Accounting Exam 1 Flashcards

Questions and Answers

What is an Account Balance?

Difference between total debits and total credits (including the beginning balance) for an account.

Define Accounting.

Comprehensive system for collecting, analyzing, and communicating financial information.

What is the Accounting Cycle?

The cycle of recording accounting data, adjusting the accounts, preparing the financial statements, and closing the temporary accounts.

What is an Accounting Event?

Economic occurrence that changes a company's assets, liabilities, or equity. Signup and view all the answers

What is an Accounting Period?

Time span covered by the financial statements; normally one year, but may be a quarter, month or some other time interval. Signup and view all the answers

What does Accrual mean in accounting?

Accounting recognition of revenue or expense in a period before cash is exchanged. Signup and view all the answers

Define Accrual Accounting.

Accounting system which recognizes revenues when earned and expenses when incurred regardless of when the related cash is exchanged. Signup and view all the answers

What is an Adverse Opinion?

Opinion issued by a certified public accountant that states one or more departures from GAAP in a company's financial statements are so material that they do not fairly represent the company's status. Signup and view all the answers

What is an Adjusting Entry?

Entry that updates account balances prior to preparing financial statements. Signup and view all the answers

Define Allocations in accounting.

Recognizing expenses by systematically assigning the cost of an asset to periods of use. Signup and view all the answers

What is the American Institute of CPA's?

National association that serves the education and professional interests of members of the public accounting profession. Signup and view all the answers

What are Annual Reports?

Documents companies publish to provide information, including financial statements, to stockholders. Signup and view all the answers

What is an Asset Exchange Transaction?

A transaction that decreases one asset and increases another asset; total assets remain unchanged. Signup and view all the answers

What is an Asset Source Transaction?

A transaction that increases both an asset and a claim on assets. Signup and view all the answers

What is an Asset Use Transaction?

A transaction that decreases both an asset and a claim on assets. Signup and view all the answers

Define an Asset.

Economic resource used to produce revenue which is expected to provide future benefit to the business. Signup and view all the answers

What are Audits in accounting?

The verifying of facts or procedures. Signup and view all the answers

What is a Balance Sheet?

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time. Signup and view all the answers

What are Books of Original Entry?

A journal in which a transaction is first recorded. Signup and view all the answers

What is Book Value?

The asset's cost minus accumulated depreciation; carrying amount; net amount of a plant asset. Signup and view all the answers

What are Claims in accounting?

Owners' and creditors' interests in a business's assets. Signup and view all the answers

What is a Claims Exchange Transaction?

A transaction that decreases one claim and increases another claim; total claims remain unchanged. Signup and view all the answers

What is the Code of Professional Conduct?

Rules established by the American Institute of Certified Public Accountants to govern the ethical performance of professional services by CPAs. Signup and view all the answers

What are Closing Entries?

Journal entries used to prepare temporary accounts for a new fiscal period. Signup and view all the answers

What is the Closing Process?

The transfer process of converting temporary account balances to zero by transferring revenue and expense balances to income summary. Signup and view all the answers

Define Common Stock.

Represents ownership in a publicly held company which entitles owners to dividends and voting rights. Signup and view all the answers

Study Notes

Accounting Definitions

Account Balance: Represents the difference between total debits and total credits for an account, inclusive of the beginning balance.
Accounting: A comprehensive system for collecting, analyzing, and communicating financial information.
Accounting Cycle: A continuous process of recording data, adjusting accounts, preparing financial statements, and closing temporary accounts for a given time period.
Accounting Event: An economic occurrence that alters a company's assets, liabilities, or equity.
Accounting Period: The timeframe that financial statements cover, typically one year but can be shorter, like a quarter or month.

Key Accounting Concepts

Accrual: The recognition of revenue or expenses in a period before cash is exchanged.
Accrual Accounting: Recognizes revenues when earned and expenses when incurred, independent of cash exchange timing.
Adverse Opinion: Issued by a CPA indicating serious departures from GAAP in financial statements, suggesting they do not fairly represent the company's financial status.
Adjusting Entry: Updates account balances before preparing financial statements; does not affect the Cash account.
Allocations: Systematic assignment of the cost of an asset to periods of use to recognize expenses.

Professional Organizations and Reporting

American Institute of CPA's: Voluntary national association for public accounting professionals, focusing on education and professional interests.
Annual Reports: Documents providing financial information and statements aimed at stockholders.

Transaction Types

Asset Exchange Transaction: Involves one asset decreasing and another increasing while total assets remain unchanged.
Asset Source Transaction: Increases both an asset and a claim on assets, arising from equity, liabilities, or revenue operations.
Asset Use Transaction: Decreases both an asset and a claim on assets; includes distributions, liability payments, and expenses.

Financial Statement Components

Asset: Economic resources expected to provide future benefit and revenue.
Balance Sheet: Summaries a company's assets, liabilities, and shareholders' equity at a specific moment in time.
Books of Original Entry: Journals where transactions are first documented.
Book Value: Represents an asset's cost minus accumulated depreciation, reflecting its carrying amount.

Other Important Terms

Claims: Interests of owners and creditors in a business's assets.
Claims Exchange Transaction: Changes one claim while increasing another, leaving total claims unchanged.
Code of Professional Conduct: Ethical rules established by the AICPA for CPA professional service performance.
Closing Entries: Journal entries that reset temporary accounts for a new fiscal period.
Closing Process: Involves converting temporary account balances to zero, transferring balances of revenue and expenses to income summary, and updating retained earnings.
Common Stock: Represents ownership in a publicly traded company, entitling owners to dividends (if declared), voting rights, and participation in Board elections.

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Description

This quiz features flashcards for Accounting Exam 1, covering essential terms and definitions like 'Account Balance' and 'Accounting Cycle.' Enhance your understanding of key concepts in accounting and prepare effectively for your exam.