Exam 1

Question 1

Financial Accounting

Answer 1

process of identifying, measuring, and recording information about the
resources of a business

Question 2

Asset

Answer 2

resources the company owns or has a right to

Question 3

liability

Answer 3

an obligation the company must satisfy or pay in the future

Question 4

stockholders equity

Answer 4

stockholders’ equity
(corporation), Owner’s equity (sole proprietorship), Owners’ equity (partnership): what is left over of assets after subtracting liabilities

Question 5

stock

Answer 5

amount invested into the company in exchange for shares of ownership

Question 6

retained earnings

Answer 6

he amount of net income (or earnings) since the company began that has been kept inside the company

Question 7

beginning retained earnings

Answer 7

retained earnings from all prior periods

Question 8

net income

Answer 8

revenues minus expenses, earnings

Question 9

dividends

Answer 9

distribution of earnings to stockholders. These are paid periodically

Question 10

revenues

Answer 10

Increase in assets from the sale of goods or services to a customer

Question 11

earned

Answer 11

product or service provided

Question 12

expenses

Answer 12

Cost of assets consumed or liabilities created, in the operation of a business

Question 13

incurred

Answer 13

resource used

Question 14

financial reporting concepts

Answer 14

qualities of useful information, assumptions, and principles

Question 15

revenue recognition principle

Answer 15

Revenue is recorded when earned

Question 16

expense recognition (matching)

Answer 16

Expenses are recorded when incurred. Expenses should be recorded in the same
time period (matched) with the revenues they help generate

Question 17

economic entity assumption

Answer 17

activities of the business be kept separate from the activities of the owner

Question 18

qualities of useful information

Answer 18

fundamental characteristics are relevance and faithful
representation

Question 19

relevance

Answer 19

make a difference in a decision

Question 20

time period assumption

Answer 20

the life of the business can be divided into artificial time periods
(month, quarter, year)

Question 21

faithful representation

Answer 21

Reflects what really existed or happened