Chap. 1

Question 1

Field that focuses on providing info for external decision makers

Answer 1

Financial Accounting

Question 2

Field that focuses on providing info for internal decision makers

Answer 2

Managerial Accounting

Question 3

Any person or business to whom businesses owe money to

Answer 3

Creditors

Question 4

What is the accounting equation?

Answer 4

Assets = Liabilities + Equity

Question 5

Economic resources that are expected to benefit the business in the future
Something the business owns / controls

Answer 5

Asset

Question 6

Debts owed to creditors

Answer 6

Liabilities

Question 7

The owner’s claim to the assets of the business

Answer 7

Equity / Stockholders’s Equity

Question 8

Owners contributions to a corporation

Answer 8

Contributed Capital

Question 9

Amounts earned from delivering goods/services to customers

Answer 9

Revenues

Question 10

Cost of selling goods / services

Answer 10

Expenses

Question 11

Define Dividends

Answer 11

A distribution of a corporation’s earnings to stockholders

Question 12

Capital earned by profitable operations of a corporation that is not distributed to stockholders

Answer 12

Retained Earnings

Question 13

Define Net Income

Answer 13

Result of operations that occurs when total revenues are greater than total expenses

Question 14

Result of operations when total expenses are
Greater than
total revenues

Answer 14

Net Loss

Question 15

Transaction is any even that affects the financial position of the business and can be measure reliably in dollar amounts.
Each transaction must have at least 2 Types of Accounts which are:

Answer 15

Cash (Asset)
Common Stock (Equity)

Question 16

*For each transaction the amount on the left sides of the equation must equal the amount on the right side.

Answer 16

True

Question 17

A short term liability that will be paid in the future

Answer 17

Accounts Payable

Question 18

The right to receive cash in the future from customers for goods sold for services performed

Answer 18

Accounts Receivable

Question 19

Define the 4 Types of financial statements
1) Answers the question of whether the business is profitable.
Summarizes the entity’s revenues and expenses,
reports the net income and net loss for a specified period
2) Answers the question of how the business uses its earnings.
Reports retained earnings balance changed from the beginning to
end
3) Answers the questions of the amount of assets a business has and
who can claim those assets.
Reports of the assets, liabilities, and stockholders equity on a
specific date
4) Answers whether the business generate enough cash to pay bills.
Reports on the business’s cash receipts and cash payments for a
specific period

Answer 19

1. Income Statement
2. Statement of Retained Earnings
3. Balance Sheet
4. Statement of Cash Flows

Question 20

Information system that measures business activities,
Processes the information reports,
And communicates the results to the decision makers

Answer 20

Accounting

Question 21

Stockholders’ claims to the assets through contributed capital and retained earnings
(Common stock, dividends, revenues, expenses)

Answer 21

Equity

Question 22

Items the business owes

Accounts, notes, and salaries payable

Answer 22

Liabilities

Question 23

Statement of Retained Earnings Formula:
Beginning Retained Earnings 
\+ N\_\_ I \_\_\_\_\_
- Dividends 
- N\_\_\_ L\_\_\_ 
= Ending Retained Earnings

Answer 23

Beginning Retained Earnings 
\+ Net Income 
- Dividends 
- Net Loss = 
Statement of Retained Earnings

Question 24

How do you prepare a Balance Sheet?

Answer 24

Assets = Liabilities + Stockholders ‘ Equity

Question 25

What are the 3 sections that make up a

Statement of Cash Flow

Answer 25

Cash flow from:
Operating
Investing
Financing 
---Activities

Question 26

Formula for ROA (Return on Assets)

Answer 26

Net Income

/ Average Total of Assets

Question 27

Items the business owns/controls

Answer 27

Assets

Question 28

Formula for an Income Statement:
R____
- E____
=Net Income/Loss

Answer 28

Revenues - Expenses =
Net Income or Net Loss
- Income Statement

Question 29

Debits on the

Credits on the

Answer 29

Debits = Left
Credits = Right

Question 30

Asset or Liability:
Unearned Revenue - Is when a company receives cash from a customer but hasn’t provided the product or service which are delivered in the future

Answer 30

Liability

Question 31

Asset or Liability:
Prepaid Expense - A payment of an expense in advance,
includes prepaid rent, insurance, and office supplies

Answer 31

Asset

Question 32

Asset or Liability:

Cash - A business’s money

Answer 32

Asset

Question 33

Asset or Liability:

Land - Cost of land a business uses in operations

Answer 33

Asset

Question 34

Asset or Liability:

Building - Cost of building, warehouse, or store

Answer 34

Asset

Question 35

Asset or Liability:

Accounts Payable - Promise made by the business to pay a debt in the future

Answer 35

Liability

Question 36

Asset or Liability:
Accrued Liability - Amount owed but not paid,
includes Taxes, Rent, and Salaries payable

Answer 36

Liability

Question 37

Asset or Liability:

Notes Payable - A written promise made by the business to pay a debts, usually involving interest in the future

Answer 37

Liability

Question 38

Asset or Liability:

Notes Receivable -

Answer 38

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