Principles of Accounting Exam 1 Study Guide Exam Questions And Correct Answers.
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Course
Fundamentals of Accounting
Institution
Fundamentals Of Accounting
What is accounting ? - Answer the information system that identifies, records, and communicates the economic events of an organization to interested users
What are the three basic activities of Accounting ? - Answer Identifying, recording, and communicating
Internal Users - Answer Ma...
Principles of Accounting Exam 1 Study
Guide Exam Questions And Correct
Answers.
What is accounting ? - Answer the information system that identifies, records, and communicates the
economic events of an organization to interested users
What are the three basic activities of Accounting ? - Answer Identifying, recording, and communicating
Internal Users - Answer Managers who plan, organize, and run the business. Ex: Marketing Managers,
Finance Directors
External Users - Answer Individuals, and organizations outside a company who want financial
information about the company.
Investors (Owners) - Answer Decide whether to buy, hold, or sell ownership shares of a company.
Creditors (Bankers and Suppliers) - Answer Evaluate the risks of granting credit or lending money.
Why is Ethics a fundamental building block of business ? - Answer Helps to keep dependable, and
accurate financial reporting.
What is SOX ? - Answer Sarbanes-Oxley Act: Law passed by Congress intended to reduce unethical
corporate behavior.
What are Generally Accepted Accounting Principles ? (GAAP) - Answer Common standards that indicate
how to report economic events.
Financial Accounting Standards Board (FASB): - Answer A private organization that establishes GAAP in
the U.S.
, Security and Exchange Commission (SEC): - Answer A governmental agency that oversees U.S. financial
markets and accounting standard-setting bodies.
International Accounting Standards Board (IASB): - Answer An accounting standard-setting body that
issues standards adopted by many countries outside the U.S.
Historical Cost Principle: - Answer Dictates that companies record assets at their cost. This is true at the
time the asset is purchased, as well as over the time the asset is held.
Fair Value Principle: - Answer States that assets, and liabilities should be reported at fair value. ( The
price received to sell an asset or settle a liability )
Monetary Unit Assumption: - Answer requires that companies include in the accounting records ONLY
transaction data that can be expressed in Money Terms.
-Enables accounting to quantify (Measure) economic events.
-The monetary unit assumption is vital to applying the historical cost principle.
Economic Entity Assumption: - Answer Requires that the activities of the entity be kept separate, and
distinct from the activities of its owner and all other economic entities.
-An economic entity can be any organization or unit in society.
Proprietorship's: - Answer A business owned by one person.
~Strengths
-Only a relatively small amount of money is needed to start this kind of business.
-The owner receives all of the profits.
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