Exam2 Defintions

Question 1

equation that shows a company’s resources (assets) equal creditors’ and owners’
claims to those resources (liabilities and stockholders’ equity).

Answer 1

Accounting Equation

Question 2

record revenue when we earn them and record expenses with related
expenses, regardless of when cash is received or paid.

Answer 2

Accrual-basis accounting

Question 3

record revenues at the time cash received and expenses at the time cash is paid.

Answer 3

Cash Basis Accounting

Question 4

The rules of financial accounting

Answer 4

Generally accepted accounting principles (GAAP)

Question 5

– record revenue in the period in which we earn it.

Answer 5

Revenue Recognition principle

Question 6

recognizing expenses in the same period as the revenues they help generate.

Answer 6

Matching Principle

Question 7

Resources owned by a company

Answer 7

Assets

Question 8

Amounts owed to creditors

Answer 8

Liabilities

Question 9

Owners’ claims to resources

Answer 9

Stockholders’ Equity

Question 10

The amounts earned from selling products or services to customers

Answer 10

Revenues

Question 11

The costs of providing products and services

Answer 11

Expenses

Question 12

An economic event that initiates the accounting process of recording it in the
company’s accounting system.

Answer 12

Business Transaction

Question 13

• the specific time period (beginning and end) for which the accounts are aggregated,
  balanced, and the financial statements are prepared

Answer 13

Accounting Period

Question 14

summary of the effects of all transactions related to a particular item over a period of time.

Answer 14

Account

Question 15

a list of all account names used to record transactions of a company

Answer 15

Chart of accounts

Question 16

periodic reports published by the company for the purpose of providing
information (communicate) to external users.

Answer 16

Financial Statement

Question 17

• financial statement that reports the company’s revenues and expenses over an interval
  of time.

Answer 17

Income statement

Question 18

financial statement that summarizes the changes in stockholders’
equity over an interval of time

Answer 18

Statement of stockholders’ equity

Question 19

• financial statement that presents the financial position of the company on a particular
  dat

Answer 19

Balance Sheet

Question 20

financial statement that measures activities involving cash receipts and cash
payments over an interval of time.

Answer 20

Statement of cash flows

Question 21

All accounts used to record the company’s transactions

Answer 21

General Ledger

Question 22

a chronological record of all transactions affecting a firm

Answer 22

Journal

Question 23

the process of transferring the debit and credit information from the journal to individual
accounts in the general ledger.

Answer 23

Posting

Question 24

A list of all accounts and their balances before adjusting entries are
completed, showing the total debits and credits.

Answer 24

Unadjusted Trial Balance

Question 25

a list of all accounts and their balances after the completion of adjusting entries, showing the total debits and credits.

Answer 25

Adjusted Trial Balance

Question 26

to record events that have occurred but that have not been recorded, such recording insurance expense at the end of the month from a prepaid policy.

Answer 26

Adjusting entries

Question 27

entries that transfer balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the retained earnings account

Answer 27

Closing Entries

Question 28

revenues, expenses, and dividends are closed out at the end of each accounting period and transferred to Retained Earnings so that the new period begins with a zero (0) balance for these accounts.

Answer 28

Temporary Accounts

Question 29

the balance sheet accounts where the balances are carried forward from period to period.

Answer 29

Permanent Accounts

Question 30

liquid assets owned by the company. (debit, asset, balance sheet)

Answer 30

Cash

Question 31

amounts the company expects to collect from customers based on the delivery of service or products. (debit, asset, balance sheet)

Answer 31

Accounts Receivable

Question 32

costs of assets acquired in one period that will be expensed in a future period. (debit, asset, balance sheet)

Answer 32

Pre-paid Expenses

Question 33

– the cost of the merchandise purchased but not yet sold to customers. (debit, asset, balance sheet)

Answer 33

Inventory

Question 34

the cost of supplies (pens, paper, toner, etc.) used in the operation of a business. (debit, asset, balance sheet)

Answer 34

Supplies

Question 35

Promise to pay cash in the future to creditors when purchasing supplies or materials. (credit, liability, balance sheet)

Answer 35

Accounts Payable

Question 36

Total amounts owed to creditors for loaning money to the company. (credit, liability, balance sheet)

Answer 36

Notes Payable

Question 37

cash in advance from a customer for products or services to be provided in the future. (credit, liability, balance sheet)

Answer 37

Deferred Revenue

Question 38

Amount shareholders have invested in the business. (credit, liability, balance sheet)

Answer 38

Common Stock

Question 39

cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends. (credit, liability, balance sheet)

Answer 39

Retained Earnings

Question 40

cumulative amount of depreciation expensed against a particular asset, such as a vehicle. (credit, contra asset, balance sheet)

Answer 40

Accumulated Depreciation

Question 41

historical cost of an asset, such as equipment, less the accumulated depreciation.

Answer 41

Book Value

Question 42

- the amounts earned from selling products or services to customers. (credit, revenue, income statement)

Answer 42

Revenues

Question 43

the costs of providing products and services. (debit, expense, income statement)

Answer 43

Expenses

Question 44

– the process of allocating the cost of an asset, such as equipment, to expense over the useful life of the asset. (debit, expense, income statement)

Answer 44

Depreciation Expense

Question 45

- the difference between revenues and expenses. (calculation: revenues – expense, income statement)

Answer 45

Net Income

Question 46

– cash payments to stockholders (owners). (debit, no major category, stmt. of stockholders’ equity)

Answer 46

Dividend