Test 1

Question 0

U.S. governmental agency that oversees U.S. financial markets.

Answer 0

SEC

Question 1

A privately funded organization that formulates accounting standards.

Answer 1

FASB

Question 2

Main U.S. accounting rule book.

Answer 2

GAAP

Question 3

Accounting is..

Answer 3

The language of business

Question 4

Definition of liability

Answer 4

What you owe on assets (accounts payable). Debts payable to outsiders.

Question 5

Definition of assets

Answer 5

What we own

Question 6

What does an owner of a corporation do?

Answer 6

Obtain charter from state, issue stock, and conduct business in accordance with state law.

Question 7

Accounting equation

Answer 7

Assets = liabilities + equity

Question 8

Definition of equity

Answer 8

Owner’s claim to assets

Question 9

Good for 1 day. Inaccurate after another transaction is made.

Answer 9

Balance sheet

Question 10

1st statement that can be prepared because the other financial statements rely upon the net income number calculated on it.

Answer 10

Income statement

Question 11

Order of preparing the financial statements

Answer 11

Income statement - balance sheet - statement of owner’s equity - statement of cash flows

Question 12

Chronological record of transactions (organized by date)

Answer 12

Journal

Question 13

The book holding all the accounts and their balances (organized by account)

Answer 13

Ledger

Question 14

Accounting process

Answer 14

Record transactions in the journal - copy to the ledger - prepare the trial balance

Question 15

What are debits?

Answer 15

Assets, expenses, drawing

Question 16

What are credits?

Answer 16

Liabilities, capital, revenues

Question 17

Define posting

Answer 17

Coping amounts from the journal to the ledger.

Question 18

For a specific date.

Answer 18

Trial balance

Question 19

Revenues recognized when earned. Expenses recognized when incurred.

Answer 19

Accrual basis

Question 20

Revenues recognized when cash received. Expenses recorded when cash paid.

Answer 20

Cash basis

Question 21

Define liquidity

Answer 21

How quickly an item can be converted into cash.

Question 22

Temporary accounts

Answer 22

Closed at the end of a period. Start next period with a zero balance. (revenues, expenses, drawing)

Question 23

Permanent accounts

Answer 23

Not closed at the end of the period. Ending balance carries forward to next period. (assets, liabilities, capital)

Question 24

Current assets

Answer 24

Cash 
Accounts receivable
Supplies
Prepaid expenses
Inventory

Question 25

Long-term assets

Answer 25

Plant assets (land,building,equipment)
Long-term investments
Other assets
(Not converted to cash within the current year or operating cycle)

Question 26

Current liabilities

Answer 26

Accounts payable
Notes payable within 1 year 
Salary payable 
Interest payable 
Unearned revenue 
(Must be paid within 1 year/operating cycle)

Question 27

Long-term liabilities

Answer 27

Notes payable due over 1 year
Mortgages
(Are not due within 1 year/operating cycle)

Question 28

Formula for current ratios

Answer 28

Total current assets / total current liabilities

Question 29

Formula for debt ratio

Answer 29

Total liabilities / total assets