Chapter 1 Vocab

Question 1

Requires an exchange of value between 2+ parties

Answer 1

Business transactions

Question 2

Owned by only one person

Answer 2

Sole proprietorship

Question 3

Multiple co-owners

Answer 3

Partnership

Question 4

An amount associated with a business transaction

Answer 4

Money measure

Question 5

Management appointed by board of directors

Answer 5

Corporations

Question 6

Distinct from customers, lenders, and owners

Answer 6

Separate entity

Question 7

Biggest segment of economy

Answer 7

Corporations

Question 8

Creditors’ Equities+Owner’s Equities=

Answer 8

Economic resources

Question 9

Liabilities+Owner’s Equity=

Answer 9

Assets

Question 10

Accounting Equation

Answer 10

A=L+OE

Question 11

Examples of assets

Answer 11

Cash
Inventories 
Land
Buildings
Equipment

Question 12

Examples of liabilities

Answer 12

Bank loans
Salaries 
Wages owed
Taxes 
Services

Question 13

Examples of owners equity

Answer 13

Owner’s investments

Withdrawals

Question 14

When revenues exceed expenses, the difference is called..

Answer 14

Net income

Question 15

When expenses exceed revenue, the difference is called..

Answer 15

Net loss

Question 16

Owners have limited liability

Answer 16

Corporations

Question 17

What is an income statement?

Answer 17

Summary of the revenues earned and expenses spent over an accounting period

Question 18

What is the purpose of a balance sheet?

Answer 18

To show the financial position of a business on a certain date

Question 19

Four major financial statements

Answer 19

Income statement
Statement of owners equity
Balance sheet
Statement of cash flows

Question 20

What is profitability?

Answer 20

The ability to earn enough income to attract and hold investment capital

Question 21

What is liquidity?

Answer 21

The ability to have enough cash to pay debts when they are do

Question 22

Operating activities

Answer 22

Buying, producing, and selling goods/services, hiring employees, paying taxes

Question 23

Investing activities

Answer 23

Spending the company’s capital to help is achieve its goals;
Land
Buildings
Equipment

Question 24

Financing activities

Answer 24

Obtaining adequate funds to begin/continue operating the business;
Obtaining capital from creditors
Repaying creditors
Paying a return to the owners