Accounting 101 Final Exam Study
Guide Latest Updated
What is accounting? - ANSWER-the action or process of keeping financial accounts
revenues - ANSWER-inflows of assets resulting from the sale of goods and services
expenses - ANSWER-outflow of assets resulting from the sale of goods and services
internal user - ANSWER-managerial accounting
external user - ANSWER-financial accounting
who is responsible for GAAP - ANSWER-FASB
accounting equation - ANSWER-assets = liabilities + owners equity
international accounting standards board (IFRS) is responsible for - ANSWER-
developing a single set of worldwide accounting standards
These standards will help companies to reduce accounting costs, make it easier to
acquire foreign companies, and facilitate comparisons between foreign companies -
ANSWER-(IFRS) international accounting standards board
primary objective of financial reporting - ANSWER-provide economic information to
permit users of the information to make informed decisions
what makes information relevant - ANSWER-it must be able to make a difference in a
decision
assets are recorded at historical/original cost because - ANSWER-it is objective and
verifiable
financial information should be understandable to whom - ANSWER-those willing to
spend the necessary time to understand it
balance sheet - ANSWER-lists assets, liabilities, and owner's equity
income statement - ANSWER-revenues minus expenses equal net income
net income - ANSWER-revenues - expenses
, order of statement preparation - ANSWER-income statement, statement of retained
earnings, balance sheet and statement of cash flows
why do investors purchase preferred stock - ANSWER-they receive their dividends and
assets before common stockholders
cumulative feature - ANSWER-the right to dividends in arrears before the current year
dividend is distributed
if $1 par value stock is sold for $20, by what amount is Cash increased, by what amount
is Common Stock increased, and by what amount is Additional Paid-in Capital
increased - ANSWER-cash is increased $20
common stock increased $1
additional paid in capital increased $19
treasury stock - ANSWER-a company's own stock that it has issued and later
reacquired
why would corporations buy treasury stock - ANSWER--Has issued all it's authorized
stocks and needs some stock for distribution
-Business wants to increase net assets by buying its stock low and hoping to resell it for
higher price.
-Avoid a take over by an outside party
how is treasury stock recorded - ANSWER-contra account decreases stockholders
equity
A company must have __________ and __________ to pay dividends. Two important
dates for dividends are - ANSWER-Must have enough cash to pay the dividend and
enough retained earnings to declare the dividend.
Declaration Date: Dividends are declared
Payment Date: Payment of dividends
Know effect of stock dividend - ANSWER-Stock dividends increase the stock account
and decreases Retained Earnings
Know effect of stock split - ANSWER-An increase in the number of authorized, issued,
and outstanding shares of stock coupled with a proportionate reduction in the stock's
par value
Guide Latest Updated
What is accounting? - ANSWER-the action or process of keeping financial accounts
revenues - ANSWER-inflows of assets resulting from the sale of goods and services
expenses - ANSWER-outflow of assets resulting from the sale of goods and services
internal user - ANSWER-managerial accounting
external user - ANSWER-financial accounting
who is responsible for GAAP - ANSWER-FASB
accounting equation - ANSWER-assets = liabilities + owners equity
international accounting standards board (IFRS) is responsible for - ANSWER-
developing a single set of worldwide accounting standards
These standards will help companies to reduce accounting costs, make it easier to
acquire foreign companies, and facilitate comparisons between foreign companies -
ANSWER-(IFRS) international accounting standards board
primary objective of financial reporting - ANSWER-provide economic information to
permit users of the information to make informed decisions
what makes information relevant - ANSWER-it must be able to make a difference in a
decision
assets are recorded at historical/original cost because - ANSWER-it is objective and
verifiable
financial information should be understandable to whom - ANSWER-those willing to
spend the necessary time to understand it
balance sheet - ANSWER-lists assets, liabilities, and owner's equity
income statement - ANSWER-revenues minus expenses equal net income
net income - ANSWER-revenues - expenses
, order of statement preparation - ANSWER-income statement, statement of retained
earnings, balance sheet and statement of cash flows
why do investors purchase preferred stock - ANSWER-they receive their dividends and
assets before common stockholders
cumulative feature - ANSWER-the right to dividends in arrears before the current year
dividend is distributed
if $1 par value stock is sold for $20, by what amount is Cash increased, by what amount
is Common Stock increased, and by what amount is Additional Paid-in Capital
increased - ANSWER-cash is increased $20
common stock increased $1
additional paid in capital increased $19
treasury stock - ANSWER-a company's own stock that it has issued and later
reacquired
why would corporations buy treasury stock - ANSWER--Has issued all it's authorized
stocks and needs some stock for distribution
-Business wants to increase net assets by buying its stock low and hoping to resell it for
higher price.
-Avoid a take over by an outside party
how is treasury stock recorded - ANSWER-contra account decreases stockholders
equity
A company must have __________ and __________ to pay dividends. Two important
dates for dividends are - ANSWER-Must have enough cash to pay the dividend and
enough retained earnings to declare the dividend.
Declaration Date: Dividends are declared
Payment Date: Payment of dividends
Know effect of stock dividend - ANSWER-Stock dividends increase the stock account
and decreases Retained Earnings
Know effect of stock split - ANSWER-An increase in the number of authorized, issued,
and outstanding shares of stock coupled with a proportionate reduction in the stock's
par value
