accounting exam and chapter 1

Question 1

1. What are Generally Accepted Accounting Principles?

Answer 1

Measurment principle (an agreement)
Revenue Recognition Principle (service is preformed or property is changed in ownership)
Expense recognision principle
Full Disclouser principle

Question 2

2. What is the accounting equation?

Answer 2

Assets=Liabilities + Owners equity

Question 3

3. If you change one part of the accounting equation, what must happen to keep the accounting equation in balance?

Answer 3

If a change in one account happens then it must be matched in another account

Question 4

4. What are the two primary pieces of owner’s equity?

Answer 4

contributed capital and retained earnings

Question 5

5. How does a corporation calculate retained earnings?

Answer 5

Common Stock (- Dividends + Revenues - Expenses)

Question 6

6. What are the four financial statements?

Answer 6

Income statements, balance sheets, statements of cash flow, and statements of owner equity.

Question 7

8. How do you calculate the return on assets ratio?

Answer 7

Net Income/Average Total Cost

Question 8

9. How do you interpret the return on assets ratio?

Question 9

contributed capital

Answer 9

Cash and other assets given to a company by its shareholders exchange for stock (Common stock)

Question 10

Retained earnings

Answer 10

Dividends, Expenses, Revenues