EXAM 1 Prep
Last Modified: 2011-06-29
- 1. Manufacturing
- 2. Merchandising
- 3. Service
- Debt Financing (borrowing from creditors)
- 1) Capital contributions. (Owners contribute assets for ownership rights.)
- 2)Retained earnings. (Owners allow assets created through profitable operations to be retained in the business.)
- Stockholders have the right to vote for a corporation’s Board of Directors (typically one vote per share). They benefit from dividend distributions and increasing stock values and have the right to share in any net assets available after the payment of liabilities in the event of business termination and liquidation.
- The Board of Directors hires and monitors the performance of senior management. They’re also involved in the making of long-term strategic decisions. Board members may or may not be stockholders and are typically compensated for their time and effort.
- Senior management is responsible for daily operations of the company. They are paid a salary by the company and may or may not own shares of stock themselves.
- Accounting is often referred to as the language of business because its sole purpose is to communicate business information.
Management accounting reports often provide detailed information and many times include forecasts of future results or budgets.
What are the three general-purpose financial statements required under generally accepted accounting principles and what is the purpose of each?
- Balance Sheet or Statement of Financial Position
- Income Statement, Statement of Operations, Statement of Earnings, or Profit and Loss Statement
- Statement of Cash Flows
- Reflects a company’s financial position (assets, liabilities and owners’ equity) as of a point in time
- provide important supplemental information in support of a company’s general purpose financial statements.
- includes information on accounting methods as well as more detailed information relative to certain financial statement amounts.
- a federal agency responsible for the regulation of public capital markets in the United States
- “publicly-held businesses” are subject to SEC rules and regulations requiring the disclosure of financial statement and other information to investors.
- Generally Accepted Accounting Principles
- methods of accounting and the financial statement disclosures required of SEC regulated companies
- improves the comparability and usefulness of financial statement information to investors, creditors and other external users
- (IASB) is a private organization headquartered in London
- committed to developing a single set of high quality global accounting standards.
- cooperates with national accounting standard setters in an attempt to achieve convergence in accounting standards around the world.
- SEC deems FASB standards superior in providing fuller and fairer disclosure of financial information
- a benefit is breakdown of a significant investment and trade barrier. Capital markets will never be truly global until common accounting standards are applied to companies world wide.
- The AICPA is a private professional organization made up of CPAs across the nation. In addition to the administration of the CPA exam, the AICPA also determines generally accepted auditing standards (GAAS), which govern the practices and procedures to be used by CPA firms in the conduct of a certified audit of financial statements.
- False (Not true for liabilities, capital stock, retained earnings and revenue accounts.)
- False (Debits increase expenses. Increasing expenses cause a reduction in net income, retained earnings and owners’ equity.)
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