What is accounting in business terms?
An information and measurement system for business activities.
How does bookkeeping differ from accounting?
Bookkeeping records transactions; accounting analyzes and interprets them.
What distinguishes external users from internal users in accounting?
External users do not run the organization and have limited information access.
Who are internal users in accounting?
People who directly manage the organization and receive tailored reports.
Which fields offer accounting career opportunities?
Financial, managerial, taxation, and accounting-related work.
Where else can accountants find opportunities besides traditional fields?
In government and not-for-profit agencies.
What is data analytics?
The process of analyzing data to identify meaningful relations and trends.
What are the four basic types of analytics?
Descriptive, diagnostic, predictive, and prescriptive analytics.
What are ethics in behavior standards?
Accepted standards of good and bad behavior separating right from wrong.
What is the first step when facing an ethical concern?
Recognize the concern.
What should be done after analyzing options in an ethical concern?
Choose the best option after weighing consequences.
What are the three factors in the fraud triangle?
Opportunity, pressure or incentive, and rationalization or attitude.
What do generally accepted accounting principles govern?
Financial accounting concepts and rules.
Who sets GAAP under SEC authority?
The Financial Accounting Standards Board.
What components are included in the FASB conceptual framework?
Objectives, qualitative characteristics, elements, and recognition and measurement criteria.
What are the four general accounting principles?
Measurement, revenue recognition, expense recognition, and full disclosure principles.
When is revenue recognized in accounting?
When goods or services are provided to customers.
At what amount is revenue recognized?
At the amount expected to be received from the customer.
What are the four fundamental accounting assumptions?
Monetary unit, business entity, time period, and going-concern assumptions.
What are assets in accounting?
Resources a company owns or controls expected to yield future benefits.
What do liabilities represent in accounting?
Creditors’ claims on assets and obligations to provide assets, products, or services.
What is the accounting equation formula?
How is equity calculated from assets and liabilities?
Equity equals assets minus liabilities.
Which components increase equity?
Common stock and revenues increase equity.
Which components decrease equity?
Dividends and expenses decrease equity.
What are the three steps in transaction analysis?
Identify affected accounts, determine increase or decrease, record equal effects to balance.
How does a $30,000 cash investment affect accounts?
It increases both cash and common stock by $30,000.
How does providing services for cash or credit affect accounts?
It increases cash or accounts receivable and increases revenue.
What is the effect of paying expenses on cash and equity?
It decreases cash and total equity.
What does the income statement report and compute?
Revenues, expenses, and net income or loss over a period.
What does the balance sheet report about assets, liabilities, and equity?
Their types and amounts at a point in time.
What does the statement of cash flows report?
Cash inflows and outflows over a period of time.
What is the starting point of the statement of retained earnings?
Beginning retained earnings.
Which items are added or subtracted in the statement of retained earnings?
Net income or loss and dividends.
What does the statement of retained earnings produce?
Ending retained earnings.
How are cash flows classified in the statement of cash flows?
As operating, investing, or financing activities.
What links the statement of cash flows to the balance sheet?
The ending cash balance.
What is return on assets also called?
Return on investment.
How is return on assets calculated?
Net income divided by average total assets.
What is the formula for return on assets?
.
Which users does financial accounting serve?
External users.
Who does managerial accounting focus on?
Internal users such as executives and managers.
What services does public accounting provide?
Auditing, taxation, and advisory services.
Where are accountants employed in private accounting?
Within businesses.
What is data visualization?
A graphical presentation of data that helps users understand its significance and make informed business decisions.
What do internal controls protect?
Assets.
What do internal controls ensure?
Reliable accounting.
What do internal controls promote?
Efficiency.
What do internal controls uphold?
Company policies.
What does the International Accounting Standards Board issue?
International Financial Reporting Standards.
How do IFRS compare to U.S. GAAP?
They are similar but sometimes different.
What does the cost-benefit constraint require?
Benefits of disclosed information must exceed the cost of providing it.
What does materiality concern in accounting?
Information’s ability to influence user decisions.
What happens to total assets and equity when purchasing supplies for cash?
Total assets and total equity remain unchanged.
What occurs when collecting accounts receivable?
One asset exchanges for another without changing total assets.
How does paying accounts payable affect cash and liabilities?
It decreases cash and liabilities.
How are average total assets calculated?
As the average of beginning and ending total assets.
What is the formula for average total assets?
.
For what purposes is return on assets useful?
Evaluating management, analyzing and forecasting profits, and planning activities.
Answer 26 questions on Accounting in Business.
1. Regarding accounting as an information system, which statements are correct?
2. Which statements correctly distinguish bookkeeping from accounting?
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