Chapter 1: Business Decisions and Financial Accounting

Question 1

a system that collects and processes financial information about an organization and reports that information to decision makers

Answer 1

accounting

Question 2

measurement of information about a business in the monetary unit (dollars or other national currency)

Answer 2

unit of measure

Question 3

an unincorporated business owned by two or more persons

Answer 3

partnership

Question 4

a company that sells shares of its stock privately and is not required to release its financial statements to the public

Answer 4

private company

Question 5

and incorporated business that issues shares of stock as evidence of ownership

Answer 5

corporation

Question 6

buying and selling productive resources with long lives

Answer 6

investing activities

Question 7

transactions with lenders (borrowing and repaying cash) and stockholder (selling company stock and paying dividends)

Answer 7

financing activities

Question 8

activities directly related to running the business to earn profit

Answer 8

operating activities

Question 9

securities and exchange commission

Answer 9

SEC

Question 10

financial accounting standards board

Answer 10

FASB

Question 11

a company that has its stock bought and sold on stock exchanges and is required to publicly release its financial statements

Answer 11

public company

Question 12

; the rules used in the US to calculate and report information in the financial statements

Answer 12

Genrally accepted accounting principles(GAAP)

Question 13

the financial reports of a business are assumed to include the results of only that business’s activities

Answer 13

separate entity

Question 14

the resources owned by a business

Answer 14

assets

Question 15

financial information that depicts the economic substance of businesses actvities

Answer 15

faithful representation

Question 16

the total amounts invested and reinvested in the business by its owners

Answer 16

stockholder’s equity

Question 17

the cost of business necessary to earn revenues

Answer 17

expenses

Question 18

a feature of financial information that allows it to influence a decision

Answer 18

relevance

Question 19

earned by selling goods or services to customers

Answer 19

revenues

Question 20

the amounts owed by a business

Answer 20

liabilities

Question 21

form of business owned and usually opporated by one individual, all profits or losses become part of the taxable income of the owner

Answer 21

sole proprietorship

Question 22

which finanical statement provides the information regarding the source of financing?

Answer 22

balance sheet

Question 23

suppliers, banks, and anyone to whom money is owed

Answer 23

creditors

Question 24

existing and potentioal stockholders

Answer 24

investors

Question 25

short title for the members of a companies board of directors

Answer 25

directors

Question 26

which financial statement provides the information regarding profitability?

Answer 26

income statement

Question 27

which financial statement would report the business activities responsible for the change in cash?

Answer 27

statement of cash flows

Question 28

which financial statement provides the information regarding the company’s dividends?

Answer 28

statement of retained earnings

Question 29

what is included on an income statement?

Answer 29

revenues - expenses = net income

Question 30

what is included on the staement of retained earnings?

Answer 30

beginning and ending retained earnings, net income, dividends

Question 31

what is included on the balance sheet?

Answer 31

assets = liabilities + stockholder’s equity

Question 32

what is included on the statement of cash flows?

Answer 32

the business’s: investing, financing, and operating activities that cause the cash balance to change over time

Question 33

owed liability

Answer 33

accounts payable

Question 34

right to collect from customers for sales and services provided on credit

Answer 34

accounts receivable

Question 35

what are the 4 main groups of external users?

Answer 35

• creditors
• investors
• directors
• government

Question 36

states that business transactions are separate from and should exclude the personal transactions of the owners

Answer 36

separate entity assumption

Question 37

what are retained earnings?

Answer 37

the amount of profit a company has left over after paying its direct and indirect costs, income taxes, and dividends to shareholders

Question 38

where do retained earnings go? and as what

Answer 38

balance sheet; SE

Question 39

dividends -
account type; statement

Answer 39

dividend; statement of retained earnings

Question 40

common stock - account type; statement

Answer 40

SE; balance sheet

Question 41

sales revenue - account type; statement

Answer 41

revenue; income statement

Question 42

equipment - account type; statement

Answer 42

asset; balance sheet

Question 43

cash - account type; statement

Answer 43

asset; balance sheet

Question 44

notes payable - account type; statement

Answer 44

liability; balance sheet

Question 45

accounts payable - account type; statement

Answer 45

liablity; balance sheet