Chapter 1

Question 1

Resources controlled by an enterprise as a result of past events from which future economic benefits to the enterprise are expected to flow

Answer 1

Assets

Question 2

The financial statement that presents an entities current financial position by disclosing resources the entity controls(its assets) and the claims on those resources ( its liabilities and equity claims) as a particular point in time.

Answer 2

Balance sheet

Question 3

Assets less liabilities; The residual interest in the assets after subtracting the liabilities

Answer 3

Equity

Question 4

Outflows of economic resources or increases in liabilities that result in decreases in equity; Reductions in net assets associated with the creation of revenues

Answer 4

Expenses

Question 5

Activities related to obtaining or repair in capital to be used in the business. For example equity in a long-term debt.

Answer 5

Financing activities

Question 6

Present obligations of an enterprise arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits; creditors claim on the resources of a company.

Answer 6

Liabilities

Question 7

The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting the entities liabilities.

Answer 7

Owners equity

Question 8

Activities that are part of the day-to-day business functioning of an entity, such as selling inventory in providing services.

Answer 8

Operating activities

Question 9

The process of systematically allocating the cost of long-lived (tangible) assets to the periods during which the assets are expected to provide economic benefits.

Answer 9

Depreciation

Question 10

Activities which are associated with the acquisition and disposal of property plant and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt(bonds and loans) issued by other companies.

Answer 10

Investing activities

Question 11

The ability to react in adapt to financial adversities and opportunities.

Answer 11

Financial flexibility

Question 12

The amount charged for the delivery of goods or services in the ordinary activities of a business over a stated period; The inflows of economic resources to a company over a stated period.

Answer 12

Revenue

Question 13

A financial statement that provides information about a company’s profitability overstated period of time.

Answer 13

Statement of operations

Question 14

The financial statement that presents an entities current financial position by disclosing resources the entity controls(its assets) and the claims on those resources(its liabilities and equity claims) as a particular point in time. (The date of the balance sheet)

Answer 14

Statement of financial position

Question 15

Includes the theory, and rules of practice developed by the accounting profession so financial statements can be compared between accounting and between various businesses

Answer 15

Generally excepted accounting principles (GAAP)

Question 16

Body within the accounting profession in the United States that issue standards to define GAAP in various situations

Answer 16

Financial accounting standards Board (FASB)

Question 17

Body within the United States federal government that regulates financial reporting a publicly owned corporations (For example does firms that sell stocks on US exchanges.) so has authority to define GAAP for those companies

Answer 17

Securities and exchange commission (SEC)

Question 18

Body within the United States federal government that enforces tax laws and collects income taxes so interprets tax reporting requirements.

Answer 18

Internal Revenue Service (IRS)

Question 19

Auditor believes financial statements have been presented fairly in accordance with GAAP

Answer 19

Unqualified

Question 20

Auditor was unable to evaluate the fairness of the financial statement and, as a result, expresses no opinion on them.

Answer 20

Disclaimer