ACCT 211 Chapter 1 Flashcards
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Questions and Answers

Define accounting.

It identifies, records, and communicates business transactions or communicates financial information.

What is an external user of accounting information?

Does not directly run the organization.

A process of analyzing data to identify meaningful relations and trends is called what?

Analytics/Analysis.

According to the fraud triangle, what are the three factors that must exist for a person to commit fraud?

<p>Opportunity, rationalization, pressure/incentive.</p> Signup and view all the answers

What are Generally Accepted Accounting Principles?

<p>The concepts and rules that govern financial accounting practice.</p> Signup and view all the answers

What consists of the FASB conceptual framework?

<p>Objectives, qualitative characteristics, elements, recognition and measurement.</p> Signup and view all the answers

An _____ user of accounting information does not directly run the organization.

<p>external</p> Signup and view all the answers

Which of the statement(s) below define(s) an asset?

<p>All of the above</p> Signup and view all the answers

A graphical presentation of data to help in understanding their significance is called what?

<p>Visualization.</p> Signup and view all the answers

Which of the following statements explain(s) how the accounting equation applies to businesses?

<p>The equation states that Assets = Liabilities + Equity</p> Signup and view all the answers

An employee that is having trouble paying his personal bills might exhibit which fraud factor?

<p>Pressure.</p> Signup and view all the answers

What best represents the reason for the accounting equation?

<p>The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.</p> Signup and view all the answers

Generally Accepted Accounting Principles (GAAP) wants information to have?

<p>Faithful representation and relevance.</p> Signup and view all the answers

What are part of the FASB conceptual framework?

<p>All of the above</p> Signup and view all the answers

What is the most accurate definition of dividends?

<p>Outflows of cash or other assets paid to the owners of a corporation.</p> Signup and view all the answers

Identify the correct definition of an asset.

<p>An asset is a resource that a business owns or controls.</p> Signup and view all the answers

Which of the following statements describe the effect of expenses on equity?

<p>Expenses cause equity to decrease</p> Signup and view all the answers

Which of the following statements is correct regarding revenues?

<p>Revenues cause equity to increase</p> Signup and view all the answers

What lists the rules of entering transactions into the accounting equation?

<p>The accounting equation must always remain in balance</p> Signup and view all the answers

How do you record Jack Pickle's initial investment in common stock in the accounting equation?

<p>Increase Cash by $4,000; Increase Common Stock by $4,000.</p> Signup and view all the answers

When supplies are purchased on credit, it means what?

<p>The business will pay for the supplies at a later time.</p> Signup and view all the answers

Which of the following statements represent(s) how expenses affect equity?

<p>Both A and B</p> Signup and view all the answers

To record the purchase of supplies for cash, the correct entry into the accounting equation would include an increase to ________ and a decrease to _________.

<p>Supplies/cash</p> Signup and view all the answers

Which of the following statements are true regarding the effect of revenues on the equity of a business?

<p>Both A and B</p> Signup and view all the answers

How would you record the purchase of office equipment costing $3,000?

<p>Decreasing Cash; increasing Equipment.</p> Signup and view all the answers

The accounts payable account is a(n) _____ account.

<p>Liability.</p> Signup and view all the answers

Which of the following statements describe how expenses affect equity?

<p>Expenses cause equity to decrease</p> Signup and view all the answers

What is the first financial statement to be prepared?

<p>Income statement.</p> Signup and view all the answers

Calculate the ending balance in the retained earnings account for Sheldon Company given the values.

<p>$5750.</p> Signup and view all the answers

True or false: Dividends are resources paid to the owners of a corporation/stockholders.

<p>False</p> Signup and view all the answers

How is return on assets computed?

<p>Net Income divided by Average Total Assets</p> Signup and view all the answers

Which list identifies only accounts that would appear on a balance sheet?

<p>Common Stock, Equipment, Accounts Payable.</p> Signup and view all the answers

Which accounts belong on the statement of retained earnings?

<p>Retained earnings and Dividends.</p> Signup and view all the answers

Calculate Boaz Company's return on assets.

<p>4.5%</p> Signup and view all the answers

Identify which of the following accounts would appear on a balance sheet.

<p>All of the above</p> Signup and view all the answers

The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time.

<p>Dividends.</p> Signup and view all the answers

Given the beginning retained earnings of Jacob's Chocolates, calculate the ending balance.

<p>$13,700.</p> Signup and view all the answers

True or false: Return on assets is computed as Net Income divided by Total Assets.

<p>False</p> Signup and view all the answers

Study Notes

Accounting Basics

  • Accounting involves identifying, recording, and communicating financial information about business transactions.
  • External users of accounting information are those who do not directly run the organization.

Data Analysis and Visualization

  • Data analytics is the process of analyzing data to find significant relationships and trends.
  • Data visualization refers to the graphical presentation of data to enhance understanding.

Fraud Triangle

  • The three factors of the fraud triangle include opportunity, rationalization, and pressure/incentive.

Accounting Principles and Framework

  • Generally Accepted Accounting Principles (GAAP) govern financial accounting practices, ensuring faithful representation and relevance of information.
  • The FASB conceptual framework encompasses objectives, qualitative characteristics, elements, recognition, and measurement.

Assets and the Accounting Equation

  • An asset is a resource that is expected to provide future benefits, controlled by the business, or an amount owned.
  • The accounting equation states that Assets = Liabilities + Equity, emphasizing that what a business owns equals what it owes.

Impact of Revenues and Expenses on Equity

  • Revenues result in an increase in equity; common forms include consulting services and commissions.
  • Expenses lead to a decrease in equity, highlighting their negative impact during financial assessments.

Dividends and Financial Transactions

  • Dividends represent outflows of cash or assets to shareholders and are part of equity considerations.
  • Transactions like purchasing supplies for cash affect the accounting equation by increasing supplies and decreasing cash.

Financial Statements Preparation

  • Financial statements are prepared in the following order: Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows.
  • The Statement of Retained Earnings details changes in equity through net income and dividends over time.

Retained Earnings and Return on Assets

  • Retained earnings reflect the cumulative earnings retained for future use after paying dividends.
  • Return on assets (ROA) is calculated by dividing Net Income by Average Total Assets, providing a metric for financial efficiency.

Essential Accounting Accounts

  • Key accounts reflecting a company’s financial position on the Balance Sheet include Cash, Equipment, and Accounts Payable.
  • The accounts payable account is classified as a liability, indicating obligations to pay suppliers.

Transaction Example

  • Recording transactions typically involves balancing the accounting equation, where increases in one account correspond to decreases in another, maintaining overall balance.

Analysis of Specific Financial Scenarios

  • To assess company performance or calculate financial metrics, specific examples, such as starting capital or retained earnings, can showcase practical applications of accounting principles.

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Description

Test your knowledge of key concepts in accounting with these flashcards covering external users and data analysis. This quiz is essential for understanding the fundamental principles introduced in Chapter 1 of ACCT 211. Perfect for students preparing for exams or needing a quick review of essential terminology.

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