COB 241

1. Q: What is the purpose of accounting?
A: To provide information to stakeholders.

2. Q: Define stakeholder.
A: A person or entity with an interest in the economic performance and well-being of a business.

3. Q: Give examples of stakeholders.
A: Creditors, investors, government regulators, analysts, attorneys, media, management, employees.

4. Q: What is financial accounting?
A: Provides information to external stakeholders (resource providers, government agencies, analysts, media).

5. Q: What is managerial accounting?
A: Provides information to internal stakeholders (managers, employees).

6. Q: Who sets measurement and reporting rules in the U.S.?
A: The Financial Accounting Standards Board (FASB).

7. Q: What are GAAP?
A: Generally Accepted Accounting Principles — U.S. measurement rules.

8. Q: What are IFRS?
A: International Financial Reporting Standards — rules used by most countries.

9. Q: Define asset.
A: Resources acquired by a business and used to make money.

10. Q: Give examples of assets.
A: Cash, land, equipment, inventory.

11. Q: What are liabilities?
A: Obligations a business owes to creditors (debts).

12. Q: What is interest?
A: A fee charged by creditors when money is borrowed.

13. Q: What is common stock?
A: Certificates showing investor contributions to a business (form of stockholders’ equity).

14. Q: What is stockholders’ equity?
A: The business’s commitment to stockholders; owners’ claim on assets.

15. Q: What are dividends?
A: Distributions of earnings to shareholders (not an expense).

16. Q: What is revenue?
A: The economic benefit earned from providing goods/services to customers.

17. Q: What are expenses?
A: Economic sacrifices incurred to generate revenue.

18. Q: Define net income.
A: Revenues minus expenses (profit).

19. Q: What are retained earnings?
A: Profits kept in the company after dividends are paid; used for growth, emergencies, etc.

20. Q: What is double-entry bookkeeping?
A: Every transaction affects the accounting equation in at least two places.

21. Q: State the accounting equation.
A: Assets = Liabilities + Stockholders’ Equity.

22. Q: How can assets increase?
A: By increasing liabilities, increasing equity, or decreasing another asset.

23. Q: How can assets decrease?
A: By decreasing liabilities, decreasing equity, or increasing another asset.

24. Q: What is a general ledger?
A: The complete collection of a company’s accounts.

25. Q: What are the four main financial statements?
A: Income Statement, Statement of Changes in Equity, Balance Sheet, Statement of Cash Flows.

26. Q: What does the Income Statement show?
A: Revenues – Expenses = Net Income (over a period).

27. Q: What does the Statement of Changes in Equity show?
A: Changes in equity from common stock and retained earnings.

28. Q: What does the Balance Sheet show?
A: Assets, liabilities, and equity at a specific point in time (snapshot).

29. Q: What does the Statement of Cash Flows show?
A: Inflows and outflows of cash during a period.

30. Q: What are financing activities in cash flow?
A: Cash transactions with owners/creditors (issuing stock, borrowing, paying dividends).

31. Q: What are investing activities in cash flow?
A: Cash transactions involving long-term assets (buying/selling land, equipment, buildings).

32. Q: What are operating activities in cash flow?
A: Day-to-day transactions (paying expenses, collecting revenue, interest).

33. Q: Classify: Earned $300,000 revenue.
A: Operating.

34. Q: Classify: Sold a warehouse for $85,000.
A: Investing.

35. Q: Classify: Borrowed $50,000 from the bank.
A: Financing.

36. Q: Classify: Paid $10,000 dividends.
A: Financing.

37. Q: Classify: Paid $45,000 salaries.
A: Operating.

38. Q: Classify: Repaid $25,000 bank loan.
A: Financing.

39. Q: Classify: Bought $70,000 equipment.
A: Investing.

40. Q: Classify: Received $100,000 from issuing stock.
A: Financing.