chapters 1-5

Question 1

Whats the purpose of accounting?

Answer 1

Decision making

Question 2

Why do we need rules for accounting?

Answer 2

Every accountant must follow the same language and rules. Good info = Consistant info

Question 3

Business entity concept

Answer 3

Accounting for a business or organization is kept separate from personal affaires.

Question 4

Cost principle

Answer 4

Accounting purchases must be recorded at their cost price. When a business buys an asset it must be listed at the price the business paid and not the market value.

Question 5

Conservatism

Answer 5

Ensure assets are not overstated and liabilities are not understated.

Question 6

Consistency principle

Answer 6

Must use same accounting policies. If you change, you must disclose and show impact.

Question 7

Ledger and Account

Answer 7

All accounts together form a ledger. Ledger is used to store bookkeeping entries.

Question 8

Purchased on account

Answer 8

Not paid for item at time of purchase
An Asset=debit
A/P=credit

Question 9

Sold on credit

Answer 9

Didn’t receive money when sold
A/R=debit
Capital=credit

Question 10

Payment on account

Answer 10

Paying back an item not paid for at the time
Bank=credit
A/P=debit

Question 11

Receipt on account

Answer 11

Receiving money that is owed to you
Bank=debit
A/R=credit