Accounting Basics Quiz

Accounting Process

• Accounting is the process of identifying, recording, and communicating economic information that is useful in making economic decisions.

Characteristics of Accounting

• Accounting is not just about recording transactions or keeping a diary of events.
• Accounting involves the recognition or non-recognition of business activities as accountable events.

Types of Accounting Information

• Accounting provides two types of information: financial and non-financial.

Professional Organizations

• The American Institute of Certified Public Accountants (AICPA) defines accounting as a service activity.

Users of Financial Information

• Internal users: management, concerned with the profits of the company.
• External users: investors, creditors, and regulatory bodies.

Components of Financial Statements

• Financial statements consist of: Balance Sheet, Income Statement, and Cash Flow Statement.
• Note: Management's Discussion and Analysis (MD&A) is not a component of financial statements.

Definition of Accounting

• Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users of the information.
• The Accounting Standards Council defines accounting as the process of identifying, recording, and communicating economic information.

Key Figures

• Luca Pacioli is considered the Father of Accounting.

Accounting Events

• Identifying economic events that are relevant to a specific business transaction is called transaction recognition.

Accounting Records

• Keeping a chronological diary of events measured in pesos is called journalizing.

Reporting

• Accounting information is communicated through the preparation and distribution of financial and other accounting reports.