Accounting Chp 1&2

Question 1

Financing Activities

Answer 1

borrowing or repaying debt, short term bank loans, issuing or repurchasing stock and paying dividends

Question 2

Investing Activities

Answer 2

Buying and selling noncurrent assets and investments

Question 3

Operating Activities

Answer 3

primarily with customers, suppliers, interest payments on debt, and earning on investments.

Question 4

Management Accounting

Answer 4

information for internal decision makers

Question 5

Finance Accounting

Answer 5

Accounting for external decision makers

Question 6

4 Basic Financial Statements

Answer 6

balance sheet, income statement, statement of stockholders equity, statement of cash flows

Question 7

Balance Sheet

Answer 7

Amount of assets, liabilities, and stockholders equity

Question 8

Income Statement

Answer 8

reports revenue less the expenses of the accounting period

Question 9

Stockholders Equity

Answer 9

Stockholders’ equity refers to the assets remaining in a business once all liabilities have been settled. This figure is calculated by subtracting total liabilities from total assets; alternatively, it can be calculated by taking the sum of share capital and retained earnings, less treasury stock.

Question 10

Cash Flow Statement

Answer 10

reports inflows and outflows of cash during operating, investing, and financing activities

Question 11

Balance Sheet Equation

Answer 11

Assets = Liabilities + Stockholders’ Equity

Question 12

Income Statement Equation

Answer 12

Revenues - Expenses = Net Income

Question 13

Retained Earnings Equation

Answer 13

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

Question 14

Cash Flow Equation

Answer 14

+/- Cash from operating activities
+/- Cash from investing activities
+/- Cash from financing activities
= Change in Cash
+ Beginning Cash Balance
= Ending Cash Balance

Question 15

GAAP

Answer 15

Generally Accepted Accounting Principles

Question 16

SEC

Answer 16

Securities and Exchange Commission

Question 17

FASB

Answer 17

Financial Accounting Standards Board

Question 18

IFRS

Answer 18

International Financial Reporting Standards

Question 19

Ponzi Scheme

Answer 19

using cash from newer investors to pay off older ones

Question 20

separate entity assumption

Answer 20

Business transactions are accounted for separately from the transactions of the owners

Question 21

Going Concern Assumption

Answer 21

The assumption that the company will continue in operation for the foreseeable future.

Question 22

Monetary Unit Assumption

Answer 22

The assumption that requires the items on the financial statements to be measured in terms of a monetary unit.

Question 23

Assets

Answer 23

Economic resources (things of value) owned by a firm.

Question 24

Liabilities

Answer 24

what a company owes

Question 25

Current Liabilities

Answer 25

liabilities due within a short time, usually within a year

Question 26

current assets

Answer 26

cash and other assets expected to be exchanged for cash or consumed within a year (inventory is always a current asset)

Question 27

Stockholders’ Equity

Answer 27

The owners’ equity in a corporation. (Financing Provided)

Question 28

Financing Provided by Owners

Answer 28

(contributed capital) owners invest in the business by providing cash and sometimes other assets and receive in exchange shares of stock as evidence of ownership

Question 29

Financing Provided by Operations

Answer 29

earned capital (retained earnings) profits that could either be distributed to owners or retained

Question 30

Transactions

Answer 30

An exchange or an event that has a direct economic effect on the assets, liabilities, or stockholders’ equity of a business.

Question 31

External Events

Answer 31

exchanges of assets, goods, or services by one party for assets, services, or promises to pay (liabilities) from one or more other parties

Question 32

Internal Events

Answer 32

certain events that are not exchanges between the business and other parties but nevertheless have a direct and measurable effect on the entity. Example using up insurance paid in advance and using buildings and equipment over several years

Question 33

Accounts

Answer 33

A standardized format that organizations use to accumulate the dollar effects of transactions on each financial statement item.

Question 34

Chart of Accounts

Answer 34

a list of accounts used by a business

Question 35

Transaction Analysis

Answer 35

the process of studying a transaction to determine its economic effect on the business in terms of the accounting equation

Question 36

2 Principles

Answer 36

Every transaction affects at least two accounts and the accounting equation must remain in balance after each transaction

Question 37

Dual Effect

Answer 37

the principle stating that all business transactions are recorded as having at least two effects on the basic accounting elements (assets, liabilities, and owner’s equity)

Question 38

Accounting Cycle

Answer 38

The series of accounting activities included in recording financial information for a fiscal period

Question 39

General Journal

Answer 39

the chronological accounting record of the transactions of a business

Question 40

General Ledger

Answer 40

a record of effects to and balances of each account

Question 41

Debit

Answer 41

An amount recorded on the left side of an account

Question 42

Credit

Answer 42

An amount recorded on the right side of an account

Question 43

Current Ratio

Answer 43

current assets divided by current liabilities

Question 44

DEALER

Answer 44

Dividends +Expenses + Assets = Liabilities + Owners Equity + Revenue