Exam 1

Question 1

What is the Accounting Equation?

Answer 1

Assets = Liabilities + Owner’s Equity

Question 2

Assets

Answer 2

Resources available to the person or business

Question 3

Liabilities

Answer 3

Money that is owed to another

Question 4

Owner’s Equity

Answer 4

The Net worth of the person or business

Question 5

What are the Components of a set of Financial Statements?

Answer 5

Balance Sheet, Income Statement, Statement of Cash Flows

Question 6

Balance Sheet

Answer 6

Reflects Assets, and equity. PERMANENT

Question 7

Income Statement

Answer 7

Reflects the revenue and expenses. TEMPORARY (Resets every year)

Question 8

Statement of Cash Flows

Answer 8

Reflects the sources and uses of the entity’s cash

Question 9

Account

Answer 9

The Basic storage unit in Accounting

Question 10

Permanent Accounts

Answer 10

Located on Balance Sheets (assets, liabilities, and equity)

Question 11

Temporary accounts

Answer 11

(revenue, expenses, gains, and losses are reported on the income sheet.

Question 12

Historical Cost Method

Answer 12

The idea that a company should record costs at what they were, not their current market value