Chapter 1

Question 1

certified public accountants

Answer 1

licensed professional accountants who serve the general public

Question 2

certified management accountant

Answer 2

Canertified professionals who specialize in accounting and financial management knowledge. They typically work for a single company

Question 3

financial accounting standards board

Answer 3

the private organization that oversees the creation and governance of accounting standards in the United States

Question 4

accounting

Answer 4

the information system that measures business activities, processes the information into reports, and communicates the results to decision-makers.

Question 5

pathways commission

Answer 5

leaders from across the accounting community

Question 6

financial accounting

Answer 6

provides information for external decision-makers, such as outside investors, lenders, customers, and the federal government.

Question 7

managerial accounting

Answer 7

focuses on information for internal decision makers such as the company’s managers and employees

Question 8

creditor

Answer 8

a person or business to whom a business owes money

Question 9

securities and exchange commission

Answer 9

US governmental agency that oversees the US financial

Question 10

generally accepted accounting principles

Answer 10

accounting guidelines currently formulated by the FASB, the main US accounting rule book.

Question 11

faithful representation

Answer 11

providing information that is complete, neutral, and free from error

Question 12

economic entity assumption

Answer 12

an organization that stands apart as a separate economic unit p

Question 13

sole proprietorship

Answer 13

a business with one owner

Question 14

partnership

Answer 14

a business with two or more owners and not organized as a corporation

Question 15

accounting equation

Answer 15

the basics of accounting, measuring the resources of the business (what the business owns and has control of) and the claims to those resources (what the business owes to creditors and to the owner). assets = liabilities+equity

Question 16

corporation

Answer 16

a business organized under state law that is a separate legal entity

Question 17

limited liability company

Answer 17

a company in which each member is only liable for his or her own actions

Question 18

cost principle

Answer 18

a principle that states acquired assets and services should be recorded at their actual cost

Question 19

going concern assumption

Answer 19

assumes that the entity will remain in operation for the foreseeable future

Question 20

monetary unit assumption

Answer 20

assumption that requires the items on the financial statements to be measured in terms of a monetary unit

Question 21

international financial reporting standards

Answer 21

a set of global accounting guidelines formulated by the international accounting standards board

Question 22

international accounting standards board

Answer 22

private organization that oversees the creation and governance of international financial reporting standards

Question 23

transaction

Answer 23

an event that affects the financial position of the business and can be measured with faithful representation

Question 24

audit

Answer 24

an examination of a company’s financial statements and records

Question 25

sarbanes-oxley act

Answer 25

requires management to review internal control and take responsibility for the accuracy and completeness of their financial reports, and makes it a criminal offense to falsify financial statements.

Question 26

assets

Answer 26

economic resources that are expected to benefit the business in the future.

something the business has control of or owns.

Question 27

liabilities

Answer 27

debts that are owed to creditors

Question 28

equity

Answer 28

owner’s claims to the assets of the business

Question 29

owner’s capital

Answer 29

the owner’s contributions to a business

Question 30

revenues

Answer 30

income

amounts earned from delivering goods or services to customers.

Question 31

expenses

Answer 31

cost of selling goods or services

Question 32

owners withdrawals

Answer 32

payments of equity to the owner

Question 33

net income

Answer 33

the result of operations that occurs when total revenues are greater than total expenses

Question 34

net loss

Answer 34

the results of operations that occurs when total expenses are greater than total revenues

Question 35

accounts payable

Answer 35

a short term liability that will be paid in the future

Question 36

accounts receivable

Answer 36

they right to receive cash in the future from customers for goods sold or services performed

Question 37

financial statements

Answer 37

business documents that are used to communicate information needed to make business decisions

Question 38

income statement

Answer 38

provides information about profit for a particular period of time

revenues-expenses= net income/loss

Question 39

statement of owner’s equity

Answer 39

shows changes in owner’s capital

oc beginning+
 oc+
 net income-
 net loss-
 ow=
 owner capital ending

Question 40

balance sheet

Answer 40

provides valuable info to financial statement users about assets and liabilities. allows stakeholders to determine the financial position of the company.

assets= liability+ equity

Question 41

statement of cash flows

Answer 41

report of cash receipts and payments for a period of time

Question 42

return on assets

Answer 42

measures how profitably a company uses its assets.

net income÷average total assets