FA Chapter 1

Question 1

Investor

Answer 1

Contributes Money to business (maybe get dividends)

Question 2

Creditor

Answer 2

Lender plus interest

Question 3

Four Basic Financial Statements

Answer 3

1. Balance Sheet
2. Income Statement
3. Statement of Retained Earnings
4. Statement of cash Flows

Question 4

A=

Answer 4

L+SE

Question 5

Assets=

Answer 5

Liabilities+Stockholders Equity

Question 6

Accrual Account

Answer 6

Revenue When It’s Earned, Expense When It’s Incurred

Question 7

GAAP

Answer 7

Generally Accepted Accounting Principles

Question 8

Securities and Exchange Commission (SEC)

Answer 8

has been given broad powers to determine measurement rules for financial statements.

Question 9

Financial Accounting Standards Board (FASB) is NOT

Answer 9

Part of the government

Question 10

Financial Accounting Standards Board (FASB)

Answer 10

the body to formulate GAAP.

Question 11

What do independent auditors do?

Answer 11

ØAuditors express an opinion as to the fairness of the financial statements.
ØIndependent auditors have responsibilities that extend to the general public.
ØThe PCAOB issues detailed auditing standards that auditors must follow.

Question 12

The American Institute of Certified Public Accounts

Answer 12

requires that all members adhere to a professional code of ethics.

Question 13

Sole Proprietorship

Answer 13

owned by a single individual.

Question 14

Partnership

Answer 14

owned by two or more individuals.

Question 15

Corporation

Answer 15

ownership represented by shares of stock.

Question 16

Advantages of Corporation

Answer 16

Limited liability, Continuity of life, Ease of transfer of ownership, Opportunity to raise large amounts of money

Question 17

Disadvantages of a corporation

Answer 17

Double Taxation

Question 18

Balance Sheet

Answer 18

reports the amount of assets, liabilities, and stockholders’ equity of an accounting entity at a point in time.

Question 19

Income Statement

Answer 19

reports the revenues less the expenses of the accounting period.

Question 20

Statement of Retained Earnings

Answer 20

reports the way that net income and distribution of dividends affected the financial position of the company during the accounting period.

Question 21

Statment of Cash Flows

Answer 21

reports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing.

Question 22

Contributed Capital=

Answer 22

Common Stock

Question 23

Common Stock=

Answer 23

Contributed Capital

Question 24

Rent expense includes…

Answer 24

months not yet paid for