Exam 1 Prep (Definitions)

Question 1

Generally Accepted Accounting Principles

Answer 1

GAAP, faithful representation (complete, error-free, neutral information)

Question 2

Cost Principle

Answer 2

Assets and services must be recorded at historical cost, not fair value

Question 3

Matching Principle

Answer 3

Revenues and expenses must be recorded together in the same accounting period

Question 4

Fair Value

Answer 4

Market value, price if the asset was sold today

Question 5

Accounting Equation

Answer 5

Assets=Liabilities-Stockholder’s Equity

Question 6

Unearned Revenue

Answer 6

A company receives cash before distributing the product (liability)

Question 7

Accounts Receivable

Answer 7

A company performs a service, but doesn’t receive cash (asset)

Question 8

Contra Account

Answer 8

An account that relies on the existence of another account (depreciation accounts are contra accounts)

Question 9

Revenue Recognition Principle

Answer 9

Revenues and expenses are recorded when earned/incurred, not when received/paid

Question 10

Residual Value

Answer 10

Value of an asset at the end of its usable life

Question 11

Accrued Expenses

Answer 11

Expenses incurred but not paid

Question 12

Accrued Revenue

Answer 12

Revenues earned but not collected

Question 13

Deferred Expense

Answer 13

Prepaid expenses (rent, utilities)

Question 14

Deferred Revenue

Answer 14

Unearned Revenue (liability) (apartment security deposit)

Question 15

Assets (D/C)

Answer 15

Debit +
Credit -

Question 16

Expenses (D/C)

Answer 16

Debit +
Credit -

Question 17

Dividends (D/C)

Answer 17

Debit +
Credit -

Question 18

Liabilities (D/C)

Answer 18

Debit -
Credit+

Question 19

Revenue (D/C)

Answer 19

Debit -
Credit +

Question 20

Common Stock (D/C)

Answer 20

Debit -
Credit +

Question 21

Gains (D/C)

Answer 21

Debit -
Credit +

Question 22

Losses (D/C)

Answer 22

Debit +
Credit -