Financial Reporting Basics Quiz

Exchanges of value between entities, quantifiable in money.

The process of examining financial data for decision-making purposes.

To provide information for capital changes, resource tracking, and legal needs.

The consistent recording of daily business transactions.

Facilitates financial statements and maintains transaction records.

Bookkeeping gathers data; Accounting analyzes it for decisions.

Providing information to meet legal and regulatory standards.

Change in the financial composition of an organization.

Reports cash inflows and outflows within a period.

Shows revenue, costs, and profits over a specific time frame.

Snapshot of a company's assets, liabilities, and equity at a point in time.

Attributes of useful financial information like relevance and reliability.

Set of objectives and rules guiding the development of accounting standards.

Assumes a business will continue operating indefinitely.

Revenues and costs are recognized when earned or incurred, not when cash is exchanged.

Adjustments made to financial records at the end of the accounting period to match revenues and expenses.

Determining associated costs and apportioning expenses can be difficult with this concept.

Once a method is adopted, it should be used consistently over time.

Enhances decision-making, objectivity, and comparability of financial results.

Strict adherence to consistency may limit creativity in accounting methods.

Accountants should anticipate losses but not profits, prioritizing caution in financial reporting.

Withdrawing goods for private use decreases assets, liabilities, capital, and inventory.

Withdrawing cash increases cash balance, decreases bank balance, total assets remain unchanged.

Assets = Liabilities + Capital; helps reconcile business transactions.

Transactions can be recorded using the accounting equation without a full ledger.

Starting a business with cash increases both capital and assets.

Purchasing on credit increases liabilities and inventory simultaneously.

Contracting a loan increases both liabilities and assets (cash), enhancing business capacity.

Receiving cash from sales increases cash assets and decreases accounts receivable.

A system where each transaction is recorded in at least two accounts.

Debit entry for cash received in a transaction.

Credit entry showing owner's investment or contributions.

Debit entry for purchasing fixed assets with cash.

Credit entry that reduces cash when assets are purchased.

Debit entry for goods bought for resale, indicating an expense.

Credit entry to reflect liabilities to suppliers after purchases on credit.

Debit entry when goods are sold on credit, increasing assets.

The components that make up financial statements: Assets, Liabilities, Equity, Revenues, Expenses.

Attributes that enhance the usability of financial information: understandability, relevance, reliability, and comparability.

The process of including an item in financial statements if it meets specific criteria: definition, measurability, relevance, and reliability.

Assigning a monetary value to recognized items, using methods like historical cost, current cost, and present value.

Generally Accepted Accounting Principles; a framework of accounting standards and practices used in business.

To standardize how financial statements are prepared, organized, summarized, and disclosed.

Guiding principles and customs that inform the accounting profession, despite its non-exact nature.

The organization that sets GAAP and oversees accounting standards in the United States.