Introduction

Question 1

What is accounting?

Answer 1

organizing and reporting financial information.

Question 2

How is information presented in accounting?

Answer 2

Financial Statements

Question 3

What are the 2 types of financial statements

Answer 3

Balance Sheet
Income Statement

Question 4

What are the 3 main groups that use financial statement?

Answer 4

Business Managers or Owners
Want to compare financials statements from one period to the next

Investors and Lenders
Helps them decide if they want to invest in this type of business or loan the business money

Government
Tax officials from the government check financial statements to make sure that the correct amount of tax is paid

Question 5

What is a balance sheet?

Answer 5

Shows the financial position of a business on a particular date.
Like a “Snapshot” on a camera – the financial position of a business changes constantly

Question 6

What are the three main parts of a balance sheet?

Answer 6

Assets, Owner’s Equity, Liabilities

Question 7

What are “Assets” and give examples

Answer 7

Items of value owned by a business
Examples: Bank, Land, Building, Supplies, Automobile

Question 8

What are “Liabilities” and give examples

Answer 8

Debts owed by a business
Examples: Mortgages, Bank Loans, accounts payable

Question 9

What is Owner’s Equity?

Answer 9

Assets - liability
Own - owe = what we have left, want to be positive
The value of the business to the owner

Question 10

What is the accounting equation?

Answer 10

Assets = liabilities + owner’s equity