Chapter 1

Question 1

accounting

Answer 1

A set of concepts and techniques that are used to measure and report financial information about an economic unit.

Question 2

accounting equation

Answer 2

A financial relationship at the heart of the accounting model: Assets = Liabilities + Owners’ Equity

Question 3

assets

Answer 3

The economic resources owned by an entity; entailing probable future benefits to the entity.

Question 4

auditing

Answer 4

The examination of transactions and systems that underlie an organization’s financial statements with the goal or reporting thereon.

Question 5

balance sheet

Answer 5

A financial statement that presents a firm’s assets, liabilities, and owners’ equity at a particular point in time.

Question 6

certified public accountant (CPA)

Answer 6

An individual who is licensed by a state to practice public accounting.

Question 7

corporation

Answer 7

A form of business organization where ownership is represented by divisible units called shares of stock.

Question 8

dividends

Answer 8

Amounts paid from profits of a corporation to shareholders as a return on their investment in the stock of the entity.

Question 9

expenses

Answer 9

The costs incurred in producing revenues.

Question 10

financial accounting

Answer 10

An area of accounting that deals with external reporting to parties outside the firm; usually based on standardized rules and procedures.

Question 11

Financial Accounting Standards Board

Answer 11

An organization charged with producing standards for financial reporting in the USA.

Question 12

financial statements

Answer 12

Core financial reports that are prepared to represent the financial position and results of operations of a company.

Question 13

historical cost principle

Answer 13

The concept that many transactions and events are to be measured and reported at acquistion cost.

Question 14

income statement

Answer 14

A financial statement that summarizes the revenues, expenses, and results of operations for a specified period of time.

Question 15

internal auditor

Answer 15

A person within an organization who reviews and monitors the controls, procedures, and information of the organization.

Question 16

International Accounting Standards Board

Answer 16

An organization charged with producing accounting standards with global acceptance.

Question 17

liabilities

Answer 17

Amounts owed by an entity to others.

Question 18

managerial accounting

Answer 18

An area of accounting concerned with reporting results to managers and others who are internal to an organization.

Question 19

net income

Answer 19

The excess of revenues over expenses for a designated period of time.

Question 20

net loss

Answer 20

The excess of expenses over revenues for a designated period of time.

Question 21

owner investments

Answer 21

Resources provided to an organization by a person in exchange for a position of ownership in the organization.

Question 22

owner’s equity

Answer 22

The residual of assets minus liabilities, representing the collective interest or position of the entity’s owners.

Question 23

partnership

Answer 23

A non-corporation representing an association of two or more persons organized to carry out a business plan for a profit motive.

Question 24

public accounting

Answer 24

Accounting activities provided by a person to the general public, typically relating to audit, tax and similar services.

Question 25

retained earnings

Answer 25

The excess of a corporation’s income over it’s dividends.

Question 26

revenue

Answer 26

Inflows and other benefits received in exchange for the providing of goods and services.

Question 27

sole proprietorship

Answer 27

a non-corporation business owned by a sole individual.

Question 28

statement of retained earnings

Answer 28

A financial statement that discloses changes in retained earnings during a designated period of time; those changes usually attributable to income and dividends.