Chapter 1

Question 1

Opportunities in Accounting

Answer 1

-Financial

-Managerial: Serves decision making needs of internal users.

-Taxation

-Accounting-related

Question 2

Data Visualization

Answer 2

Graphical representation to help people understand their significance.

Question 3

Internal Controls

Answer 3

Procedures to protect assets.

Question 4

Auditors

Answer 4

Verify the effectiveness of internal control.

Question 5

GAAP

Answer 5

Rules that specify acceptable accounting practices.

Question 6

GAAP wants information to have

Answer 6

-Relevance

-Faithful representation

Question 7

IASB

Answer 7

Identifies preferred accounting practices.

Question 8

IFRS

Answer 8

International accounting standards explaining how transactions are reported.

Question 9

Accounting General Principles

Answer 9

-Measurement (cost) principle
-Revenue recognition principle
-Expense recognition principle
-Full disclosure principle

Question 10

Measurement (cost) principle

Answer 10

Prescribes financial statement information.

Question 11

Revenue recognition principle

Answer 11

Revenue is recognized when goods are delivered to customers.

Question 12

Expense recognition principle

Answer 12

Prescribes expenses to be reported in the same period as the revenues.

Question 13

Full disclosure principle

Answer 13

Financial statements to report all relevant information about an entity’s operation and financial condition.

Question 14

Accounting Assumptions

Answer 14

-Going-concern assumption
-Monetary unit assumption
-Time period assumption
-Business entity assumption

Question 15

Going-concern assumption

Answer 15

Presumes that business will operate instead of being closed.

Question 16

Monetary unit assumption

Answer 16

Transactions are expressed in monetary units.

Question 17

Time period assumption

Answer 17

Life of a company can be divided into time periods.

Question 18

Business entity assumption

Answer 18

A business is accounted for separately from other businesses and its owner.

Question 19

Cost-constraint

Answer 19

Benefit of disclosure exceeds cost of disclosure.

Question 20

Assets

Answer 20

Resources a company owns/controls.

Question 21

Equity

Answer 21

Owner’s claim on assets of a business minus liabilities.

Question 22

Accounting Equation

Answer 22

Assets = Liabilities + Equity.

Question 23

Expanded Accounting Equation

Answer 23

Assets = Liabilities + Equity

Assets = Liabilities + (Contributed Capital + Retained Earnings)

Assets = Liabilities + (Common Stock - ((Dividends + Revenues – Expenses))

Question 24

Owner Investments

Answer 24

Assets put into the business by the owner.

Question 25

Common Stock

Answer 25

Reflects inflow of cash from shareholders.

Question 26

Dividends

Answer 26

Outflow of cash to shareholders.

Question 27

Revenues

Answer 27

Increase equity from sales of products/services to customers.

Question 28

Expenses

Answer 28

Decrease equity from cost of providing said products/services.

Question 29

External Transactions

Answer 29

Exchanges of values between two entities.

Question 30

Internal Transactions

Answer 30

Exchanges within an entity.

Question 31

Net Income

Answer 31

When revenues exceed expenses.

Question 32

Net Loss

Answer 32

When expenses exceed revenues.

Question 33

Returns on assets

Answer 33

Return on Investment (ROI); Net Income / Average total assets.

Question 34

Shareholder

Answer 34

Owner of a corporation.