Introduction to Accounting Concepts and MCQs

Flashcards covering introductory accounting principles, professional organizations, GAAP, the FASB framework, and fundamental accounting calculation formulas.

What is the primary purpose of accounting?

To provide information that will help you make correct financial decisions.

What is an accountant's primary job when assisting a business?

To give you the information needed to run the business as efficiently as possible while maximizing profits and keeping costs low.

What two qualities describe the type of accountant that is critical to hire for business operations?

Professional and ethical.

How is accounting defined in terms of handling economic events?

Accounting is the process of recording, classifying, and summarizing economic events through certain documents or financial statements.

Understanding what basic element of accounting is essential to success in business?

The basic concepts of accounting.

What do bookkeepers record and keep track of that are later used to generate financial statements?

Business transactions.

What is the professional organization of CPAs in the United States called?

AICPA

What are the rules that govern the preparation of financial statements?

GAAP

According to the FASB conceptual framework, what are the objectives of financial reporting for business enterprises based on?

The needs of the users of the information.

What is the fundamental accounting equation for the Balance Sheet?

$$\text{Assets} = \text{Liabilities} + \text{Equity}$$

What formula defines Net Income?

$$\text{Revenues} - \text{Expenses} = \text{Net income}$$

How does net income affect retained earnings?

Net income increases retained earnings (equity).

From what account are dividends paid out?

Dividends are paid out from retained earnings (equity).