Vocabulary Exam 1

Question 1

_________ is a process of communication. Its purpose is to provide economic information about an
organization that will be useful to those who need to make decisions regarding that organization.

Answer 1

Accounting

Question 2

_____________ is the difference between the assets of an entity and its liabilities, and consists of two distinct
elements. _______________, as represented by capital stock, is the original contribution to the company by
the owners. _______________ represents the earnings of the company that have not been paid out in dividends.

Answer 2

Stock Equity, Contributed capital, Retained Earnings

Question 3

A _____________ is a statement of financial position that is dated at a specific point in time. Its purpose is to show the financial position of an entity as of a particular point in time. The purpose of the _______________ is to summarize the revenues and expenses of a company for a period of time. It is an indicator of a company’s
_____________ for that period.

Answer 3

Balance Sheet, Income Statement, Profitability

Question 4

The Securities and Exchange Commission has generally allowed the accounting profession, through the _______________, to establish accounting rules in the United States. These rules, or guidelines, are known as _______________.

Answer 4

Financial Accounting Standards Board, GAAP

Question 5

Two important principles in accounting are the _______________ principle, which states that revenue should be reported when it is earned, and the _______________ principle, which states that expenses should be reported in the same period as the revenue that the expense helped generate. Revenues and expenses are not recorded based on whether cash has been received or paid. Together, these two principles define the _______________ basis of accounting.

Answer 5

Revenue Recognition, Matching, Accrual

Question 6

The _______________ system of accounting means that every transaction must be entered into at least two accounts and in such a way that the equality of the balance sheet equation is maintained.
(14) omit

Answer 6

Double Entry, omit

Question 7

__________ shows changes in cash for periods of time

Answer 7

Statement of Cash Flows

Question 8

___________ aka statement of financial position shows resources and claims to resources at point in time

Answer 8

Balance sheet

Question 9

________ event that has financial impact on business and that can be reliably measured in $

Answer 9

Transaction

Question 10

__________ collection of all accounts manual system: giant notebook with pages for each account

Answer 10

General ledger

Question 11

__________ simplified or condensed version of an account

Answer 11

T-accounts

Question 12

___________ means left (Dr.)

Answer 12

Debit

Question 13

________ means right (Cr.)

Answer 13

Credit

Question 14

Investors/potential investors
Lenders/creditors
Analysts
Outside day-to-day operation

Answer 14

Financial accounting

Question 15

Management
More details
Historical and forecast

Answer 15

Managerial accounting