ACG 4101 CHAPTER 1 STUDY GUIDE
Financial Accounting - Answer -Chiefly concerned with providing financial information
to various external users
Financial Intermediaries - Answer -(financial analysts, stockbrokers, mutual fund
managers, credit rating organizations) these users are provide advice to investors and
creditors and/or make investment-credit decisions on their behalf
Financial Reporting - Answer -process of providing information to external users
through financial statements and related disclosure notes - Answer -Primary means of
conveying financial information to investors, creditors, and other external users
Profit oriented companies, non for profit entities, households - Answer -Providers of
financial information
investors, creditors (banks, bondholders, lenders), employees, labor unions, customers,
suppliers, government agencies, financial intermediaries - Answer -External User
groups
is on the information needs of investors and creditors - Answer -primary focus of
accounting
Free enterprise economy - Answer -economy to operate efficiently, resources should
be allocated to private enterprises that will use them best to provide the goods and
services desired by society, not to those who waste them
capital markets - Answer -mechanisms that foster an efficient allocation of resources; a
composite of all investors and creditors
proprietorship, partnership, corporation - Answer -three primary forms of business
corporation - Answer -dominant form of business organization that acquires capital
from investors in exchange for ownership interest and from creditors by borrowing
initial market transactions - Answer -provide for new cash by the ISSUANCE of stocks
and bonds by the corporation
secondary market transactions - Answer -provide for the TRANSFER of stocks and
bonds by the corporation
Expected rate of return (formula) - Answer -dividends + change in price / initial
investment
, Primary objective of financial accounting - Answer -provide investors and creditors with
USEFUL information that will help them make investment and credit decisions
accrual accounting - Answer -measurement of the entity's accomplishments and
resource sacrifices during the period, regardless of when cash is received or paid
Cash basis accounting - Answer -helps predict future cash flows; with net operating
cash flow
net operating cash flow - Answer -difference between cash receipts and cash
disbursements during reporting period from transactions related to providing goods and
services to customers; may not be good indicator of long run cash generating ability
net income - Answer -difference between revenues and expenses
Generally Accepted Accounting Principles (GAAP) - Answer -set of both broad and and
specific guidelines that companies should follow when measuring and reporting the
information int their financial statements and related notes
so investors can compare financial information across companies to make resource
allocation decisions - Answer -Why is GAAP important to follow?
1933 Securities Act - Answer -sets forth accounting and disclosure requirements for
initial offerings of securities (stocks and bonds)
1934 Securities Act - Answer -applies to secondary market transactions and mandates
reporting requirements for companies whose securities are publicly traded on either
organized stock exchanges or in over the counter markets
Securities and Exchange Commission (SEC) - Answer -responsible for setting
accounting and reporting standards for companies whose securities are publicly traded;
they have delegated the task to the private sector; issues Releases and Bulletins
it can force a change in the standard - Answer -If SEC does not agree with standards
set forth b the private sector?
Committee on Accounting Procedure (CAP) - Answer -first private sector body that was
delegated the task of setting accounting standards
American Institute of Accountants (AIA) - Answer -CAP was a committee of
American Institute of Accountants (AIA) - Answer -renamed American Institute of
Certified Public Accountants (AICPA) in 1957, is the national professional organization
for certified public accountants
Financial Accounting - Answer -Chiefly concerned with providing financial information
to various external users
Financial Intermediaries - Answer -(financial analysts, stockbrokers, mutual fund
managers, credit rating organizations) these users are provide advice to investors and
creditors and/or make investment-credit decisions on their behalf
Financial Reporting - Answer -process of providing information to external users
through financial statements and related disclosure notes - Answer -Primary means of
conveying financial information to investors, creditors, and other external users
Profit oriented companies, non for profit entities, households - Answer -Providers of
financial information
investors, creditors (banks, bondholders, lenders), employees, labor unions, customers,
suppliers, government agencies, financial intermediaries - Answer -External User
groups
is on the information needs of investors and creditors - Answer -primary focus of
accounting
Free enterprise economy - Answer -economy to operate efficiently, resources should
be allocated to private enterprises that will use them best to provide the goods and
services desired by society, not to those who waste them
capital markets - Answer -mechanisms that foster an efficient allocation of resources; a
composite of all investors and creditors
proprietorship, partnership, corporation - Answer -three primary forms of business
corporation - Answer -dominant form of business organization that acquires capital
from investors in exchange for ownership interest and from creditors by borrowing
initial market transactions - Answer -provide for new cash by the ISSUANCE of stocks
and bonds by the corporation
secondary market transactions - Answer -provide for the TRANSFER of stocks and
bonds by the corporation
Expected rate of return (formula) - Answer -dividends + change in price / initial
investment
, Primary objective of financial accounting - Answer -provide investors and creditors with
USEFUL information that will help them make investment and credit decisions
accrual accounting - Answer -measurement of the entity's accomplishments and
resource sacrifices during the period, regardless of when cash is received or paid
Cash basis accounting - Answer -helps predict future cash flows; with net operating
cash flow
net operating cash flow - Answer -difference between cash receipts and cash
disbursements during reporting period from transactions related to providing goods and
services to customers; may not be good indicator of long run cash generating ability
net income - Answer -difference between revenues and expenses
Generally Accepted Accounting Principles (GAAP) - Answer -set of both broad and and
specific guidelines that companies should follow when measuring and reporting the
information int their financial statements and related notes
so investors can compare financial information across companies to make resource
allocation decisions - Answer -Why is GAAP important to follow?
1933 Securities Act - Answer -sets forth accounting and disclosure requirements for
initial offerings of securities (stocks and bonds)
1934 Securities Act - Answer -applies to secondary market transactions and mandates
reporting requirements for companies whose securities are publicly traded on either
organized stock exchanges or in over the counter markets
Securities and Exchange Commission (SEC) - Answer -responsible for setting
accounting and reporting standards for companies whose securities are publicly traded;
they have delegated the task to the private sector; issues Releases and Bulletins
it can force a change in the standard - Answer -If SEC does not agree with standards
set forth b the private sector?
Committee on Accounting Procedure (CAP) - Answer -first private sector body that was
delegated the task of setting accounting standards
American Institute of Accountants (AIA) - Answer -CAP was a committee of
American Institute of Accountants (AIA) - Answer -renamed American Institute of
Certified Public Accountants (AICPA) in 1957, is the national professional organization
for certified public accountants
