PRAXIS 5101 Latest 2023 Already Graded A

PRAXIS 5101 Latest 2023 Already Graded A Assets Something valuable that an entity owns, benefits from, or has use of, in generating income. Different types of assets Fixed, variable, intangible, tangible examples of fixed assets Tangible assets used to generate profit and will not be turned into cash within the year: "plant," land, computer equipment, furniture, cars, buildings, and equipment used to make products What are variable assets May be transformed to cash sooner; inventory of product and accounts receivable What are intangible assets? Not physical-brand names, intellectual property- are high in value What is liquidity? How easy it is to turn an item into cash without losing any money What is equity? In business, it shows what the owner has contributed in addition to retained earnings; ownership minus debts What is depreciation? Loss of value for any reason. What is cash flow? the total amount of money being transferred into and out of a business; revenues and/or expenses What is GAAP? Generally accepted accounting principles. A set of rules and practices, having substantial authortitative support, that accounting profession recognizes as a general guideline for a financial reporting purposes; standardized how income statements, balance sheets, and cash flow statements are prepared How is GAAP used for investors? So investors understand what they are getting when they receive statements What does GAAP standardize/cover? Economic activity measurement, timing disclosures, and how financial statements are prepared and presented. Who requires GAAP? Companies regulated by the US Securities and Exchange Commission (SEC) Who issues GAAP through pronouncements? Financial Accounting Standards Board (FASB) Two major types of accounting systems Cash and accrual accounting What does cash accounting entail? Transactions are counted when money is actually received or the expenses are paid out. What does accrual accounting entail? Transactions are counted when orders are made or delivered-even if no cash has been exchanged. How does cash and accrual accounting affects taxes? If an item is purchased in delivered in one month (accrual), but paid for in another month (cash), this affects where it is recorded for tax purposes. How does cash and accrual accounting differ? Cash accounting is more advantageous as it gives the business a better idea of cash on hand, but may not show correct profits; however, accrual accounting will show correct profits, but won't reflect