Exam (elaborations)
Accounting Exam #1 Ch 1-3 Questions and Answers
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- Accounting
Accounting Exam #1 Ch 1-3 Questions and Answers
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Accounting Exam #1 Ch 1-3 Questionsand Answers
GAAP - Answer-concepts and rules that govern financial accounting, aims to make
information relevant, reliable, and comparable
SEC - Answer-securities and exchange commission, a government agency, that
oversees proper use of GAAP
FASB - Answer-financial accounting standards board, a private sector group that sets
both broad and specific principles
IASB - Answer-international accounting standards board, an independent group
(consisting of individuals from many countries) that issue IFRS (international financial
reporting standards)
Measurement (cost) Principle - Answer-accounting information is based on actual cost
(cash or equal-to-cash basis)
Revenue Recognition Principle - Answer-provides guidance on when a company must
recognize revenue
1) revenue is recognized when earned
2) proceeds from selling products and services need not be in cash
3) revenue is measured by the cash received plus the cash value of any other items
received
Matching (expense recognition) Principle - Answer-prescribes that a company record
the expenses it incurred to generate the revenue reported
Full Disclosure Principle - Answer-prescribes that a company report the details behind
financial statements that would impact users' decisions
Going-Concern Assumption - Answer-accounting information reflects a presumption that
the business will continue operating instead of being closed or sold
Monetary Unit Assumption - Answer-transactions and events can be expressed in
monetary unites
Time Period Assumption - Answer-presumes that the life of a company can be divided
into time periods
Business Entity Assumption - Answer-a business is accounted for separately from other
business entities, including its owner
, Accounting Equation - Answer-Assets= Liabilities+Owner's Equity
Assets=Liabilites+Common Stock-Dividends+Revenues-Expenses
Income Statement - Answer-a company's revenues and expenses along with the
resulting net income or loss over a period of time due to earnings activities
-revenues
-expenses
Statement of Retained Earnings - Answer-explains changes in equity from net income
or loss and from any dividends over a period of time
Balance Sheet - Answer-describes a company's financial position at a point in time
-assets
-liabilities
-equity
Statement of Cash Flows - Answer-identifies cash inflows (receipts) and cash outflows
(payments) over a period of time
-operating activities (used up in short term)
-investing activities (long term assets)
-financing activies
General Ledger - Answer-a record containing all accounts used by a company
Asset Accounts - Answer-cash
accounts receivable
note receivable
prepaid accounts
supplies accounts
equipment accounts
building accounts
land
Liability Accounts - Answer-accounts payable
note payable
unearned revenue accounts
accrued liabilities- amounts owed but not yet paid (wages payable, taxes payable,
interest payable)
Equity Accounts - Answer-owner investments
owner distributions
revenue accounts (fees earned, rent revenue, interest revenue)
expense accounts
Chart of Accounts - Answer-a list of all ledger accounts
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