Ch1prob - Ketz - Overview of Financial Accounting and...

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Ketz -- Overview of Financial Accounting and Auditing Page 1-34 REVIEW QUESTIONS 1. What is accounting and what are its branches? 2. What is the conceptual framework of financial accounting? 3. Who are the users of financial reports? 4. What is the objective of financial accounting? 5. Name the four basic financial statements. 6. Distinguish between data and information. 7. What are the qualitative characteristics of information? 8. Explain what is meant by verifiability. 9. Define asset, liability, and stockholders’ equity. 10. What is the accounting identity? 11. Define revenue, gain, expense, loss, and net income. 12. Define investments by owners and distributions to owners. 13. Relate ending retained earnings to beginning retained earnings. Also indicate the relationship between ending retained earnings of one year with the beginning retained earnings of the next year. 14. What is meant by cash flow? cash inflow? cash outflow? 15. What is the sum of cash from operating activities, cash from investing activities, and cash from financing activities? 16. Give an example of an exchange, a nonreciprocal transfer, an event, and an allocation. 17. Define transaction and transactions processing. 18. What are the basic steps in transactions processing? 19. Define auditing, and differentiate an external auditor from an internal auditor. 20. What assertions do managers make when they prepare financial statements? What is important about these assertions?
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Ketz -- Overview of Financial Accounting and Auditing Page 1-35 21. What is internal control? 22. What components comprise internal control? 23. What is a management’s responsibility report? 24. What is an unqualified audit report? What does it say? 25. What is the disclosure principle and why is it important? DISCUSSION QUESTIONS 1. An objective of financial accounting might be to assist macroeconomic policy. For example, many economists think it is desirable to dampen the business cycle, i.e., make the up and down cycles smaller, with the emphasis obviously on reducing the severity of a recession. Accounting could help accomplish this goal by tying the financial income number to taxable income, and then increase income, thereby increasing taxes, during the boom half of the cycle and decrease income during a recession. (a) Is this goal better or worse than the U.S. objective of financial accounting?
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This note was uploaded on 01/26/2011 for the course HRIM 318 taught by Professor Howard,paul during the Fall '10 term at Pennsylvania State University, University Park.

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Ch1prob - Ketz - Overview of Financial Accounting and...

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