Chapter 1

Question 1

Accounting

Answer 1

Planning, recording, analyzing, and interpreting financial information

Question 2

Accounting System

Answer 2

A planned process for providing financial information that will be useful to managers

Question 3

Accounting Records

Answer 3

Organized summaries of a business’s financial activities.

Question 4

Service Business

Answer 4

A business that performs an activity for a fee

Question 5

Proprietorship/Sole Proprietorship

Answer 5

A business owned by one person

Question 6

Financial Statements

Answer 6

Financial reports that summarize the financial condition and operations of a business

Question 7

Concept: Business Entity

Answer 7

A business’s financial information is recorded and reported separetaly from the owner’s personal financial information

Question 8

Asset

Answer 8

Anything of value that is owned

Question 9

Equities

Answer 9

Financial rights to the assets of a business

Question 10

Liability

Answer 10

An amount owned by a business

Question 11

Owner’s Equity

Answer 11

The amount remaining after the value of all liabilities is subtracted from the value of all assets

Question 12

Accounting Equation

Answer 12

An equation showing the relationship among assets, liabilities, and owner’s equity

Question 13

Ethics

Answer 13

The principles of right and wrong that guide an individual in making decisions

Question 14

Business Ethics

Answer 14

The use of ethics in making business decisions

Question 15

Transaction

Answer 15

A business activity that changes assets, liabilities, or owner’s equity

Question 16

Concept: Unit of Measurement

Answer 16

Business transactions are stated in numbers that have common values; using a common unit of measurement

Question 17

Account

Answer 17

A record summarizing all the information pertaining to single item in the accounting equation

Question 18

Account Title

Answer 18

The name given to an account

Question 19

Account Balance

Answer 19

Amount in an account

Question 20

Capital

Answer 20

The account used to summarize the owner’s equity in a business

Question 21

Revenue

Answer 21

An increase in owner’s equity resulting from the operation of a business

Question 22

Sale on Account/Charge Sale

Answer 22

A sale for which cash will be received at a later date

Question 23

Concept: Realization of Revenue

Answer 23

Revenue is recorded at the time goods or services are sold

Question 24

Expense

Answer 24

Decrease in owner’s equity resulting from the operation of a business

Question 25

Withdrawals

Answer 25

Assets taken out of a business for the owner’s personal use

Question 26

GAAP

Answer 26

The standards and rules accountants follow while recording and reporting financial activities

Question 27

FASB

Answer 27

Financial Accounting Standards Board has the authority to set accounting standards; SEC too