Chapter 1 Terms

Question 1

Accounting

Answer 1

The information system that identifies, records, and communicates the economic events of an organization to interested users

Question 2

Accounting Information System

Answer 2

The system of collecting and processing transaction data and communicating financial information to decision makers

Question 3

Assets

Answer 3

Resources a business owns

Question 4

Auditing

Answer 4

The examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation

Question 5

Balance Sheet

Answer 5

A financial statement that reports the assets, liabilities, and owner’s equity at a specific date

Question 6

Basic Accounting Equation

Answer 6

Assets = Liabilities + Owners Equity

Question 7

Bookkeeping

Answer 7

A part of the accounting process that involves only the recording of economic events

Question 8

Corporation

Answer 8

A business organized as a separate legal entity under state corporation law, having ownership divided into transferrable shares of stock

Question 9

Data Analytics

Answer 9

The use of software and statistics to draw inferences from data

Question 10

Drawings

Answer 10

Withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s)

Question 11

Economic Entity Assumption

Answer 11

An assumption that requires that the activities of the entity be kept separate and distinct from the activities of the owner and all other economic entities

Question 12

Ethics

Answer 12

The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair

Question 13

Expanded Accounting Equation

Answer 13

Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenue - Expenses

Question 14

Expenses

Answer 14

The cost of assets consumed or services used in the process of generating revenue

Question 15

Fair Value Principle

Answer 15

An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)

Question 16

Faithful Representation

Answer 16

Numbers and descriptions match what really existed or happened - they are factual

Question 17

Financial Accounting

Answer 17

The field of accounting the provides economic and financial information for investors, creditors, and other external users

Question 18

Forensic Accounting

Answer 18

An area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud

Question 18

Financial Accounting Standards Board (FASB)

Answer 18

A private organization that establishes generally accepted accounting principles (GAAP) in the United States

Question 19

Generally Accepted Accounting Principles (GAAP)

Answer 19

Common standards the indicate how to report economic events

Question 20

Historical Cost Principle

Answer 20

An accounting principle that states that companies should record assets at their cost

Question 21

Income Statement

Answer 21

A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time

Question 22

International Accounting Standards Board (IASB)

Answer 22

An accounting standard-setting body that issues standards adopted by many countries outside the United States

Question 23

International Financial Reporting Standards (IFRS)

Answer 23

International accounting standards set by the IASB

Question 24

Investments By Owner

Answer 24

The assets an owner puts into the business

Question 25

Liabilities

Answer 25

Creditor claims against total assets

Question 26

Management Consulting

Answer 26

An area of public accounting ranging from development. of accounting and computer systems to support the services for marketing projects and merger and acquisition activities

Question 27

Managerial Accounting

Answer 27

The field of accounting that provides internal reports to help users make decisions about their companies

Question 28

Monetary Unit Assumption

Answer 28

An assumption stating that companies include in the accounting records only transaction data that can be expressed in terms of money

Question 29

Net Income

Answer 29

The amount by which revenues exceed expenses

Question 30

Net Loss

Answer 30

The amount by which expenses exceed revenues

Question 31

Owner’s Equity

Answer 31

The ownership claim on total assets

Question 32

Owner’s Equity Statement

Answer 32

A financial statement that summarizes the changes in owner’s equity for a specific period of time

Question 33

Partnership

Answer 33

A business owned by two or more persons associated as partners

Question 34

Propietorship

Answer 34

A business owned by one person

Question 35

Public Accounting

Answer 35

An area of accounting in which the accountant offers expert service to the general public

Question 36

Relevance

Answer 36

Financial information that is capable of making a difference in a decision

Question 37

Revenues

Answer 37

The increases in assets or decreases in liabilities resulting from the sale of goods or the performance of services in the normal course of business

Question 38

Sarbarnes-Oxley Act (SOX)

Answer 38

Law passed by congress intended to reduce unethical corporate behavior

Question 39

Securities and Exchange Commission (SEC)

Answer 39

A governmental agency that oversees U.S. financial markets and accounting standard-setting bodies

Question 40

Statement of Cash Flows

Answer 40

A financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time

Question 41

Taxation

Answer 41

An area of public accounting involving tax advice, tax planning, preparing tax returns, and representing clients before governmental agencies

Question 42

Transactions

Answer 42

The economic events of a business that are recorded by accountants