Section2

Question 1

resources

Answer 1

property or rights

Question 2

assets

Answer 2

property or rights that provide probable FUTURE ECONOMIC BENEFIT

Question 3

What is the basic accounting equation?

Answer 3

Assets = Liabilities + Owners’ Equity

Question 4

liabilities

Answer 4

probable FUTURE OBLIGATIONS to pay assets (usually cash) or provide services to another entity

Question 5

owner’s equity

Answer 5

amount of ASSETS PROVIDED BY OWNERS
or
amount of owners’ rights to assets in the event of business termination

Question 6

2 ways owners provide assets

Answer 6

1. cash or asset contributions in exchange for shares of stock
2. allowing increases in assets arising from profitable operations to be retained

Question 7

balance sheet

Answer 7

statement of FINANCIAL POSITION
and HOW RESOURCES HAVE BEEN OBTAINED
at various POINTS IN TIME

Question 8

financial position

Answer 8

assets, liabilities, and owners’ equity

Question 9

income statement

Answer 9

statement of

• operations
• profit
• earnings
• loss

for various PERIODS of time

Question 10

statement of cash flows

Answer 10

presents the major inflows and outflows of cash for a company
for various periods of time

Question 11

what are a company’s assets financed through debt?

Answer 11

liabilties

Question 12

what are a company’s assets financed through equity?

Answer 12

owners’ equity

Question 13

expenses

Answer 13

the amount of outflowing assets representing a cost of providing goods or services for sale

Question 14

revenues

Answer 14

the amount of inflowing assets from the sale or providing of goods or services to customers

Question 15

cost of goods sold

Answer 15

an expense representing the cost of inventory sold to customers

Question 16

profit or net income is ALWAYS defined in terms of

Answer 16

revenues minus expenses equals net income

R—E=NI

Question 17

dividends

Answer 17

the amount of assets distributed to owners (stockholders) from current or previous profits

Question 18

2 ways that owners may provide capital to a business

Answer 18

capital contributions

retained earnings

Question 19

net income equals

Answer 19

revenues minus expenses

Question 20

profit is synonymous with

Answer 20

earnings or net income

Question 21

NI

Answer 21

net income

Question 22

RE

Answer 22

retained earnings

Question 23

D

Answer 23

dividends

Question 24

R

Answer 24

revenues

Question 25

E

Answer 25

expenses

Question 26

inflows of cash or any asset are recorded as revenues only when

Answer 26

received as a result of providing goods and services

Question 27

t/f an owner’s contribution/investment of cash into his or her business would be recoded as revenue to the business

Answer 27

false

Question 28

capital contributions are also known as

Answer 28

capital stock

Question 29

capital contributions + retained earnings =

Answer 29

owners’ equity

Question 30

t/f warranty obligations might be an example of probable future obligations to provide services

Answer 30

true

Question 31

t/f assets are recorded as assets only to the extent they have probable future economic benefit to the company

Answer 31

true

Question 32

retained earnings is not a description of an asset, it is a description of

Answer 32

HOW some of a company’s ASSETS WERE RECEIVED

Question 33

the increase in a business’ cash as a result of borrowing from a bank would

Answer 33

increase the business assets and increase its liabilities

Question 34

a company’s purchase of inventory with cash would

Answer 34

have no net effect on the business assets, liabilities, or owners’ equity

Question 35

an owner’s contribution of cash into his or her business would

Answer 35

increase the business assets and increase its owner’s equity

Question 36

a company’s profitable sale of inventory to a customer for cash would

Answer 36

increase the business’ total assets and increase its total owner’s equity

Question 37

revenues and expenses affect a company’s profit or net income, which affects its

Answer 37

retained earnings, a part of owners’ equity

Question 38

revenues—expenses=

Answer 38

net income

Question 39

owner’s equity accounts

Answer 39

revenues | expenses

Question 40

revenues and expenses are owners equity accounts because

Answer 40

they indirectly affect retained earnings

Question 41

t/f cash is considered revenue

Answer 41

false, cash is an asset

Question 42

The balance sheet is affected by activity over a period of time, but does not

Answer 42

show that activity, instead it reflects only the balance at the end of that period

Question 43

What is directly reflected in a statement of retained earnings?

Answer 43

dividends

Question 44

is “prepaid” an asset or expense?

Answer 44

asset

Question 45

t/f divdends do not appear on the balance sheet or the income statement

Answer 45

true

Question 46

unearned revenue is a….

Answer 46

liability

Question 47

a balance sheet is affected by, but does not show

Answer 47

activity

Question 48

Which statement or statements show activity over a period of time?

Answer 48

income statement and statement of cash flows

Question 49

the income statement reports net income for

Answer 49

a period of time

Question 50

the balance sheet portrays the financial position

Answer 50

at the end of a period

Question 51

Which financial statement is not required under GAAP, but typically provided?

Answer 51

Statement of Retained Earnings/Owners’ Equity

Question 52

Which General Purpose Financial Statements are required under GAAP?

Answer 52

Income Statement, Statement of Cash Flows and Balance Sheet

Question 53

T/F Supplemental and explanatory footnotes to the financial statements are also required under GAAP to provide additional information to statement users

Answer 53

true

Question 54

Which financial statement embodies the basic accounting equation?

Answer 54

the balance sheet