Chapter 2 - Investments and Financing Decisions and the Accounting System

Question 1

Two requirements for accounting information to be useful

Answer 1

To be useful accounting information must be RELEVANT and a FAITHFUL REPRESENTATION

Question 2

The assumption that business activities must be accounted for separately from from the activities of its owners is…

Answer 2

The SEPARATE ENTITY ASSUMPTION

Question 3

The assumption that a business will continue operating into the forseeable future…

Answer 3

The GOING CONCERN ASSUMPTION

Question 4

The assumption that business entity accounts in terms of the national monetary unit without adjustment for changes in purchasing power….

Answer 4

The MONETARY UNIT ASSUMPTION

Question 5

Accountants measure the elements of the balance sheet using…

Answer 5

The MIXED-ATTRIBUTE MEASUREMENT MODEL

Question 6

Assets are listed in order of…

Answer 6

LIQUIDITY

Question 7

Financing provided by owners is known as…

Answer 7

Contributed Capital

Question 8

Financing provided by operations is known as…

Answer 8

EARNED CAPITAL or RETAINED EARNINGS

Question 9

List 5 Current Assets constituting total current assets

Answer 9

Cash, Short-term investments, Accounts receivable, Supplies, prepaid expenses

Question 10

List 4 credits to non-current assets and 1 debit to non-current assets

Answer 10

Land, Buildings, Equipment, Intangible Assets, Accumulated Depreciation (Debit)