unit 1

Question 1

The process of planning, recording, analyzing, and interpreting financial information

Answer 1

accounting

Question 2

A planned process designed to compile financial data and summarize the results in accounting records and reports

Answer 2

accounting system

Question 3

Financial reports that summarize the financial condition and operations of a business

Answer 3

financial statements

Question 4

A formal report that shows what an individual owns, what an individual owes, and the difference between the two

Answer 4

net worth statement

Question 5

Anything of value that is owned

Answer 5

asset

Question 6

An amount owed

Answer 6

liability

Question 7

The difference between personal assets and personal liabilities

Answer 7

personal net worth

Question 8

The difference between assets and liabilities

Answer 8

equity

Question 9

The principles of right and wrong that guide an individual in making decisions

Answer 9

ethics

Question 10

The use of ethics in making business decisions

Answer 10

business ethics

Question 11

A business that performs an activity for a fee

Answer 11

service business

Question 12

A business owned by one person

Answer 12

proprietorship

Question 13

A formal written document that describes the nature of a business and how it will operate

Answer 13

business plan

Question 14

Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities

Answer 14

GAAP

Question 15

Financial rights to the assets of a business

Answer 15

equities

Question 16

The amount remaining after the value of all liabilities is subtracted from the value of all assets

Answer 16

owners equity

Question 17

The equation showing the relationship among assets, liabilities, and owner’s equity

Answer 17

accounting equation

Question 18

Any business activity that changes assets, liabilities, or owner’s equity.

Answer 18

transaction

Question 19

A record that summarizes all the transactions pertaining to a single item in the accounting equation

Answer 19

account

Question 20

The name given to an account

Answer 20

account title

Question 21

The difference between the increases and decreases in an account

Answer 21

account balance

Question 22

An account used to summarize the owner’s equity in a business

Answer 22

capital account

Question 23

A person or business to whom a liability is owed

Answer 23

creditor

Question 24

An increase in equity resulting from the sale of goods or services

Answer 24

revenue

Question 25

A sale for which payment will be received at a later date

Answer 25

sale on account

Question 26

The cost of goods or services used to operate a business

Answer 26

expense

Question 27

Assets taken from the business for the owner's personal use

Answer 27

withdrawal

Question 28

Accounting is the language of business

Answer 28

true

Question 29

A creditor would favor a positive net worth

Answer 29

true

Question 30

The principles of right and wrong that guide an individual in making personal decisions is called business ethics

Answer 30

false

Question 31

Keeping personal and business records separate is an application of the business entity concept

Answer 31

true

Question 32

Generally Accepted Accounting Principles, GAAP, allows for flexibility in reporting

Answer 32

false

Question 33

Recording business costs in terms of hours required to complete projects is an application of the unit of measurement concept

Answer 33

false

Question 34

Assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business

Answer 34

true

Question 35

The relationship among assets, liabilities, and owner's equity can be written as an equation

Answer 35

true

Question 36

The accounting equation does not have to be in balance to be correct

Answer 36

false

Question 37

When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage

Answer 37

false

Question 38

When items are bought and paid for later, this is referred to as buying on account

Answer 38

true

Question 39

When cash is paid on account, a liability is increased

Answer 39

false

Question 40

When cash is received from a sale, the total amount of both assets and owner's equity is increased

Answer 40

true

Question 41

The accounting concept Realization of Revenue is applied when revenue is recorded at the time goods or services are sold

Answer 41

true

Question 42

When cash is paid for expenses, the business has more equity

Answer 42

false

Question 43

If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance

Answer 43

false

Question 44

When a company receives cash from a customer for a prior sale, the transaction increases the cash account balance and increases the accounts receivable balance

Answer 44

false

Question 45

A withdrawal decreases owner's equity

Answer 45

true