Final

Question 1

Process of allocating the cost of an intangible asset to expense over its estimated life

Answer 1

Amortization

Question 2

Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset

Answer 2

Deprecation

Question 3

Recorded on the left side; an entry that increases asset and expense accounts and decreases liability, revenue, and equity accounts

Answer 3

Debits

Question 4

Recorded on the right side; am entry that decreases asset and expense accounts, and increases liability, revenue, and equity accounts

Answer 4

Credits

Question 5

Financial Accounting Standards Board. Independent group of full time members responsible for setting accounting rules

Answer 5

FASB

Question 6

A stockholder right that common stockholders have but preferred stockholders do not

Answer 6

Voting rights

Question 7

Amounts due from customers for credit sales; backed by the customer’s general credit standing

Answer 7

Accounts receivable

Question 8

Resources a business owns or controls that are expected to provide current and future benefits to the business

Answer 8

Assets

Question 9

Liability created by buying goods and services on credit; backed by the buyer’s general credit standing

Answer 9

Accounts Payable

Question 10

Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement

Answer 10

Bank reconciliation

Question 11

Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts

Answer 11

Bad debts

Question 12

Corporation’s distribution of assets to its owners

Answer 12

Dividends

Question 13

Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are sold first

Answer 13

FIFO

Question 14

Area of accounting aimed mainly at serving the decision-making needs of internal users

Answer 14

Managerial Accounting

Question 15

Area of accounting aimed mainly at serving external users

Answer 15

Financial Accounting

Question 16

Accounting system that recognizes revenues when cash is received and records expenses when cash is paid

Answer 16

Cash basis

Question 17

Includes currency, coins, and amounts on deposit in bank checking or savings accounts

Answer 17

Cash

Question 18

Generally accepted accounting principles. Rules that specify acceptance accounting practices

Answer 18

GAAP

Question 19

Document signed by a depositor instructing the bank to pay a specified amount to designated recipients

Answer 19

Check

Question 20

Obligation to make a future payment if and only if an uncertain future event occurs

Answer 20

Contingent liability

Question 21

Accounting system that recognizes revenues when earned and expenses when incurred, the basis for GAAP

Answer 21

Accrual basis

Question 22

Difference between a bond’s par value and its lower issue price or carrying value; occurs when the contract rate is less than the market rate

Answer 22

Discount on bonds

Question 23

Corporation’s distribution of its own stock to its stockholders without the receipt of any payment

Answer 23

Stock dividend

Question 24

Federal agency congress has charged to set reporting rules for operations that sell ownership shares to the public

Answer 24

SEC

Question 25

Includes the balance sheet, income statement, statement of stockholders’ equity and statement of cash flows

Answer 25

Financial Statements

Question 26

Process of recording transactions in a journal

Answer 26

Journalizing

Question 27

Creditors’ claims on an organization’s assets; involves a probable future payment of assets, products, or services that a company is obligated to make due to past transactions or events

Answer 27

Liabilities

Question 28

All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company polices

Answer 28

Internal control

Question 29

Long-term assets (resources) used to produce or sell products or services; usually lack physical form and have uncertain benefits

Answer 29

Intangible assets

Question 30

Charge for using money (or other assets) loaned from one entity to another

Answer 30

Interest expense

Question 31

Method for assigning cost to inventory that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold

Answer 31

LIFO

Question 32

Corporation’s own stock that it reacquired and still holds

Answer 32

Treasury Stock

Question 33

Equity of a corporation divided into ownership units; also called shares

Answer 33

Stock

Question 34

Stock with a priority status over common stockholders in one or more ways, such as paying dividends or distributing assets

Answer 34

Preferred stock

Question 35

Difference between a bond’s par value and its higher carrying value; occurs when the contract rate is higher than the market rate

Answer 35

Premium on bonds

Question 36

Amount that the signer of a note agrees to pay back when it matures, not including interest

Answer 36

Principal

Question 37

What is the basic accounting equation?

Answer 37

Assets=Liabilities+Equity

Question 38

List the 9 steps in the accounting cycle

Answer 38

1.Analyze transactions 2.Journalize 3.Post 4.Prepare unadjusted trial balance 5.Adjust and post accounts 6.Prepare adjusted trial balance 7.Prepare financial statements 8.Close accounts 9.Prepare post-closing trail balance

Question 39

List the 4 general purpose financial statements:

Answer 39

1. income statements 2.balance sheet 3. statement of shareholder’s equity 4.Statement of cash flows

Question 40

How do companies account for uncollectible accounts receivable

Answer 40

Contra asset account

Question 41

Account for interest revenue in a note receivable

Answer 41

Principal x interest x time

Question 42

Calculate straight line partial year deprecation

Answer 42

cost- salvage value / useful life in periods

Question 43

Calculate gain/loss on the sale of a plant asset

Answer 43

If the sale price is higher than the bookvalue, it is a gain, if the sale price is lower than the bookvalue, it is a loss

Question 44

When are bonds sold at a discount/premium

Answer 44

If market rate is higher than stated contract rate, it is a premium, if the market rate is lower than the stated contract rate, it is a discount

Question 45

Calculate semi-annual interest payment to bond holders

Answer 45

Principal x interest rate / 2

Question 46

Accounting for an installment note payable

Answer 46

Note payable is found by subtracting original note payable from the principal payment. The principal payment is found by subtracting annual payment from interest expense. Interest expense is found by multiplying the original note payable and the interest rate.

Question 47

Privileges for stockholders

Answer 47

voting rights, sell or dispose their stock, preemptive right

Question 48

Privileges for preferred stockholders

Answer 48

preference for receiving dividends, distribution of assets

Question 49

List the 3 main activities of a company (3 sections of the statement of cash flows)

Answer 49

operating, investing, financing

Question 50

What is financial statement analysis?

Answer 50

Process of reviewing and analyzing a company’s financial statements to make better economic decisions

Question 51

What are the 3 main tools used to analyze financial statements?

Answer 51

Horizontal analysis, vertical analysis, ration analysis