Accounting Foundations: Bookkeeping

Question 1

The preservation of a systematic, quantitative record of an activity; provides information so individuals can make decisions.

Answer 1

Bookkeeping

Question 2

Assets = Liabilities + Equity

Answer 2

Accounting Equation

Question 3

One of a company’s core financial statements that reports a company’s assets, liabilities and shareholders’ equity. It is a summary of the financial balances of an individual or organization.

Answer 3

The Balance Sheet

Question 4

One of a company’s core financial statements that shows the company’s revenues and expenses during a particular period. Also referred to as a P&L statement or statement of operations (Revenues - Expenses = Net Income/Loss).

Answer 4

The Income Statement

Question 5

One of a company’s core financial statements that summarizes the amount of cash and cash equivalents entering and leaving a company. It measures how well a company manages its cash position and breaks the analysis down to operating, investing, and financing activities.

Answer 5

The Statement of Cash Flows

Question 6

The amount of assets generated in doing business (cash, receivables, etc.).

Answer 6

Revenue

Question 7

The amount of assets consumed in doing business (rent, wages paid, etc.).

Answer 7

Expenses

Question 8

The net amount of assets generated by a business during it’s business operations.

Answer 8

Net Income

Question 9

Are the core activities that a business performs to earn revenue; usually refers to the first section of the statement of cash flows.
*** includes cash collection from sales and cash paid for expenses such as rent, wages, taxes, utilities, etc.

Answer 9

Operating Activities

Question 10

The purchase and sale of LT assets and other business investments (such as securities), within a specific reporting period; usually refers to the second section of the statement of cash flows.

Answer 10

Investing Activities

Question 11

Transactions involving debt, equity, and dividends; usually refers to the third section of the statement of cash flows.
*** includes borrowing money, repaying loans, managing new investments, paying DIV; etc.

Answer 11

Financing Activities

Question 12

LT expenses incurred to acquire or upgrade or maintain the tangible assets like plants, machinery, buildings, etc.

Answer 12

Capital Expenditures

Question 13

ST expenses incurred to maintain day to day functioning of an organization.

Answer 13

Revenue Expenditures

Question 14

A specific accounting record that provides an efficient way to categorize similar transactions.

Answer 14

Account

Question 15

Cash, inventory, and equipment are examples of which part of the accounting equation?

Answer 15

Assets

Question 16

Accounts payable and notes payable are examples of which part of the accounting equation?

Answer 16

Liabilities

Question 17

Paid-in capital (capital stock for corps) and retained earnings are examples of which part of the accounting equation?

Answer 17

Owner’s Equity

Question 18

An abbreviated representation of an actual account.

Answer 18

T-Account

Question 19

Refers to the left side of the T-account.

*** Note that is takes on additional meaning when coupled with specific accounts.

Answer 19

Debit (DR)

Question 20

Refers to the right side of the T-account.

*** Note that is takes on additional meaning when coupled with specific accounts.

Answer 20

Credit (CR)

Question 21

debits = increases
credits = decreases
*** accounts from this part of the accounting equation will usually have a debit balance

Answer 21

Assets

Question 22

debits = decreases
credits = increases
*** accounts from these 2 parts of the accounting equation will usually have a credit balance

Answer 22

Liabilities & Owner’s Equity

Question 23

Resources owned or controlled by a company that will provide probable future benefit.

Answer 23

Assets

Question 24

A journal entry with more than one debit or more than one credit per transaction.

Answer 24

Compound Journal Entry

Question 25

A distribution to the stockholders of part of the earnings of the company.

Answer 25

Dividends

Question 26

Money that owners directly invest in their business is called _______.

Answer 26

Paid-in Capital

Question 27

Chronological listing of ALL business events using accounting debit-and-credit language.

Answer 27

Journal

Question 28

A copy of the journal’s events, but sorted by category or account.

Answer 28

Ledger

Question 29

Sorting all journal entries and copying them to the appropriate accounts.

Answer 29

Posting

Question 30

List of accounts used by a company.

Answer 30

Chart of Accounts

Question 31

A collection of hundreds, thousands, or millions of individuals who each own a portion of the company.

Answer 31

Corporation

Question 32

An internal summary document of ALL general ledger accounts and their ending balances for a given period.

Answer 32

Trial Balance