Exam 1

Question 0

Sole proprietorship

Answer 0

A form of organization with a single owner

Question 1

Business entity

Answer 1

An organization operated to earn a profit

Question 2

Economic entity concept

Answer 2

The assumption that a single identifiable unit must be accounted for in all situations

Question 3

Shares of stock

Answer 3

A certificate that acts as evidence of ownership in corporation

Question 4

Bond

Answer 4

A certificate that represents a corporations promise to repay a certain amount of money and interest in the future

Question 5

Capital Stock

Answer 5

Indicates the owners contributions to a corporation

Question 6

Stockholder

Answer 6

One of the owners of a corporation

Question 7

Creditor

Answer 7

Someone to whom a company or person has a debt

Question 8

Balance sheet

Answer 8

Summarizes the assets liabilities and owners equity at a specific point in time

Question 9

Income statement

Answer 9

Summarizes revenues and expenses

Question 10

Cost principle

Answer 10

Assets are recorded at the costs to acquire them

Question 11

Generally accepted accounting principles (GAAP)

Answer 11

The various methods rules practices and other procedures that have evolved over time in response to the need to regulate the preparation of financial statements

Question 12

Financial accounting standards board (FASB)

Answer 12

The group in the private sector with authority to set accounting standards

Question 13

Ethical decision making model

Answer 13

Identification, analysis, and resolution

Question 14

Relevance

Answer 14

The capacity of information to make a difference in a decision

Question 15

Faithful representation

Answer 15

The quality of information that makes it complete neutral and free from error

Question 16

Comparability

Answer 16

Analyze two or more companies and look for similarities and differences

Question 17

Depreciation

Answer 17

The process of allocating the cost of a long term tangible asset over it’s useful life

Question 18

Consistency

Answer 18

Allows a user to compare two or more accounting periods for a single company

Question 19

Materiality

Answer 19

The magnitude of an accounting information omission or misstatement that will affect the judgement of someone relying on the information

Question 20

Conservatism

Answer 20

The practice of using the least optimistic estimate when two estimates of amounts are about equally likely

Question 21

Operating cycle

Answer 21

The period of time between the purchase of inventory and the collection of any receivable from the sale of the inventory

Question 22

Liquidity

Answer 22

The ability of a company to pay it’s debt as they come due

Question 23

Working capital

Answer 23

Currant assets - current liabilities

Question 24

Current ratio

Answer 24

Current assets / current liabilities

Question 25

Single step income statement

Answer 25

Income statement in which all expenses are added together and subtracted from all revenues

Question 26

Multi step income statement

Answer 26

Income statement that shows classifications of revenues and expenses as well as important subtotals

Question 27

Gross profit

Answer 27

Sales - costs of goods sold

Question 28

Profit margin

Answer 28

Net income / sales

Question 29

Event

Answer 29

A happening of consequence to an entity

Question 30

External event

Answer 30

An event involving interaction between an entity and it's environment

Question 31

Internal event

Answer 31

An event occurring entirely within an entity

Question 32

Transaction

Answer 32

Any event that is recognized in a set of financial statements

Question 33

Source document

Answer 33

A piece of paper that is used as evidence to record a transaction

Question 34

Chart of accounts

Answer 34

A numerical lists of all accounts used by a company

Question 35

Double entry system

Answer 35

System of accounting in which every transaction is recorded with equal debits and credits and the accounting equation is kept in balance

Question 36

Posting

Answer 36

Process if transferring amounts from a journal to the ledger accounts

Question 37

Historical costs

Answer 37

Amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets

Question 38

Current value

Answer 38

The amount of cash or it's equivalent that could be received by selling an assets currently

Question 39

Cash basis

Answer 39

A system of accounting in which revenues are recognized when cash is received and expenses are recognized when cash is paid

Question 40

Accrual basis

Answer 40

A system of accounting in which revenues are recognized when earned and expenses are recognized when incurred

Question 41

Adjusting entries

Answer 41

Journal entries made at the end if a period by a company using the accrual basis of accounting

Question 42

Straight line method

Answer 42

The assignment of an equal amount of depreciation to each period

Question 43

Contra account

Answer 43

An account with a balance that is opposite that of a related account

Question 44

Deferral

Answer 44

Cash has been paid or decided but expenses or revenue has not yet been recognized

Question 45

Deferred expenses

Answer 45

An asset resulting from the payment of cash before the incurrence of expense

Question 46

Differed revenue

Answer 46

A liability resulting from the receipt of cash before the recognition of revenue

Question 47

Accrual

Answer 47

Cash has not yet been paid or received but expense has been incurred or revenue earned

Question 48

Accursed liability

Answer 48

Liability resulting from the recognition of an expense before the payment of cash

Question 49

Accrued assets

Answer 49

Assets resulting from the recognition of a revenue before the receipt of cash