UCB_UGBA102A_Topic01_Practice_Questions_Solns

UCB_UGBA102A_Topic01_Practice_Questions_Solns - Topic01...

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Topic01 Introduction & Basic Financial Statements Question 1. What do the following acronyms stand for and what significance do they have for accounting? a. GAAP Generally Accepted Accounting Principles are the conventions, rules, and procedures that define accepted accounting practices and are embodied in the pronouncements of the FASB. b. FASB The Financial Accounting Standards Board is a private- sector organization established for the purpose of setting accounting standards. c. AICPA The American Institute of Certified Public Accountants is a national professional association that represents CPAs and administers the Uniform CPA Examination. d. SEC The Securities and Exchange Commission is an agency authorized by Congress that provides oversight of the U.S. financial markets and has authority to regulate the financial reporting practices of public corporations. e. AAA The American Accounting Association is an organization primarily for academic accountants but open to all interested in accounting that publishes the Accounting Review . Question 2. In a short sentence, define the following terms: a. Owners’ Equity is reported on the balance sheet and represents the residual claims by the owners against the assets of an enterprise. It comprises both contributed capital as well as earned capital and is calculated by subtracting total liabilities from total assets. b. Net Income is reported on the income statement and represents the increase in owners’ equity from operations during a given period of time. It is calculated by taking revenues and gains for a period and subtracting expenses and losses of the same period.
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