Chapter 1 Glossary

Question 1

Account payable

Answer 1

Liabilities for amounts incurred from purchases of products or services in the normal operations of a business

Question 2

Accounting

Answer 2

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

Question 3

Accounting equation

Answer 3

Assets = Liabilities + Stockholders equity

Question 4

Accounting period concept

Answer 4

An accounting concept in which accounting data are recorded and summarized in a period process

Question 5

Accounts receivable

Answer 5

Receivables created by selling merchandise or services on credit

Question 6

Adequate disclosure concept

Answer 6

An accounting concept that requires financial statements to include all relevant data a reader needs to understand the financial condition and performance of a business

Question 7

Administrative expenses

Answer 7

Expenses incurred in the administration or general operations of the business; costs not directly related to selling, such as officer salaries

Question 8

Administrative expenses

Answer 8

Expenses incurred in the administration or general operations of the business; costs not directly related to selling, such as officer salaries

Question 9

Assets

Answer 9

The resources owned by a business

Question 10

Balance sheet

Answer 10

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 year

Question 11

Bonds payable

Answer 11

A type of long-term debt financing with a face amount that is in the future with interest that is normally paid semiannually

Question 12

Business

Answer 12

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

Question 13

Business entity concept

Answer 13

An accounting concept that limits the economic data in the accounting system of a specific business or entity to data related directly to the activities of that business or entity

Question 14

Business stakeholder

Answer 14

A person or entity that has an interest in the economic performance of a business

Question 15

Chief financial officer

Answer 15

The head of the accounting department in a company; aka comptroller

Question 16

Common stock

Answer 16

The basic type of stock issued to Stockholders of a corporation when a corporation has issued only one class of stock

Question 17

Common stock

Answer 17

The basic type of stock issued to Stockholders of a corporation when a corporation has issued only one class of stock

Question 18

Corporation

Answer 18

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

Question 19

Cost concept

Answer 19

An accounting concept that determines the amount initially entered into the accounting records for purchases

Question 20

Cost of goods concept

Answer 20

The cost of products sold; also may be referred to as cost of merchandise sold or cost of sales