MBA 510 Test 1 With Complete Questions and Answers 100% Correct

MBA 510 Test 1 With Complete Questions and Answers 100% Correct Accounting Information and measurement systems that identifies, records, and communicated relevant information about a companies business activities. recordkeeping/bookkeeping the recording of transactions and events. Financial accounting focuses on the needs of external users managerial accounting focuses on the needs of internal users External Users do not directly run the organization and have limited access to its accounting information External Users examples lenders, shareholders, governments, consumer groups, external auditors, customers Internal Users directly manage and operate the organization Internal Users examples Purchasing managers, production manager, distribution manager, marketing managers, service managers,' research and development managers. Ethics Beliefs that separate right from wrong Three key steps to ethical decision 1. Identify ethical concerns 2. Analyze options 3. Make ethical decision What three factors push a person to commit fraud Opportunity, Pressure, Rationalization Sarbanes-Oxley Act or SOX Requires documentation and verification of internal controls and emphasizes effective internal controls. Auditors verify the effectiveness of internal controls Dodd-Frank Act 1. Clawback Mandates recovery of excessive pay. 2. Whistleblower SEC pays whistleblowers 10% to 30% of sanctions exceeding 1 million Generally accepted accounting principles (GAAP) a set of accounting standards that is used in the preparation of financial statements Financial Accounting Standards Board (FASB) The primary accounting standard-setting body in the United States. International Accounting Standards Board (IASB) Issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices. The FASB conceptual framework consists of the following: Objectives Qualitative Characteristics Elements Recognition and measurement Measurement principle (cost principle) accounting information is based on actual cost Revenue Recognition Principle The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied. Expense Recognition Principle States that A company records the expense it incurred to generate the revenue reported. An example is rent costs of office space. Full Disclosure Principle Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users. Often in footnotes Going Concern Assumption The assumption that the company will continue in operation for the foreseeable future. 4 accounting assumptions going concern, monetary unit, time period, business entity cost-benefit constraint prescribes that only information with benefits of disclosure greater than the costs of providing it need be disclosed Assets resources owned by a business. Expected to yield future benefits Liabilities Amounts owed to creditors. obligations to provide assets, products, or services to others. Equity The owners claim on assets and is equal to assets minus liabilities. Accounting Equation Assets = Liabilities + Equity External Transactions exchanges of value between two entities, which cause change in the accounting equation internal transactions exchanges within an entity, which may or may not affect the accounting equation Events happenings that affect the accounting equation and are reliably measured Income Statement A financial statement showing the revenue and expenses for a fiscal period. Statement of Retained Earnings Reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period. Balance Sheet A financial statement that reports assets, liabilities, and owner's equity on a specific date. Statement of Cash Flows A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time. Return on assets equation net income/average total assets Securities and Exchange Commission (SEC) monitors the stock market and enforces laws regulating the sale of stocks and bonds Source Documents identify and describe transactions and events entering the accounting process General ledger a record of all accounts used by a company The Chart of accounts a list of all ledger accounts and has an identification number assigned to each account T-Account represents a ledger account and is a tool used to understand the effects of one or more transactions account balance the difference between the total debits and the total credits in an account double-entry accounting demands the accounting equation remain in balance journal complete record of each transaction in one place journalizing Recording transactions in a journal posting transferring information from a journal entry to a ledger account