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Question 1

accounting

Answer 1

The information system that measures business activities processes that information into reports and financial statements and communicates the results to decision makers.

Question 2

accounting equation

Answer 2

The most basic tool of accounting: Assets = Liabilities + Owners Equity.

Question 3

asset

Answer 3

An economic resource that is expected to be of benefit in the future.

Question 4

balance sheet

Answer 4

List of an entity’s assets liabilities and owners equity as of a specific date. Also called the statement of financial position.

Question 5

board of directors

Answer 5

Group elected by the stockholders to set policy for a corporation and to appoint its officers.

Question 6

capital

Answer 6

Another name for the owners equity of a business.

Question 7

common stock

Answer 7

The most basic form of capital stock.

Question 8

continuity assumption

Answer 8

See going-concern assumption.

Question 9

corporation

Answer 9

A business owned by stockholders. A corporation is a legal entity an artificial person in the eyes of the law.

Question 10

current asset

Answer 10

An asset that is expected to be converted to cash sold or consumed during the next 12 months or within the business’ normal operating cycle if longer than a year.

Question 11

current liability

Answer 11

A debt due to be paid within one year or within the entity’s operating cycle if the cycle is longer than a year.

Question 12

deficit

Answer 12

Negative balance in retained earnings caused by net losses over a period of years.

Question 13

dividends

Answer 13

Distributions (usually cash) by a corporation to its stockholders.

Question 14

entity

Answer 14

An organization or a section of an organization that for accounting purposes stands apart from other organizations and individuals as a separate economic unit.

Question 15

ethics

Answer 15

Standards of right and wrong that transcend economic and legal boundaries. Ethical standards deal with the way we treat others and restrain our own actions because of the desires expectations or rights of others

Question 16

expenses

Answer 16

Decrease in retained earnings that results from operations; the cost of doing business; opposite of revenues.

Question 17

fair value

Answer 17

The amount that a business could sell an asset for or the amount that a business could pay to settle a liability.

Question 18

financial accounting

Answer 18

The branch of accounting that provides information to people outside the firm.

Question 19

financial statements

Answer 19

Business documents that report financial information about a business entity to decision makers.

Question 20

historical cost principle

Answer 20

Principle that states that assets and services should be recorded at their actual cost

Question 21

income statement

Answer 21

A financial statement listing an entity’s revenues-expenses- and net income or net loss for a specific period. Also called the statement of operations

Question 22

International Financial Reporting Standards (IFRS)

Answer 22

Accounting guidelines- formulated by the International Accounting Standards Board (IASB). By 2015-U.S.GAAP is expected to be harmonized with IFRS. At that time-U.S. companies are expected to adopt these principles for their financial statements-so that they can be compared with those of companies from other countries

Question 23

investing activities

Answer 23

Activities that increase or decrease the long-term assets available to the business; a section of the statement of cash flows

Question 24

liability

Answer 24

An economic obligation (a debt) payable to an individual or an organization outside the business

Question 25

limited liability company

Answer 25

A business organization in which the business (not the owner) is liable for the company’s debts

Question 26

long-term debt

Answer 26

A liability that falls due beyond one year from the date of the financial statements

Question 27

management accounting

Answer 27

The branch of accounting that generates information for the internal decision makers of a business- such as top executives

Question 28

net earnings

Answer 28

Another name for net income

Question 29

net income

Answer 29

Excess of total revenues over total expenses. Also called net earnings or net profit

Question 30

net loss

Answer 30

Excess of total expenses over total revenues

Question 31

net profit

Answer 31

Another name for net income

Question 32

operating activities

Answer 32

Activities that create revenue or expense in the entity’s major line of business; a section of the statement of cash flows. Operating activities affect the income statement

Question 33

owners’ equity

Answer 33

The claim of the owners of a business to the assets of the business Also called capital- stockholders’ equity- or net assets

Question 34

paid-in capital

Answer 34

The amount of stockholders’ equity that stockholders have contributed to the corporation. Also called contributed capital

Question 35

partnership

Answer 35

An association of two or more persons who co-own a business for profit

Question 36

proprietorship

Answer 36

A business with a single owner

Question 37

retained earnings

Answer 37

The amount of stockholders’ equity that the corporation has earned through profitable operation and has not given back to stockholders

Question 38

revenues

Answer 38

Increase in retained earnings from delivering goods or services to customers or clients

Question 39

shareholder

Answer 39

Another name for stockholder

Question 40

stable-monetary-unit assumption

Answer 40

The reason for ignoring the effect of inflation in the accounting records- based on the assumption that the dollar’s purchasing power is relatively stable

Question 41

statement of cash flows

Answer 41

Reports cash receipts and cash payments classified according to the entity’s major activities: operating- investing- and financing

Question 42

statement of financial position

Answer 42

Another name for the balance sheet

Question 43

statement of operations

Answer 43

Another name for the income statement

Question 44

statement of retained earnings

Answer 44

Summary of the changes in the retained earnings of a corporation during a specific period

Question 45

stock

Answer 45

Shares into which the owners’ equity of a corporation is divided

Question 46

stockholder

Answer 46

A person who owns stock in a corporation. Also called a shareholder

Question 47

stockholders’ equity

Answer 47

The stockholders’ ownership interest in the assets of a corporation.