(a) Identify the meaning of these accounting-related acronyms: GAAP, SEC, FASB and IASB. (b) Briefly explain the importance of the knowledge base or organization that is referred to for each of the accounting-related acronyms.

QS 1-1
Identifying accounting terms

C1

Identify the following users as either external users (E) or internal users (I).

1. Customers
2. Suppliers
3. Brokers
4. Business press
5. Managers
6. District attorney
7. Shareholders
8. Lenders
9. Controllers
10. FBI and IRS
11. Consumer group
12. Sales staff

QS 1-2
Identifying accounting users

C2

An important responsibility of many accounting professionals is to design and implement internal control procedures for organizations. Explain the purpose of internal control procedures. Provide two examples of internal controls applied by companies.

QS 1-3
Explaining internal control

C1

Identify at least three main areas of opportunities for accounting professionals. For each area, identify at least three job possibilities linked to accounting.

QS 1-4
Accounting opportunities

C3

Identify at least three main areas of opportunities for accounting professionals. For each area, identify at least three job possibilities linked to accounting.

QS 1-5
Identifying ethical concerns

C4

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Accounting professionals must sometimes choose between two or more acceptable methods of accounting for business transactions and events. Explain why these situations can involve difficult matters of ethical concern.

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QS 1-6
Identifying accounting principles

C5

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Identify which general accounting principle best describes each of the following practices.

1. In December 2006, Chavez Landscaping received a customer’s order and cash prepayment to install sod at a new house that would not be ready for installation until March 2007. Chavez should record the revenue from the customer order in March 2007, not in December 2006.

2. If $51,000 cash is paid to buy land, the land is reported on the buyer’s balance sheet at $51,000.

3. Jo Keene owns both Sailing Passions and Dockside Supplies. In preparing financial statements for Dockside Supplies, Keene makes sure that the expense transactions of Sailing Passions are kept separate from Dockside’s statements.

QS 1-7
Applying the accounting equation

A1

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1. Total assets of Charter Company equal $700,000 and its equity is $420,000. What is the amount of its liabilities?

2. Total assets of Martin Marine equal $500,000 and its liabilities and equity amounts are equal to each other. What is the amount of its liabilities? What is the amount of its equity?

QS 1-8
Applying the accounting equation

A1

Use the accounting equation to compute the missing financial statement amounts (a), (b), and (c).

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QS 1-9
Identifying transactions and events

A2

Accounting provides information about an organization’s business transactions and events that both affect the accounting equation and can be reliably measured. Identify at least two examples of both (a) business transactions and (b) business events that meet these requirements.

QS 1-10
Identifying and computing assets, liabilities, and equity

A2

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Use Apple’s September 25, 2004, financial statements, in Appendix A near the end of the book, to answer the following.

1. Identify the dollar amounts of Apple’s 2004 (1) assets, (2) liabilities, and (3) equity.

2. Using Apple’s amounts from part a, verify that Assets = Liabilities + Equity.

QS 1-11
Identifying items with financial statements

P1

Indicate in which financial statement each item would most likely appear: income statement (I), balance sheet (B), statement of owner’s equity (E), or statement of cash flows (CF).

1. Assets

2. Cash from operating activities

3. Withdrawals

4. Equipment

5. Expenses

6. Liabilities

7. Net decrease (or increase) in cash

8. Revenues

9. Total liabilities and equity

QS 1-12
Computing and interpreting return on assets

A3

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In a recent year’s financial statements, Home Depot reported the following results. Compute and interpret its return on assets (assume competitors average a 12% return on assets).

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