PRINCIPLES OF ACCOUNTING
Answer EXAM 1
1. Accounting
Answer System that identifies, records, and communicates a business's financial information to help users make decisions.
2. Financial accounting
Answer Area of accounting that provides information mainly to external users such as investors, lenders, and
regulators.
3. Managerial accounting
Answer Area of accounting that provides internal reports to managers for planning, controlling, and decision
making.
4. External users
Answer People who do not run the business but use its financial information (investors, lenders, regulators,
customers).
5. Internal users
Answer People who manage and operate the business (managers, executives, internal statt).
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,6. Ethics
Answer Standards of right and wrong that guide behavior; in accounting, ethics support truthful, fair reporting.
7. Sarbanes-Oxley Act (SOX)
Answer U.S. law that requires stronger internal controls and oversight for public companies to reduce financial
fraud.
8. GAAP (Generally Accepted Accounting Principles)
Answer Common set of rules and concepts that govern financial accounting and reporting in the U.S.
9. FASB (Financial Accounting Standards Board)
Answer Independent body that sets U.S. GAAP.
10. SEC (Securities and Exchange Commission)
Answer U.S. government agency that oversees public companies and enforcement of proper financial reporting.
11. IASB (International Accounting Standards Board)
Answer International body that issues IFRS, used in many countries outside the U.S.
12. IFRS (International Financial Reporting Standards)
Answer International accounting standards aiming to make financial statements comparable across countries.
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, 13. Measurement (Cost) principle
Answer Assets are recorded at actual cost paid, which is considered objective and verifiable.
14. Revenue recognition principle
Answer Record revenue when goods or services are provided to customers and collection is reasonably assured.
15. Expense recognition / Matching principle
Answer Record expenses in the same period as the revenues they help generate.
16. Full disclosure principle
Answer Financial reports must include any information that could attect users' deci- sions, often in the notes.
17. Going‑concern assumption
Answer Assumes the business will continue operating instead of being closed or sold.
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Answer EXAM 1
1. Accounting
Answer System that identifies, records, and communicates a business's financial information to help users make decisions.
2. Financial accounting
Answer Area of accounting that provides information mainly to external users such as investors, lenders, and
regulators.
3. Managerial accounting
Answer Area of accounting that provides internal reports to managers for planning, controlling, and decision
making.
4. External users
Answer People who do not run the business but use its financial information (investors, lenders, regulators,
customers).
5. Internal users
Answer People who manage and operate the business (managers, executives, internal statt).
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17
,6. Ethics
Answer Standards of right and wrong that guide behavior; in accounting, ethics support truthful, fair reporting.
7. Sarbanes-Oxley Act (SOX)
Answer U.S. law that requires stronger internal controls and oversight for public companies to reduce financial
fraud.
8. GAAP (Generally Accepted Accounting Principles)
Answer Common set of rules and concepts that govern financial accounting and reporting in the U.S.
9. FASB (Financial Accounting Standards Board)
Answer Independent body that sets U.S. GAAP.
10. SEC (Securities and Exchange Commission)
Answer U.S. government agency that oversees public companies and enforcement of proper financial reporting.
11. IASB (International Accounting Standards Board)
Answer International body that issues IFRS, used in many countries outside the U.S.
12. IFRS (International Financial Reporting Standards)
Answer International accounting standards aiming to make financial statements comparable across countries.
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17
, 13. Measurement (Cost) principle
Answer Assets are recorded at actual cost paid, which is considered objective and verifiable.
14. Revenue recognition principle
Answer Record revenue when goods or services are provided to customers and collection is reasonably assured.
15. Expense recognition / Matching principle
Answer Record expenses in the same period as the revenues they help generate.
16. Full disclosure principle
Answer Financial reports must include any information that could attect users' deci- sions, often in the notes.
17. Going‑concern assumption
Answer Assumes the business will continue operating instead of being closed or sold.
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