chapter 1 & 2

Question 1

the role of accounting in business

Answer 1

to provide information for managers to use in operating the business

Question 2

internal users

Answer 2

• include managers and employees

- involved in managing and operating the business

Question 3

the area of accounting that provides internal users with information is called

Answer 3

managerial accounting or management accounting

Question 4

object of management accounting

Answer 4

to provide relevant and timely information for managers and employees decision-making needs

Question 5

managerial accountants employed by a business are employed in

Answer 5

private accounting

Question 6

external users

Answer 6

• accounting information include investors, creditors, customers, and the government
• not directly involved in managing and operating the business

Question 7

the area of accounting that provides external users with information is called

Answer 7

financial accounting

Question 8

objective of financial accounting

Answer 8

to provide relevant and timely information for the decision making needs of users outside the business

Question 9

business entity concept

Answer 9

limits the economic data in an accounting system ti data related directly to the activities of the business

Question 10

cost concept

Answer 10

amounts are initially recorded in the accounting records at their cost or purchase price

Question 11

how do business transactions affect the accounting equation

Answer 11

an economic event or condition that directly changes an entity’s financial condition or its results of operations

Question 12

the accounting equation

Answer 12

assets = liabilities + Owner’s Equity

assets - liabilities = Owner’s Equity

Question 13

journal

Answer 13

the initial record in which the effects of a transaction are recorded

Question 14

ledger

Answer 14

a group of accounts for a business

Question 15

capital account

Answer 15

an account used for a proprietorship that represents the owner’s equity

Question 16

drawing

Answer 16

the account used to record amounts withdrawn by an owner of a proprietorship

Question 17

liabilities

Answer 17

the right of creditors that represents debts of the business

Question 18

owner’s equity

Answer 18

the owner’s right to the assets of the business

Question 19

expenses

Answer 19

assets used up or services consumed in the process of generating revenues

Question 20

financial statements

Answer 20

financial reports that summarize the effects of events on a business

Question 21

all financial statements are identified by

Answer 21

the name of the business, the title of the statement, and the date or period

Question 22

data presented in a balance sheet are for

Answer 22

a specific date

Question 23

data presented in the income statement, statement of owner’s equity, and statement of cash flows are

Answer 23

for a period of time

Question 24

income statement reports

Answer 24

• the revenues and expenses for a period of time, based on the matching concept
• prepared first

Question 25

statement of owner's equity

Answer 25

- reports the changes in the owner's equity for a period of time - it is prepared after the income statements because of the net income or net loss for the period must be reported in this statement

Question 26

balance sheet

Answer 26

a list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or year

Question 27

balance sheet

Answer 27

a list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or year

Question 28

account form | balance sheet

Answer 28

assets on the right and liabilities and owner's equity on the left assets | liabilities - owner's equity

Question 29

The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the

Answer 29

income statement

Question 30

The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the

Answer 30

balance sheet

Question 31

Under the accrual basis of accounting, revenues are reported in the accounting period when the

Answer 31

Service Or Goods Have Been Delivered

Question 32

Revenues minus expenses equals

Answer 32

net income

Question 33

Under the accrual basis of accounting, expenses are reported in the accounting period when the

Answer 33

Expense Matches The Revenues Or Is Used Up

Question 34

Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as

Answer 34

assets

Question 35

Assets are usually reported on the balance sheet at which amount?

Answer 35

cost

Question 36

Liabilities often have the word __________ in their account title.

Answer 36

payable

Question 37

Unearned Revenues is what type of account?

Answer 37

liability

Question 38

Accounting entries involve a minimum of how many accounts?

Answer 38

two

Question 39

The listing of all of the accounts available for use in a company's accounting system is known as the _____

Answer 39

chart of accounts

Question 40

Which term is associated with "left" or "left-side"?

Answer 40

debit

Question 41

Which term is associated with "left" or "left-side"?

Answer 41

debit

Question 42

Which term is associated with "right" or "right-side"?

Answer 42

credit

Question 43

When cash is received, the account Cash will be

Answer 43

debited

Question 44

When a company pays a bill, the account Cash will be

Answer 44

credited

Question 45

What will usually cause an asset account to increase?

Answer 45

debit

Question 46

What will usually cause the liability account Accounts Payable to increase?

Answer 46

credit

Question 47

Entries to expenses such as Rent Expense are usually

Answer 47

debit

Question 48

Entries to revenues accounts such as Service Revenues are usually

Answer 48

credit

Question 49

To increase the balance in the following accounts, would you debit the account or would you credit the account? Accounts Payable

Answer 49

credit

Question 50

To increase the balance in the following accounts, would you debit the account or would you credit the account? cash

Answer 50

debit

Question 51

To increase the balance in the following accounts, would you debit the account or would you credit the account? notes payable

Answer 51

credit

Question 52

To increase the balance in the following accounts, would you debit the account or would you credit the account? accounts receivable

Answer 52

credit

Question 53

To increase the balance in the following accounts, would you debit the account or would you credit the account? Mary smith, capital

Answer 53

credit

Question 54

To increase the balance in the following accounts, would you debit the account or would you credit the account? supplies

Answer 54

debit

Question 55

To increase the balance in the following accounts, would you debit the account or would you credit the account? supplies expense

Answer 55

debit

Question 56

To increase the balance in the following accounts, would you debit the account or would you credit the account? prepaid insurance

Answer 56

debit

Question 57

To increase the balance in the following accounts, would you debit the account or would you credit the account? service revenue

Answer 57

credit

Question 58

To increase the balance in the following accounts, would you debit the account or would you credit the account? Mary smith, drawing

Answer 58

debit

Question 59

To increase the balance in the following accounts, would you debit the account or would you credit the account? equipment

Answer 59

debit

Question 60

To increase the balance in the following accounts, would you debit the account or would you credit the account?unrendered revenue

Answer 60

credit

Question 61

``` To decrease the balance in the following accounts, would you debit the account or would you credit the account? Accounts Payable Cash Land Notes Payable Accounts Receivable Mary Smith, Capita l Supplies Supplies Expense Prepaid Insurance Service Revenue Mary Smith, Drawing Equipment Unearned Revenue ```

Answer 61

``` debit credit credit debit credit debit credit credit credit debit credit credit debit ```

Question 62

Generally when an expense is involved in a transaction, an expense will be

Answer 62

debit

Question 63

Generally when revenues are involved in a transaction, a revenue account will be

Answer 63

credit

Question 64

A contra-asset account such as Accumulated Depreciation will likely have which bal

Answer 64

credit

Question 65

A contra-liability account such as Discount on Notes Payable will likely have which balance?

Answer 65

debit