ACC 215 Chapter 1, 2, & 3 Study Guide (Exam 1) ACTUAL
UPDATED QUESTIONS AND CORRECT ANSWERS
, external users of accounting information Persons using accounting information who are not directly involved in running the
organization.
Lenders (creditors), shareholders (investors), board of directors, external
(independent) auditors, nonmanagerial & nonexecutive employees & labor unions,
regulators, voters & government officials, supplies, customers
Internal users of accounting information Persons using accounting information who are directly involved in managing the
organization.
Purchasing managers, HR managers, production managers, distribution managers,
marketing managers, service mangers, research & development managers
Three primary accounting functions Identifying, Recording, and Communicating
Identifying Identifying business activities requires that we select relevant transactions and
events
Recording Recording business activities requires that we keep a chronological log of
transactions and events measured in dollars
Communicating Communicating business activities includes preparing accounting reports such as
financial statements, which we analyze and interpret
What are internal controls? All policies and procedures used to protect assets, ensure reliable accounting,
promote efficient operations, and urge adherence to company policies.
Examples: good records, physical controls (locks), independent reviews
What is GAAP (Generally Accepted Accounting GAAP are rules that specify acceptable accounting practices.
Principles) and who sets the standards?
The Financial Accounting Standards Board (FASB) and Securities and Exchange
Commission (SEC). The SEC has the authority to both set and enforce accounting
standards.
What are the four accounting principles? 1. Measurement principle (cost principle)
2. Revenue recognition principle
3. Expense recognition principle (matching principle)
4. Full disclosure principle
Measurement Principle (Cost Principle) A principle that prescribes financial statement information, and its underlying
transactions and events, be based on relevant measures of valuation; also called
the cost principle.
Accounting information is based on actual cost. Actual cost is considered
objective. Cost is measured on cash or equal to cash basis.
Revenue Recognition Principle The principle that companies recognize revenue in the accounting period in
which the performance obligation is satisfied.
UPDATED QUESTIONS AND CORRECT ANSWERS
, external users of accounting information Persons using accounting information who are not directly involved in running the
organization.
Lenders (creditors), shareholders (investors), board of directors, external
(independent) auditors, nonmanagerial & nonexecutive employees & labor unions,
regulators, voters & government officials, supplies, customers
Internal users of accounting information Persons using accounting information who are directly involved in managing the
organization.
Purchasing managers, HR managers, production managers, distribution managers,
marketing managers, service mangers, research & development managers
Three primary accounting functions Identifying, Recording, and Communicating
Identifying Identifying business activities requires that we select relevant transactions and
events
Recording Recording business activities requires that we keep a chronological log of
transactions and events measured in dollars
Communicating Communicating business activities includes preparing accounting reports such as
financial statements, which we analyze and interpret
What are internal controls? All policies and procedures used to protect assets, ensure reliable accounting,
promote efficient operations, and urge adherence to company policies.
Examples: good records, physical controls (locks), independent reviews
What is GAAP (Generally Accepted Accounting GAAP are rules that specify acceptable accounting practices.
Principles) and who sets the standards?
The Financial Accounting Standards Board (FASB) and Securities and Exchange
Commission (SEC). The SEC has the authority to both set and enforce accounting
standards.
What are the four accounting principles? 1. Measurement principle (cost principle)
2. Revenue recognition principle
3. Expense recognition principle (matching principle)
4. Full disclosure principle
Measurement Principle (Cost Principle) A principle that prescribes financial statement information, and its underlying
transactions and events, be based on relevant measures of valuation; also called
the cost principle.
Accounting information is based on actual cost. Actual cost is considered
objective. Cost is measured on cash or equal to cash basis.
Revenue Recognition Principle The principle that companies recognize revenue in the accounting period in
which the performance obligation is satisfied.
