D196 QUESTIONS AND VERIFIED ANSWERS
What is the role and purpose of accounting? - Answers - Accounting is used to
accumulate, measure, and communicate financial information about organizations. This
information is used to make informed decisions regarding resource usage and
allocation.
Who uses accounting information and why? - Answers - Managerial Accounting:
Internal decision making (managers, CEO's, supervisors, etc.)
Financial Accounting: External user benefit (stakeholders, investors, tax authorities,
etc.)
What are important influences on Accounting? - Answers - Development of GAAP by
FASB in the U.S. and by the IASB worldwide. International business considerations,
ethical considerations.
What is the role of ethics in Accounting? - Answers - Accountants are seen by the public
as ensuring that misrepresentation of financial information does not occur.
What is the PCAOB and what does it do? - Answers - PCAOB is the Public Company
Accounting Oversight Board, and they oversee audits of public companies. Created by
the SEC after passage of the Sarbanes Oxley Act of 2002 to restore public confidence.
Explain the accounting cycle. - Answers - 1. Analyze transactions
2. Record effects of transactions
3. Summarize effects of transactions
3a. Post journal entries
3b. Prepare trial balance
4. Prepare financial reports
4a. Adjust journal entries
4b. Prepare financial statements
4c. Close books
What is the basic accounting equation? - Answers - Assets (resources, cash,
equipment)
=
Liabilities (method of financing req. repayment)
+
Owner's Equity (method of financing NOT req. repayment)
What is the expanded accounting equation? - Answers - Assets = Liabilities + Capital
Stock + Revenues - Expenses - Dividends
What are the four financial statements covered? - Answers - 1. The Balance Sheet
2. The Income Statement
What is the role and purpose of accounting? - Answers - Accounting is used to
accumulate, measure, and communicate financial information about organizations. This
information is used to make informed decisions regarding resource usage and
allocation.
Who uses accounting information and why? - Answers - Managerial Accounting:
Internal decision making (managers, CEO's, supervisors, etc.)
Financial Accounting: External user benefit (stakeholders, investors, tax authorities,
etc.)
What are important influences on Accounting? - Answers - Development of GAAP by
FASB in the U.S. and by the IASB worldwide. International business considerations,
ethical considerations.
What is the role of ethics in Accounting? - Answers - Accountants are seen by the public
as ensuring that misrepresentation of financial information does not occur.
What is the PCAOB and what does it do? - Answers - PCAOB is the Public Company
Accounting Oversight Board, and they oversee audits of public companies. Created by
the SEC after passage of the Sarbanes Oxley Act of 2002 to restore public confidence.
Explain the accounting cycle. - Answers - 1. Analyze transactions
2. Record effects of transactions
3. Summarize effects of transactions
3a. Post journal entries
3b. Prepare trial balance
4. Prepare financial reports
4a. Adjust journal entries
4b. Prepare financial statements
4c. Close books
What is the basic accounting equation? - Answers - Assets (resources, cash,
equipment)
=
Liabilities (method of financing req. repayment)
+
Owner's Equity (method of financing NOT req. repayment)
What is the expanded accounting equation? - Answers - Assets = Liabilities + Capital
Stock + Revenues - Expenses - Dividends
What are the four financial statements covered? - Answers - 1. The Balance Sheet
2. The Income Statement
