Exam 1 Definitions

Question 1

equation that shows a company’s resources (assets) equal
creditors’ and owners’ claims to those resources (liabilities and stockholders’ equity).

Answer 1

Accounting Equation

Question 2

The rules of financial accounting

Answer 2

Generally accepted accounting principles (GAAP)

Question 3

Resources owned by the company

Answer 3

Assets

Question 4

amounts owed to creditors.

Answer 4

Liabilities

Question 5

owners’ claims to resources.

Answer 5

Stockholder’s Equity

Question 6

The amounts earned from selling products or services to customers.

Answer 6

Revenues

Question 7

the costs of providing products and services.

Answer 7

Expenses

Question 8

An economic event that initiates the accounting process of
recording it in the company’s accounting system.

Answer 8

Business Transaction

Question 9

the specific time period (beginning and end) for which the accounts
are aggregated, balanced, and the financial statements are prepared.

Answer 9

Accounting Period

Question 10

summary of the effects of all transactions related to a particular item over a
period of time.

Answer 10

Account

Question 11

a list of all account names used to record transactions of a company.

Answer 11

Chart of Accounts

Question 12

periodic  reports  published  by  the  company  for  the  purpose  of  
providing information (communicate) to external users.

Answer 12

Financial Statement

Question 13

Financial statement that reports the company’s revenues and expenses
over an interval of time.

Answer 13

Income Statement

Question 14

financial statement that summarizes the changes in

stockholders’ equity over an interval of time

Answer 14

Statement of Stockholders’ Equity

Question 15

financial statement that presents the financial position of the company on
a particular date.

Answer 15

Balance Sheet

Question 16

financial statement that measures activities involving cash
receipts and cash payments over an interval of time.

Answer 16

Statement of Cash Flows

Question 17

provides, in a single collection, each account with its
individual transactions and resulting account balance.

Answer 17

General Ledger

Question 18

a chronological record of all transactions affecting a firm.

Answer 18

Journal

Question 19

The process of transferring the debit and credit information from the journal to
individual accounts in the general ledger.

Answer 19

Posting

Question 20

A list of all accounts and their balances before adjusting
entries are completed, showing the total debits and credits.

Answer 20

Unadjusted Trial Balance

Question 21

liquid assets owned by the company. (debit, asset, balance sheet)

Answer 21

Cash

Question 22

amounts the company expects to collect from customers

based on the delivery of service or products. (debit, asset, balance sheet)

Answer 22

Accounts Receivable

Question 23

costs of assets acquired in one period that will be expensed in
a future period. (debit, asset, balance sheet)

Answer 23

Prepaid Expense

Question 24

the cost of the merchandise purchased but not yet sold to customers.
(debit, asset, balance sheet)

Answer 24

Inventory

Question 25

the cost of supplies (pens, paper, toner, etc.) used in the operation of a
business. (debit, asset, balance sheet)

Answer 25

Supplies

Question 26

Promise to pay cash in the future to creditors when purchasing
supplies or materials. (credit, liability, balance sheet)

Answer 26

Accounts Payable

Question 27

Total amounts owed to creditors for loaning money to the
company. (credit, liability, balance sheet)

Answer 27

Notes Payable

Question 28

cash in advance from a customer for products or services to

be provided in the future. (credit, liability, balance sheet)

Answer 28

Deferred Revenue

Question 29

Amount shareholders have invested in the business. (credit,
stockholders’ equity, balance sheet)

Answer 29

Common Stock

Question 30

cumulative amount of net income earned over the life of the
company that has not been distributed to stockholders as dividends. (credit,
stockholders’ Equity, balance sheet)

Answer 30

Retained Earnings

Question 31

the amounts earned from selling products or services to customers.
(credit, revenue, income statement)

Answer 31

Revenues

Question 32

the costs of providing products and services. (debit, expense, income
statement)

Answer 32

Expenses

Question 33

the difference between revenues and expenses. (calculation: revenues
– expense, income statement)

Answer 33

Net Income

Question 34

cash payments to stockholders (owners). (debit, no major category,
stmt. of stockholders’ equity)

Answer 34

Dividend