Chapter 1

Question 1

The form of balance sheet that resembles the basic format of the accounting equation, with Assets on the left side and Liabilities and Owner’s Equity sections on the right side.

Answer 1

Account Form

Question 2

The liability created by a purchase on account.

Answer 2

Account Payable

Question 3

A claim against the customer created by selling merchadise or services on credit.

Answer 3

Account Receivable

Question 4

An information system that provides reports to stakeholders about the economic activities and condition of a business.

Answer 4

Accounting

Question 5

Assets = Liabilities + Owner’s Equity

Answer 5

Accounting Equation

Question 6

The resources owned by a business.

Answer 6

Assets

Question 7

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 a year.

Answer 7

Balance Sheet

Question 8

An organization in which basic resources (inputs), such as material and labor, are assembled and processed to provide goods or services (outputs) to customers.

Answer 8

Business

Question 9

A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business.

Answer 9

Business Entitiy Concept

Question 10

An economic event or condition that directly changes an entitiy’s financial condition or directly affects its results of operations.

Answer 10

Busniess Transaction

Question 11

Public accountants who have met a state’s education, experience, and examination requirements.

Answer 11

Certified Public Accountant (CPA)

Question 12

A business organized under state or federal statutes as a separate legal entity.

Answer 12

Corporation

Question 13

A concept of accounting that determines the amount initially entered into the accounting records for purchases.

Answer 13

Cost Concept

Question 14

Used to describe when revenues exceed expenses. (Also see net income and net profits.)

Answer 14

Earnings

Question 15

Moral principles that guide the conduct of individuals.

Answer 15

Ethics

Question 16

Assets used up or services consumed in the process of generating revenues.

Answer 16

Expenses

Question 17

Revenue from providing services.

Answer 17

Fees earned

Question 18

The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.

Answer 18

Financial Accounting

Question 19

The authoritative body that has the primary responsibility for developing accounting principles.

Answer 19

Financial Accounting Standards Board (FASB)

Question 20

Financial reports that summarize the effects of events on a business.

Answer 20

Financial Statements

Question 21

A type of financial accounting report that is distributed to external users. The term “general purpose” refers to the wide range of decision-making needs that the reports are designed to serve.

Answer 21

General-purpose Financial Statements

Question 22

Generally accepted guidelines for the preparation of financial statements.

Answer 22

Generally Accepted Accounting Principles (GAAP)

Question 23

A summary of the revenue and expenses for a specific period of time, such as a month or a year.

Answer 23

Income Statement

Question 24

Money received for interest.

Answer 24

Interest Revenue

Question 25

An organization that issues International Financial Reporting Standards for many countries outside the United States.

Answer 25

International Accounting Standards Board (IASB)

Question 26

The rights of creditors that represent debts of the business.

Answer 26

Liabilities

Question 27

A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners, yet treated as a partnership for tax purposes.

Answer 27

Limited Liability Company (LLC)

Question 28

The branch of accounting that uses both historical and estimated date in proving information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies.

Answer 28

Management (or managerial) Accounting

Question 29

A type of business that changes basic inputs into products that are sold to individual customers.

Answer 29

Manufacturing Business

Question 30

A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses.

Answer 30

Matching Concept (or Matching Principle)

Question 31

A type of business that purchases products from other businesses and sells them to customers.

Answer 31

Merchandising Business

Question 32

The amount by which revenues exceed expenses.

Answer 32

Net income or Net Profit

Question 33

The amount by which expenses exceed revenues.

Answer 33

Net Loss

Question 34

A concept of accounting that requires accounting records and the data reported in financial statements to be based on objective evidence.

Answer 34

Objectivity Concept

Question 35

The owner’s right to the assets of the business.

Answer 35

Owner’s Equity

Question 36

The unicorporated business form consisting of two or more persons conducting business as co-owners for profit.

Answer 36

Partnership

Question 37

Items such as supplies that will be used in the business in the future.

Answer 37

Prepaid Expenses

Question 38

The field of accounting whereby accountants are employed by a business firm or not-for-profit organization.

Answer 38

Private Accounting

Question 39

The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide goods or services.

Answer 39

Profit

Question 40

A business owned by one individual.

Answer 40

Proprietorship

Question 41

The field of accounting where accountants and their staff provide services on a fee basis.

Answer 41

Public Accounting

Question 42

Money received for rent

Answer 42

Rent Revenue

Question 43

Increases in owner’s equity as a result of selling services or products to customers.

Answer 43

Revenues

Question 44

The total amount charged customers for merchandise sold, including cash sales and sales on account.

Answer 44

Sales

Question 45

An _agency of the U.S. Governmen_t that has authority over the accounting and financial disclosure for companies whose shares of ownership (stock) are traded and sold to the public.

Answer 45

Securities and Exchange Commision (SEC)

Question 46

A business providing services rather than products to customers.

Answer 46

Service Business

Question 47

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.

Answer 47

Statement of Cash Flows

Question 48

A summary of the changes in owner’s equity that have occured during a specific period of time, such as a month or a year.

Answer 48

Statement of Owner’s Equity

Question 49

A concept of accounting requiring that economic data be recorded in dollars.

Answer 49

Unit of measure concept