ACG 5026 MIDTERM QUESTION AND ANSWERS
Three general uses of accounting - Answers - Financial reporting and external
performance evaluations
Managerial decision making
Managerial planning, control & internal performance evaluations
Corporate Advantages - Answers - Limited liability
Ability to raise capital
Ability to separate ownership from management
Transferability of ownership
Corporate Disadvantages - Answers - Double taxation (corporate profits and
dividends/capital gains
Paperwork and formalities
What are the three basic business activities - Answers - Operational
Investing
Financing
How did cash (on the balance sheet) change? Look at... - Answers - Statement of Cash
Flows
How did equity (on the balance sheet) change? Look at... - Answers - Statement of
Stockholders' Equity
How did operations affect retained earnings (on the balance sheet)? Look at... -
Answers - Statement of Income
Four Financial Statements - Answers - Balance Sheet
Statement of Cash Flows
Statement of Equity
Income Statement
, Generally Accepted Accounting Principles (GAAP) - Answers - Standards and accepted
practices designed to guide the preparation of financial statements
Based on underlying principles
Enables external users to rely on audited financial statements
The SEC's Authority - Answers - Regulates the issuance and trading of securities in the
U.S.
Who must report to the SEC? - Answers - Companies with more than $10 million of
assets and whose securities are held by more than 500 owners must file annual and
other periodic reports.
Financial Accounting Standards Board (FASB) - Answers - Currently establishes
accounting standards in the U.S. (GAAP).
Developed a Conceptual Framework to serve as a guide for accounting issues not
covered by standards
Auditor's Report - Answers - A statement to the board of directors of the company and
to the shareholders of the company by an independent auditor.
What does an audit report express? - Answers - An opinion as to whether the financial
statements present fairly the financial activities of the company and whether the
financials were prepared in accordance with GAAP.
A "clean" audit opinion indicates... - Answers - that the auditors do believe that the
financial statements present fairlythe economic conditions of the firm. It does NOT state
that the statements are "accurate."
Balance Sheets is reported at a... - Answers - specific point in time
Statement of cash flows, equity and income statement are reported at a - Answers -
period of time
Reporting Periods - Answers - Can be annual, semiannual, quarterly, or monthly
reporting periods
Fiscal Year - Answers - A one-year reporting period
Often called an accounting year
Sometimes ends on a date other than December 31
Three general uses of accounting - Answers - Financial reporting and external
performance evaluations
Managerial decision making
Managerial planning, control & internal performance evaluations
Corporate Advantages - Answers - Limited liability
Ability to raise capital
Ability to separate ownership from management
Transferability of ownership
Corporate Disadvantages - Answers - Double taxation (corporate profits and
dividends/capital gains
Paperwork and formalities
What are the three basic business activities - Answers - Operational
Investing
Financing
How did cash (on the balance sheet) change? Look at... - Answers - Statement of Cash
Flows
How did equity (on the balance sheet) change? Look at... - Answers - Statement of
Stockholders' Equity
How did operations affect retained earnings (on the balance sheet)? Look at... -
Answers - Statement of Income
Four Financial Statements - Answers - Balance Sheet
Statement of Cash Flows
Statement of Equity
Income Statement
, Generally Accepted Accounting Principles (GAAP) - Answers - Standards and accepted
practices designed to guide the preparation of financial statements
Based on underlying principles
Enables external users to rely on audited financial statements
The SEC's Authority - Answers - Regulates the issuance and trading of securities in the
U.S.
Who must report to the SEC? - Answers - Companies with more than $10 million of
assets and whose securities are held by more than 500 owners must file annual and
other periodic reports.
Financial Accounting Standards Board (FASB) - Answers - Currently establishes
accounting standards in the U.S. (GAAP).
Developed a Conceptual Framework to serve as a guide for accounting issues not
covered by standards
Auditor's Report - Answers - A statement to the board of directors of the company and
to the shareholders of the company by an independent auditor.
What does an audit report express? - Answers - An opinion as to whether the financial
statements present fairly the financial activities of the company and whether the
financials were prepared in accordance with GAAP.
A "clean" audit opinion indicates... - Answers - that the auditors do believe that the
financial statements present fairlythe economic conditions of the firm. It does NOT state
that the statements are "accurate."
Balance Sheets is reported at a... - Answers - specific point in time
Statement of cash flows, equity and income statement are reported at a - Answers -
period of time
Reporting Periods - Answers - Can be annual, semiannual, quarterly, or monthly
reporting periods
Fiscal Year - Answers - A one-year reporting period
Often called an accounting year
Sometimes ends on a date other than December 31
