

What is the operating cycle?

The process and time needed for cash to turn back into cash through generating sales.

What are the major types of business structures?

Sole proprietorship, partnership (General and Limited), and corporation (C-Corp and S-Corp).

What does MACRS stand for?

Modified Accelerated Cost Recovery System, the primary tax depreciation system used in the U.S.

What is the primary effect of the Vicious Cycle as described by Robert Reich?

Stagnation of wages leading to decreased consumer spending and economic growth.

What was the historical example used to illustrate the Virtuous Cycle?

The post-WWII era (1940s–1970s) when wages and productivity were high, and inequality was low.

How did CEO pay change from the 1970s to the 2000s?

Increased from about 50 times more than the average worker to about 350 times more.

What is a major consequence of the decline of labor unions?

A decrease in the middle class’s share of national income.

What was the result of Enron’s use of mark-to-market accounting?

It allowed Enron to book projected future profits immediately and hide losses.

What prompted the creation of the Sarbanes-Oxley Act?

Enron's collapse and the resulting need for increased corporate accountability.

What is the central message of the documentary 'Inequality for All'?

Extreme inequality harms economic growth, undermines democracy, and erodes opportunity.