ACG 2021; Questions & Answers 100% Correct
Financial Accounting CORRECT ANSWER-1. Measure business activity
2. Communicate measurements to people for decision making
Primary external users of financial accounting info CORRECT ANSWER-Investors and
creditors
Financing Activities CORRECT ANSWER-...
2. Communicate measurements to people for decision making
Primary external users of financial accounting info CORRECT ANSWER-Investors and
creditors
Financing Activities CORRECT ANSWER-Involves funding from external sources such as,
owners of company who invest their own funds into business and creditors who lend money to
the company
Investing Activities CORRECT ANSWER-Involves purchase and sale of long-term resources
such as, land, buildings, equipment, and machinery
Operating Activities CORRECT ANSWER-Involves transactions in primary operations of
business/ Providing products and services to customers and associated costs of doing so Ex.
utilities, wages, rent, maintenance
Accounting Equation CORRECT ANSWER-Assets=Liabilities+Stockholders' Equity/
Resources=Claims to resources
Accounting Equation used to CORRECT ANSWER-measure business transactions
Assets def CORRECT ANSWER-Resources owned by a company
, ACG 2021; Questions & Answers 100% Correct
Liabilities CORRECT ANSWER-Amounts owed to creditors
Stockholders' Equity CORRECT ANSWER-Stockholders' or owners' claims to resources
Corporation Pros CORRECT ANSWER-Limited liability: Only lose how much you invested/
Not obligated to pay corporation's debts
Corporation Cons CORRECT ANSWER-Double taxation:
1. @ corporate level (taxed more)
2. @ personal income tax when dividends are distributed (less of a tax)
CPA CORRECT ANSWER-Certified Public Accountant- serves general public
CMA CORRECT ANSWER-Certified Management Accountants- specialize in accounting
and financial management for private industries
Generally Accepted Accounting Principles (GAAP) CORRECT ANSWER-Rules of financial
accounting
Functions of GAAP CORRECT ANSWER-Allows comparison of financial info among
companies
, ACG 2021; Questions & Answers 100% Correct
Financial Accounting Standards Board (FASB) CORRECT ANSWER-Independent private
body that has primary responsibility for the establishment of GAAP in the U.S.
Functions of FASB CORRECT ANSWER-Creates rules and standards that govern financial
accounting/ Responsibility, but not authority, to set standards
SEC CORRECT ANSWER-Securities and Exchange Commission
Functions of SEC CORRECT ANSWER-Oversees US financial markets/ Requires companies
that publicly trade stock to prepare financial statements for investors and creditors
Auditors CORRECT ANSWER-Trained individual hired by a company as an independent
party to express professional opinion of accuracy of that company's financial statements/ Makes
sure financial statements are in accordance with GAAP/ Add credibility
Flow of Accounting CORRECT ANSWER-GAAP(rules) formulated by FASB -> Accounting
Equation: Assets=Liabilities+Stockholders' Equity -> Income Statement -> Statement of
Stockholders' Equity -> Balance Sheet -> Statement of Cash Flows
Cash CORRECT ANSWER-Liquid assets
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