FUNDAMENTALS OF
ACCOUNTING FINAL EXAM
REVIEW
What is a balance sheet? - Represents the economic resources of the
company and the finances of those resources
Assets=Liabilities + Stockholder's Equity
What is an income statement? - A report of a company's ability to sell
goods for more than the cost to produce and sell
Revenue-Expenses=Net Income
What is a statement of stockholder's equity and what does it include? -
Company reports additional contribution or payments to investors and
the amount of income the company reinvest in future growth.
Includes:
-Beginning of the year retained earnings
-Net Income
-Dividends
-End of the year retained earnings
,What is a statement of cash flows and what does it include? - Where
the company reports its ability to generate cash and how it was used
(+/-) Cash flow from operating activities,
(+/-) Cash flow from investing activities,
(+/-) Cash flow from financial activities,
=Change in Cash + beginning cash balance = ending cash balance
What is the GAAP? - The standard way for a company to prepare
their financial statement
What is the Securities and Exchange Commission (SEC)? - The
governing body in charge of companies financial statements and
paperwork companies issuing stock to the public must provide to
stockholders. Goal is to protect investors and maintain integrity of
securities market
What is the Financial Accounting Standard Board (FASB)? - Private,
non-profit organization whose primary purpose is to establish and
improve GAAP within the US's public interest.
What is an audit? - An examination of the financial reports to ensure
that they represent what they claim and conform with GAAP
What is the objective of financial reporting? - The primary objective
is to provide accurate financial information to external users such as
potential investors, stockholders, lenders, etc.
, What are the qualitative characteristics of useful information? - -
Relevant Info: info that can influence a decision; it is timely and has
predictive and/or feedback value
-Faithful representation: requires that the info be complete, neutral,
and free from error
What is the separate entity assumption? - States that business
transactions are separate from the transactions of the owner
What is the going concern assumption? - States that the businesses are
assumed to continue to operate into the forseeeable future
What is the monetary unit assumption? - States that the accounting
info should be measured and reported in the national monetary unit
without any adjustment for changes in purchasing power
What is the mixed-attribute measurement model? - Applied to
measuring different assets and liabilities of the balance sheet
What is historical cost? - The cash-equivalent value of an asset on the
date of the transaction
What are assets? - Items of economic value that is expected to yield a
benefit. Current assets will be used or turned to cash within a year
(inventory). Reported in order of liquidity on the balance sheet
ACCOUNTING FINAL EXAM
REVIEW
What is a balance sheet? - Represents the economic resources of the
company and the finances of those resources
Assets=Liabilities + Stockholder's Equity
What is an income statement? - A report of a company's ability to sell
goods for more than the cost to produce and sell
Revenue-Expenses=Net Income
What is a statement of stockholder's equity and what does it include? -
Company reports additional contribution or payments to investors and
the amount of income the company reinvest in future growth.
Includes:
-Beginning of the year retained earnings
-Net Income
-Dividends
-End of the year retained earnings
,What is a statement of cash flows and what does it include? - Where
the company reports its ability to generate cash and how it was used
(+/-) Cash flow from operating activities,
(+/-) Cash flow from investing activities,
(+/-) Cash flow from financial activities,
=Change in Cash + beginning cash balance = ending cash balance
What is the GAAP? - The standard way for a company to prepare
their financial statement
What is the Securities and Exchange Commission (SEC)? - The
governing body in charge of companies financial statements and
paperwork companies issuing stock to the public must provide to
stockholders. Goal is to protect investors and maintain integrity of
securities market
What is the Financial Accounting Standard Board (FASB)? - Private,
non-profit organization whose primary purpose is to establish and
improve GAAP within the US's public interest.
What is an audit? - An examination of the financial reports to ensure
that they represent what they claim and conform with GAAP
What is the objective of financial reporting? - The primary objective
is to provide accurate financial information to external users such as
potential investors, stockholders, lenders, etc.
, What are the qualitative characteristics of useful information? - -
Relevant Info: info that can influence a decision; it is timely and has
predictive and/or feedback value
-Faithful representation: requires that the info be complete, neutral,
and free from error
What is the separate entity assumption? - States that business
transactions are separate from the transactions of the owner
What is the going concern assumption? - States that the businesses are
assumed to continue to operate into the forseeeable future
What is the monetary unit assumption? - States that the accounting
info should be measured and reported in the national monetary unit
without any adjustment for changes in purchasing power
What is the mixed-attribute measurement model? - Applied to
measuring different assets and liabilities of the balance sheet
What is historical cost? - The cash-equivalent value of an asset on the
date of the transaction
What are assets? - Items of economic value that is expected to yield a
benefit. Current assets will be used or turned to cash within a year
(inventory). Reported in order of liquidity on the balance sheet
