1. Accounting is an information and measurement system that identifies, records, and
communicates relevant, reliable, and comparable information about an organization's
business activities.
2. Bookkeeping is the recording of transactions and events and is only part of
accounting.
3. An accounting information system communicates data to help businesses make
better decisions.
4. Managerial accounting is the area of accounting that provides internal reports to
assist the decision making needs of internal users.
5. Internal operating activities include research and development, distribution, and
human resources.
6. The primary objective of financial accounting is to provide general purpose financial
statements to help external users analyze and interpret an organization's activities.
7. External auditors examine financial statements to verify that they are prepared
according to generally accepted accounting principles.
8. External users include lenders, shareholders, customers, and regulators.
9. Regulators often have legal authority over certain activities of organizations.
10. Internal users include lenders, shareholders, brokers and managers.
11. Opportunities in accounting include auditing, consulting, market research, and tax
planning.
12. Identifying the proper ethical path is easy.
13. The Sarbanes-Oxley Act (SOX) requires each issuer of securities to disclose
whether is has adopted a code of ethics for its senior financial officers and the contents
of that code.
14. The fraud triangle asserts that there are three factors that must exist for a person to
commit fraud; these factors are opportunity, pressure, and rationalization.
15. The Sarbanes-Oxley Act (SOX) does not require public companies to apply both
accounting oversight and stringent internal controls.
16. A partnership is a business owned by two or more people.
17. Owners of a corporation are called shareholders or stockholders.
18. In the partnership form of business, the owners are called stockholders.
19.
The balance sheet shows a company鈥檚 net income or loss due to earnings activities
over a period of time.
20. The Financial Accounting Standards Board is the private group that sets both broad
and specific accounting principles.
21. The business entity principle means that a business will continue operating for an
indefinite period of time.
22. Generally accepted accounting principles are the basic assumptions, concepts, and
guidelines for preparing financial statements.
23. The business entity assumption means that a business is accounted for separately
from other business entities, including its owner or owners.
24. As a general rule, revenues should not be recognized in the accounting records until
it is received in cash.