ETS EXAM STUDY GUIDE
Financial Statements - Answer -are the business documents that companies use to
report
the results of activities to various external user groups.
Accounting - Answer -is an information system. It measures business activities,
processes date into reports (including financial statements) and communicates results
to
decision makers. Accounting is the "language of business"
Users of Accounting Information - Answer -Individual
Investors and Creditors
Regulatory Bodies
Nonprofit Organizations
Financial Accounting - Answer -Provides information for decision makers outside the
entity.
Investors
Creditors
Government agencies
And the public
Managerial Accounting - Answer -Provides information for internal users, management
proprietorship - Answer -is a single owner.
Partnership - Answer -Two or more parties are co-owners and each owner is a partner.
Limited Liability Company (LLC) - Answer -One in which the business (not the owner) is
liable for the company's debt.
Corporation - Answer -Is a business owner by stockholder or shareholders who own
stock (common or
preferred) representing shares of ownership in that corporation.
GAAP - Answer -Generally Accepted Accounting Principles
FASB - Answer -Financial Accounting Standards Board
IASB - Answer -International accounting Standards Board
The Accounting Equation - Answer -Assets = Liabilities + Owners Equity
, Assets - Answer -Economic resources that are expected to produce a benefit in the
future
Current assets - Answer -expected to be converted to cash, sold or consumed during
the next 12 months or business operations cycle. Whichever is longer.
Liabilities - Answer -Outside claims. Debts payable to creditors
Owners' Equity or Shareholders Equity - Answer -Insider claims.
The Income Statement or Statement of Operations - Answer -Revenues minus
expenses to equal Net Income.
The Statement of Retained Earnings - Answer -Shows What a company did with it's
Net Income.
Retained Earnings is the portion of net income that has been kept by t he
company
The Balance Sheet or Statement of Financial Position reporting - Answer -Assets,
Liabilities
And Stockholders Equity
Or the accounting equation
The Statement of Cash Flows - Answer -reports three types of activities: Operating,
investing, and financing.
Operating: - Answer -Cash flows from selling goods and providing services to
customers
Investing: - Answer -Cash flows from the purchase and sale of long-term assets
Financing: - Answer -Borrowing and repayment of borrowed funds
Equity transactions, such as issuing stock, paying dividends, and repurchase of
company stock
Current Liabilities - Answer -are the company's debts that are due within one year or
the company's operating cycle, whichever is longer.
Examples of Current Liabilities are: - Answer -Accounts Payable (owed for inventories
and services purchased on credit)
Sales Tax Payable (sales tax collected from customers and due to state and local
governments)
Salaries and Wages Payable (yearly and hourly employees' payroll expenses owed but
not paid at the end of the period)
Interest Payable (interest expense accrued on notes payable but not paid at the end of
the
Financial Statements - Answer -are the business documents that companies use to
report
the results of activities to various external user groups.
Accounting - Answer -is an information system. It measures business activities,
processes date into reports (including financial statements) and communicates results
to
decision makers. Accounting is the "language of business"
Users of Accounting Information - Answer -Individual
Investors and Creditors
Regulatory Bodies
Nonprofit Organizations
Financial Accounting - Answer -Provides information for decision makers outside the
entity.
Investors
Creditors
Government agencies
And the public
Managerial Accounting - Answer -Provides information for internal users, management
proprietorship - Answer -is a single owner.
Partnership - Answer -Two or more parties are co-owners and each owner is a partner.
Limited Liability Company (LLC) - Answer -One in which the business (not the owner) is
liable for the company's debt.
Corporation - Answer -Is a business owner by stockholder or shareholders who own
stock (common or
preferred) representing shares of ownership in that corporation.
GAAP - Answer -Generally Accepted Accounting Principles
FASB - Answer -Financial Accounting Standards Board
IASB - Answer -International accounting Standards Board
The Accounting Equation - Answer -Assets = Liabilities + Owners Equity
, Assets - Answer -Economic resources that are expected to produce a benefit in the
future
Current assets - Answer -expected to be converted to cash, sold or consumed during
the next 12 months or business operations cycle. Whichever is longer.
Liabilities - Answer -Outside claims. Debts payable to creditors
Owners' Equity or Shareholders Equity - Answer -Insider claims.
The Income Statement or Statement of Operations - Answer -Revenues minus
expenses to equal Net Income.
The Statement of Retained Earnings - Answer -Shows What a company did with it's
Net Income.
Retained Earnings is the portion of net income that has been kept by t he
company
The Balance Sheet or Statement of Financial Position reporting - Answer -Assets,
Liabilities
And Stockholders Equity
Or the accounting equation
The Statement of Cash Flows - Answer -reports three types of activities: Operating,
investing, and financing.
Operating: - Answer -Cash flows from selling goods and providing services to
customers
Investing: - Answer -Cash flows from the purchase and sale of long-term assets
Financing: - Answer -Borrowing and repayment of borrowed funds
Equity transactions, such as issuing stock, paying dividends, and repurchase of
company stock
Current Liabilities - Answer -are the company's debts that are due within one year or
the company's operating cycle, whichever is longer.
Examples of Current Liabilities are: - Answer -Accounts Payable (owed for inventories
and services purchased on credit)
Sales Tax Payable (sales tax collected from customers and due to state and local
governments)
Salaries and Wages Payable (yearly and hourly employees' payroll expenses owed but
not paid at the end of the period)
Interest Payable (interest expense accrued on notes payable but not paid at the end of
the
