Accounting-Chapter 1

Question 1

What is accounting?

Answer 1

The Information system that measures business activities

Question 2

Financial Accounting

Answer 2

Provides information for external decision makers

Question 3

Managerial Accounting

Answer 3

Focuses on information for internal decision makers

Question 4

Creditor

Answer 4

Anyone to whom a business owes money

Question 5

CPA (Certified Public Accountants)

Answer 5

licensed professional accountants who serve the general public

Question 6

CMA;s

Answer 6

certified professionals who specialize in accounting and financial management knowledge.

Question 7

Economic Entity Assumption

Answer 7

States that an organization that stands apart as a separate economic unit. It is a separate entity from its owner(s)

Question 8

Cost Principle

Answer 8

States acquired assets and service should be recorded at actual cost.

Question 9

Going concern Assumption

Answer 9

Assumes the entity will remain in operation for the foreseeable future

Question 10

Monetary Unit Assumption

Answer 10

Assumes that items on the financial statements are to be measures in terms of monetary unit.

Question 11

Accounting Equation

Answer 11

Assets= Liabilities+ Equity

Question 12

Assets

Answer 12

Economic resources that are expected to benefit the business in the future. What the business owns or has control of.

Question 13

Liabilities

Answer 13

Debts that are owed by creditors showing they have a stake in the business

Question 14

Equity

Answer 14

What the owner’s claim is in the business.

What is left over after company has paid liabilities i.e. its net worth.

Question 15

Owner’s capital

Answer 15

What the owner contributed to a business

Question 16

Expenses

Answer 16

Cost of selling goods and services

Question 17

Owner’s withdrawals

Answer 17

payments to the owner. Usually cash, taken from the equity

Question 18

Equity Equation

Answer 18

Owner’s capital- Owner’s withdrawals + Revenues- Expenses

Question 19

Net Income

Answer 19

Result of operations that occur when total revenues are greater than total expenses

Question 20

Net Loses

Answer 20

results of operations when total cost exceeds total revenues.

Question 21

Transactions

Answer 21

Any event that affects the position of the business and can be measured reliably in dollar amounts.

Question 22

Accounts Payable

Answer 22

Short-term liability that will be paid in the future. (Purchasing on account)

Question 23

Accounts receivable`

Answer 23

the right to receive payment in the future from customers for goods or services sold or services performed.

Question 24

Financial Statements

Answer 24

business documents that are used to Communicate information needed to make financial decisions

Question 25

4 types of Financial Statements

Answer 25

1) Income statement 2) State of Owner's equity 3) Balance Sheet 4) Statement of cash flows

Question 26

Income statement

Answer 26

Tells is profitable or not. Tells business' net income or net loss

Question 27

Statement of owner's equity

Answer 27

Tells how the business uses earnings. Shows the changes in the owner's capital account for a specific period.

Question 28

Balance Sheet

Answer 28

Tells the number of assets of business and who owns them (creditors or owners) Reports the assets, liabilities, and owner's equity of the business at a specific date

Question 29

Statement of Cash Flow

Answer 29

Tells whether or not a business generates enough cash to pay bills. Statement of cash flow reports on a business's cash receipts and cash payments for a specific period.

Question 30

Return of Assets (ROA)

Answer 30

Measures how profitable company is at using assets. Net Income divided by Average Total assets. Average total assets=(Beginning total assets+ Ending assets) divided by 2.