Chapter 1

Question 1

Accounts Receivable

Answer 1

Amounts due from a customer for services previously rendered

Question 2

Liabilities

Answer 2

Debts owed by a business

Question 3

Accounts Payable

Answer 3

Amounts owed to suppliers for services previously rendered

Question 4

Notes Payable

Answer 4

Written promises to pay a specific sum of money

Question 5

Stockholders’ Equity

Answer 5

The owners’ interest in a corporation

Question 6

Capital Stock

Answer 6

The amount of owners’ investment in a corporation

Question 7

Retained Earnings

Answer 7

Accumulated net income of the corporation less dividends distributed to stockholders

Question 8

Balance Sheet

Answer 8

Lists the companies assets, liabilities, stockholders’ equity as of a specific moment in time

Question 9

Assets

Answer 9

Things of value owned by the business

Question 10

Statement of Cash Flows

Answer 10

Shows cash inflows and cash outflows from operating, investing, and financing activities

Question 11

Operating Activities

Answer 11

Cash effects of transactions and other events that

Question 12

Investing Activities

Answer 12

Business transactions involving the acquisition or disposal of long term assets such as land, buildings, and equipment

Question 13

Financing Activities

Answer 13

The cash effects of transactions and other events involving creditors and owners (stockholders)

Question 14

Fundamental Accounting Equation

Answer 14

Assets = Equities = Liabilities + Shareholder Equity

Question 15

Accounting Transaction

Answer 15

A business activity or event that causes a measurable change in the accounting equation

Question 16

Source Document

Answer 16

Any written or printed evidence of a business transaction that describes the essential facts of the transaction

Question 17

Five Basic Accounting Assumptions

Answer 17

1. Business Entity Concept
2. Money Measurement Concept
3. Exchange Price Concept
4. Going-Concern Concept
5. Periodicity Concept

Question 18

Business Entity Concept

Answer 18

Assumes each business has an existence separate from its owners, creditors, employees, customers, other interested parties, and other businesses

Question 19

Money Measurement Concept

Answer 19

Economic activity is initially recorded and reported in a monetary unit of measure - the USD

Question 20

Exchange Price Concept

Answer 20

Most assets are recorded at their acquisition cost because they are objective money prices determined in the exchange process

Question 21

Going-Concern (Continuity) Concept

Answer 21

Assumes business entity will continue its operations indefinitely

Question 22

Periodicity Concept

Answer 22

An entities life can be meaningfully subdivided into time periods to report the results of economic activity