Chapter 2: Investing and financing decisions on the balance sheet

Question 1

Stockholders’ equity

Answer 1

the financing provided by the owners and business operations

Question 2

Contributed Capital

Answer 2

the financing provided by the owners and business operations

Question 3

Retained Earnings

Answer 3

• cumulative earnings of a company

- not distributed to the owners and are reinvested in the business

Question 4

Materiality

Answer 4

exception suggests that
small amounts that are not likely to influence a user’s decision can be accounted for in the most cost-beneficial manner.

Question 5

Conservatism

Answer 5

exception suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses.

Question 6

Transaction

Answer 6

(1) an exchange of assets or services for assets, services, or promises to pay between a business and one or more external parties to a business or (2) a measurable internal event such as the use of assets in operations.

Question 7

Debit

Answer 7

left side

Question 8

Credit

Answer 8

right side