Exam 1: Module 1-2

Question 1

the process of identifying and recording financial transactions and reporting the results of those transactions to interested users

Answer 1

accounting

Question 2

the process of recording financial transactions

Answer 2

bookkeeping

Question 3

higher-level managers of a company that are interested in the results of transactions to interested users

Answer 3

internal users

Question 4

preparing and supplying internal users with the financial information they need

Answer 4

managerial accounting

Question 5

banks and lending institutions, other creditors, taxing agencies, and investors

Answer 5

external users

Question 6

financial information needs of external users

Answer 6

financial accounting

Question 7

How many basic financial statements are there?

Answer 7

4

Question 8

What are the four basic financial statements?

Answer 8

income statement, statement of owner equity, balance sheet, and statement of cash flows

Question 9

a collection of commonly followed accounting rules and standards for financial reporting whose primary purpose is to ensure that financial reporting is transparent and consistent from one organization to another

Answer 9

generally accepted accounting principles (GAAP)

Question 10

revenue is not recorded until cash is received, and expenses are not recorded until cash is paid

Answer 10

cash basis accounting

Question 11

revenue should be recorded when it is earned and expenses should be recognized when they are incurred, regardless of when cash is received or paid

Answer 11

accural basis of accounting

Question 12

How many basic account types are there?

Answer 12

5

Question 13

What are the five basic account types?

Answer 13

Assets, Liabilities, Owners Equity, Revenue, and Expense (ALORE)

Question 14

an economic resource that a company owns or controls with the expectation that it will provide a future benefit (anything we own or have legal right to use)

Answer 14

asset

Question 15

What are types of assets?

Answer 15

cash, accounts receivable, inventory, prepaid assets, & land, buildings, and equipment

Question 16

a future sacrifice of economic resources that a business is obligated to make to its creditors as a result of past transactions (anything we owe)

Answer 16

liabilities

Question 17

a person or company to whom money is owed

Answer 17

creditor

Question 18

What are types of liabilities?

Answer 18

accounts payable, notes payable, unearned revenue

Question 19

the value of the owners investment in the business. it can be defined as he owners rights to the assets of the business

Answer 19

owners equity

Question 20

What are types of owners equity?

Answer 20

owners capital and owners withdraw

Question 21

a large sum of money which an owner uses to start a business

Answer 21

capital

Question 22

the amount earned by a business from selling goods or providing services as part of its normal business activities

Answer 22

revenue

Question 23

What are types of revenue?

Answer 23

Sales, service, interest, and rent

Question 24

the costs incurred by a business to generate revenue from its normal business activities

Answer 24

expenses

Question 25

What are types of expenses?

Answer 25

advertising, utilities, interest, rent, supplies, salaries and wages, and depreciation

Question 26

shows the revenues and expenses of a business for a specific period of time

Answer 26

income statement

Question 27

a bookkeeping worksheet in which the balance of each account is compiled into debit and credit account column totals that are equal

Answer 27

trial balance

Question 28

the measure of the profitability of a business

Answer 28

net income

Question 29

How do you get net income?

Answer 29

revenue - expenses = net income

Question 30

shows the changes in the capital account due to contributions, withdraws, and net income or net loss

Answer 30

statement of owners equity

Question 31

an accounting principal that states that the financial records of any business must be kept separate from those of its owner or any other business

Answer 31

business entity assumption

Question 32

reports a company's assets, liabilities, and owners equity at a specific point in time

Answer 32

balance sheet

Question 33

Whats the basic accounting equation?

Answer 33

liabilities + owners equity = assets