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🌍 Accounting Basics · flashcards
Accounting Basics Foundations of Accounting Flashcards
65 question-and-answer cards covering Foundations of Accounting as it is examined in Accounting Basics. 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the Foundations of Accounting deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
What are the two fundamental qualitative characteristics of useful accounting information?
Relevance and faithful representation.
What are the enhancing qualitative characteristics of accounting information?
Comparability, verifiability, timeliness, and understandability.
What is the materiality constraint?
An item is material if omitting or misstating it could influence a user's decision. Immaterial items may be handled in the most cost-effective or expedient way without strictly following GAAP.
What is the cost constraint (cost-benefit)?
The benefits of providing accounting information should exceed the costs of providing it; information need not be reported if the cost of producing it outweighs its usefulness.
What does IFRS stand for, and who issues it?
IFRS stands for International Financial Reporting Standards, issued by the International Accounting Standards Board (IASB) and used in many countries around the world.
Give two key differences between U.S. GAAP and IFRS.
GAAP is more rules-based while IFRS is more principles-based; GAAP prohibits LIFO's counterpart differently and IFRS bans LIFO inventory costing; IFRS permits revaluation of certain assets to fair value while GAAP generally requires historical cost.
Define an asset.
An asset is a resource controlled by the entity as a result of past events, from which future economic benefits are expected to flow to the entity (e.g., cash, inventory, equipment, accounts receivable).
Define a liability.
A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of economic resources (e.g., accounts payable, loans, wages payable).
Define owner's equity.
Owner's equity is the owner's residual claim on the assets of the business after deducting liabilities; it represents the net worth of the business (assets minus liabilities).
State the basic accounting equation.
$$\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$$
Rearrange the accounting equation to solve for owner's equity.
$$\text{Owner's Equity} = \text{Assets} - \text{Liabilities}$$
If a company has assets of $500{,}000 and liabilities of $180{,}000, what is owner's equity?
$$\text{Owner's Equity} = \$500{,}000 - \$180{,}000 = \$320{,}000$$
State the expanded accounting equation for a sole proprietorship.
$$\text{Assets} = \text{Liabilities} + \text{Owner's Capital} - \text{Owner's Drawings} + \text{Revenues} - \text{Expenses}$$
In the expanded accounting equation, which items increase owner's equity and which decrease it?
Owner's capital (investments) and revenues increase owner's equity; owner's drawings (withdrawals) and expenses decrease owner's equity.
Why must the accounting equation always remain in balance?
Because of double-entry accounting: every transaction affects at least two accounts, and total assets must always equal the total claims (liabilities plus owner's equity) against those assets.
A owner invests $10{,}000 cash into the business. What is the effect on the accounting equation?
Assets (Cash) increase by $10{,}000 and Owner's Equity (Capital) increases by $10{,}000; the equation stays in balance.
The business buys equipment for $3{,}000 cash. What is the effect on the accounting equation?
One asset (Equipment) increases by $3{,}000 and another asset (Cash) decreases by $3{,}000; total assets are unchanged and the equation stays in balance.
The business purchases $2{,}000 of supplies on account (credit). What is the effect on the equation?
Assets (Supplies) increase by $2{,}000 and Liabilities (Accounts Payable) increase by $2{,}000; the equation stays in balance.
The business earns $5{,}000 of service revenue in cash. What is the effect on the equation?
Assets (Cash) increase by $5{,}000 and Owner's Equity increases by $5{,}000 through revenue; the equation stays in balance.
The business pays $800 for this month's rent expense in cash. What is the effect on the equation?
Assets (Cash) decrease by $800 and Owner's Equity decreases by $800 through an expense; the equation stays in balance.
The owner withdraws $1{,}000 cash for personal use. What is the effect on the equation?
Assets (Cash) decrease by $1{,}000 and Owner's Equity decreases by $1{,}000 through drawings; the equation stays in balance.
The business pays $500 to a creditor on account. What is the effect on the equation?
Assets (Cash) decrease by $500 and Liabilities (Accounts Payable) decrease by $500; the equation stays in balance.
What is the difference between owner's drawings and an expense?
Both reduce owner's equity, but drawings are withdrawals of assets by the owner for personal use, whereas expenses are costs incurred in the process of earning revenue for the business.
Why is the corporate equivalent of owner's equity called stockholders' equity, and what are its two main parts?
In a corporation, owners are shareholders, so equity is called stockholders' (shareholders') equity. Its two main parts are paid-in (contributed) capital from issuing stock and retained earnings (accumulated profits not distributed as dividends).
What this deck covers
The Foundations of Accounting deck follows the Accounting Basics Foundations of Accounting syllabus — 4 chapters and 15 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 16.3 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 143 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
Foundations of Accounting flashcards FAQ
How many Foundations of Accounting flashcards are in this Accounting Basics deck?
65 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these Accounting Basics flashcards free?
Yes. The preview here is free to read with no signup, and the full 65-card deck is free inside the Examius app.
What do the Foundations of Accounting cards cover?
They follow the Accounting Basics Foundations of Accounting syllabus — 4 chapters and 15 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.