ACC 200 EXAM 1 VERIFIED STUDY GUIDE
accounting - Answers - the process of identifying, measuring and communicating
economic information to permit informed judgements and decisions
-the language of business
basic accounting formula - Answers - assets=liabilities + stockholders equity
stockholders equity - Answers - contributed capital + retained earnings
-contributed capital: reported on balance sheet
-common stock, contributed capital, RE, treasury stock
retained earnings - Answers - revenues- expenses- dividends
-reported on balance sheet and statement of RE
historic cost principle - Answers - record initially the activities of a company at cost
-assets should be recorded and reported at the cost paid to acquire them
revenue recognition principle - Answers - revenue should be recorded when a resource
has been earned
matching principle - Answers - expenses should be recorded in the period resources are
used to generate revenue
conservatism principle - Answers - avoids overstating assets or income in the
preparation of financial statements
full disclosure principle - Answers - reveal any info that makes a difference to financial
statement users
economic entity assumption - Answers - financial activities of a business should be
accounted for separately from the business's owners
monetary unit assumption - Answers - organizations are to report their financial results
and activities in monetary units
time period assumption - Answers - divides the life of the organization into artificial time
periods to report results over short periods of time
going concern assumption (continuity) - Answers - the company for which we are
accounting will continue its operations into the foreseeable future
, understandability - Answers - can be comprehended by someone with a reasonable
knowledge of business and finance
relevance - Answers - the capacity of accounting information to make a difference in
decisions
reliablity - Answers - the extent to which accounting information can be depended upon
to represent what it is suppose to represent, both in description and numbers
comparability - Answers - achieved when different companies use the same accounting
methods
-used to compare and contrast between companies
consistency - Answers - application of the same accounting principle by a single
company over time
materiality - Answers - the threshold at which a financial item begins to affect decision
making
steps to get a financial statement - Answers - 1. income statement
2. statement of retained earnings
3. balance sheet
4. statement of cash flows
income statement - Answers - states the company's revenues and expenses over a
specific period of time
revenues - expenses = net income/loss
statement of retained earnings - Answers - reports the change in a company's retained
earnings over a specific period of time
retained earnings, beginning balance
+/- net income/loss
- dividends
= ending retained earnings
balance sheet - Answers - report's a company's assets, liabilities, & equity at a specific
period of time
assets = liabilities + equity
statement of cash flows - Answers - reports company's sources and uses of cash over a
specific period of time
cash flows provided by Operating Activities
accounting - Answers - the process of identifying, measuring and communicating
economic information to permit informed judgements and decisions
-the language of business
basic accounting formula - Answers - assets=liabilities + stockholders equity
stockholders equity - Answers - contributed capital + retained earnings
-contributed capital: reported on balance sheet
-common stock, contributed capital, RE, treasury stock
retained earnings - Answers - revenues- expenses- dividends
-reported on balance sheet and statement of RE
historic cost principle - Answers - record initially the activities of a company at cost
-assets should be recorded and reported at the cost paid to acquire them
revenue recognition principle - Answers - revenue should be recorded when a resource
has been earned
matching principle - Answers - expenses should be recorded in the period resources are
used to generate revenue
conservatism principle - Answers - avoids overstating assets or income in the
preparation of financial statements
full disclosure principle - Answers - reveal any info that makes a difference to financial
statement users
economic entity assumption - Answers - financial activities of a business should be
accounted for separately from the business's owners
monetary unit assumption - Answers - organizations are to report their financial results
and activities in monetary units
time period assumption - Answers - divides the life of the organization into artificial time
periods to report results over short periods of time
going concern assumption (continuity) - Answers - the company for which we are
accounting will continue its operations into the foreseeable future
, understandability - Answers - can be comprehended by someone with a reasonable
knowledge of business and finance
relevance - Answers - the capacity of accounting information to make a difference in
decisions
reliablity - Answers - the extent to which accounting information can be depended upon
to represent what it is suppose to represent, both in description and numbers
comparability - Answers - achieved when different companies use the same accounting
methods
-used to compare and contrast between companies
consistency - Answers - application of the same accounting principle by a single
company over time
materiality - Answers - the threshold at which a financial item begins to affect decision
making
steps to get a financial statement - Answers - 1. income statement
2. statement of retained earnings
3. balance sheet
4. statement of cash flows
income statement - Answers - states the company's revenues and expenses over a
specific period of time
revenues - expenses = net income/loss
statement of retained earnings - Answers - reports the change in a company's retained
earnings over a specific period of time
retained earnings, beginning balance
+/- net income/loss
- dividends
= ending retained earnings
balance sheet - Answers - report's a company's assets, liabilities, & equity at a specific
period of time
assets = liabilities + equity
statement of cash flows - Answers - reports company's sources and uses of cash over a
specific period of time
cash flows provided by Operating Activities
