1. What is GAAP?

2. Name the four characteristics that help make accounting information useful.

3. What is the separate-entity assumption ?

4. Why would the going-concern assumption be important to a bank giving a business a loan?

5. Explain materiality and give an example of both a material and an immaterial item.

6. What are the four basic financial statements?

7. Which financial statement pertains to a single moment in time?

8. What is a current asset? What is a current liability?

9. What are the two ways that equity is generated in a business?

10. What does the income statement report about a firm? Name the types of accounts that appear on the income statement.

11. What is the purpose of the statement of cash flows? How are the cash flows catego- rized? What is the significance of classifying cash flows into these categories?

12. What is the full-disclosure principle?

13. What does recognize revenue mean in accounting?

14. What is the matching principle?

15. What is an accrual? What is a deferral?

16. Must a company collect the money from a sale before the sale can be recognized?

17. What is the cost of goods sold?

18. Explain the difference between cash basis accounting and accrual basis accounting.

19. How is the current ratio computed? What does it tell us about a company?

20. Define internal control and explain why it is important.