Chapter 1- Intro To Accounting And Business

Question 1

Accounting

Answer 1

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

Question 2

Generally Accepted Accounting Principles (GAAP)

Answer 2

A collection of accounting standards, principles, and assumptions that define how financial information will be reported

Question 3

Measurement Principle

Answer 3

Determines the amounts to be recorded and reported, the amounts are required to be objective and verifiable (independent, unbiased evidence and confirmed by third parties)

Question 4

Historical Cost Principle

Answer 4

Assets are recorded at the cost of acquisition and the amount recorded does not normally change until another transaction occurs
Simply means that assets are recorded as the price bought and does not change until another item is bought

Question 5

Revenue Recognition Principle

Answer 5

Determines when revenue is recorded in the accounting records

Question 6

Expense Recognition Principle

Answer 6

Aka the matching Principle
Requires expenses to be recorded in the same period as related revenue
This allows for reporting of a profit or loss for the period

Question 7

Assets

Answer 7

Resources owned by the business

Cash, Accounts receivable, land, supplies

Question 8

Liabilities

Answer 8

Debts or the rights of creditors

Anything that is payable or if something is paid on account is a liablitlty

Question 9

Stockholders’ Equity

Answer 9

Rights of owner

Common stock, fees earned, and any expenses(expenses are reported as a loss in cash)

Question 10

The Accounting Equation

Answer 10

Assets (Cash, land, supplies, accounts receivable) = Liabilities (Accounts payable) + Stockholders’ Equity (common stock - dividends + fees Earn - Wages Expenses - Rent expenses - Supplies expense - Utilities expense - miscellaneous expense)

Question 11

Business Transactions

Answer 11

Anything a business does

Question 12

Accounts Payable

Answer 12

An IOU, liability created by a purchase on account

Question 13

Prepaid Expense

Answer 13

Items like supplies that are used in a business that are used in teh future

Question 14

Common Stock

Answer 14

Proof of ownership of a company

Question 15

Dividends

Answer 15

Distributions of earnings to stockholders

Question 16

Income Statement

Answer 16

Summary of the revenue and expense for a specific period of time
Simple just shows expenses and fees earned

Question 17

Statement of stockholders’ equity

Answer 17

Summary of changes in stockholders’ equity that have occurred during a specific period of time
Shows the common stock and the dividends

Question 18

Balance Sheet

Answer 18

List of the assets, liabilities, and stockholders’ equity as a specific date
Aka all the final assets, liabilities and stockholders’ equity

Question 19

Statement of cash flow

Answer 19

A summary of cash receipts and cash payments for a specific period of time (operating, investing, financing)