exam 1 ent3451

Question 1

4 principles

Answer 1

1. cost principle
2. monetary unit assumption
3. going concern assumption
4. economic entity

Question 2

cost principle

Answer 2

assets and services should be recorded at their actual cost

Question 3

going concern assumption

Answer 3

assumption entity will remain in operation for foreseeable future

Question 4

monetary unit assumption

Answer 4

items on financial statements are measured in monetary unit (US dollars)

Question 5

A corporation…

Answer 5

is a separate taxable entity

Question 6

assets

Answer 6

economic resource expected to benefit the business in the future

Question 7

liability

Answer 7

debts owed to creditors

Question 8

equity

Answer 8

the owner’s claims to the assets (assets-liabilities)

Question 9

contributed capital

Answer 9

owner contributions to entity

Question 10

common stock

Answer 10

the basic ownership of every corporation

Question 11

revenues

Answer 11

earnings resulted from performing sevices

Question 12

expenses

Answer 12

cost of performing services

Question 13

dividends

Answer 13

distributions to stockholders

Question 14

retained earnings

Answer 14

equity earned by profitable operations that is not distributed to stockholders

Question 15

interest equation

Answer 15

interest= principle x interest rate x time

Question 16

depreciation equation

Answer 16

straight-line depreciation= (cost - residual value) / useful life

Question 17

income statement

Answer 17

revenues - expenses

Question 18

statement of retained earnings

Answer 18

retained earnings + net income - dividends

Question 19

balance sheet

Answer 19

assets vs. liabilities+ stockholder’s equity (common stock + retained earnings)

Question 20

accounting process

Answer 20

1. journal entry
2. post to ledger t-account
3. unadjusted trial balance
4. income statement->statement of retained earnings->balance sheet
5. adjustments
   
   • depreciation
   • accrued salaries
   • accrued interest