Exam (elaborations)
Fundamentals of Accounting - Exam 1 Questions with Correct Answers
- Course
- Accounting
- Institution
- Accounting
Fundamentals of Accounting - Exam 1 Questions with Correct Answers
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Fundamentals of Accounting - Exam 1Questions with Correct Answers
*Accounting* - Answer-a system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers
Financial Accounting Reports - Answer-- Periodic financial statements and related
disclosures
- external decision makers
- creditors, investors, suppliers, customers
Managerial Accounting Reports - Answer-- Detailed plans and continuous performance
reports
- internal decision makers
- managers
*Balance Sheet* - Answer-(Statement of Financial Position) reports the amount of
assets, liabilities, and stockholders' equity of an accounting entity at a point in time.
Structure of Balance Sheet - Answer-1. *Name of entity,* Maxidrive Corp.
2. *Title of the Statement,* Balance Sheet.
3. *Specific Date of the Statement,* At December 31, 2010
4. *Unit of Measure* (in thousands of dollars)
*Accounting Entity* - Answer-the organization for which financial data are to be
collected
*Basic Accounting Equation* (Balance Sheet Equation) - Answer-Assets = Liabilities +
Stockholders' Equity
- Assets: economic resources
- Liabilities + Stockholders' Equity: sources of financing for the economic resources
- Liabilities: from creditors
- Stockholders' Equity: from stockholders
Financial Position - Answer-the economic resources that the company owns and the
sources of financing for those resources
Assets - Answer-the economic resources owned by the company; expected to provide
future benefits owned by the entity as a result of past transactions
Balance Sheet Assets: Cash - Answer-the amount of cash in the company's bank
accounts
, Balance Sheet Assets: Accounts Receivable - Answer-- amounts owed by customers
from prior sales
- promise of future payment
- later collected in cash
Balance Sheet Assets: Inventories - Answer-parts and completed but unsold 'disk
drives' (product)
Balance Sheet Assets: Plant and Equipment - Answer-factories and production
machinery
Balance Sheet Assets: Land - Answer-land on which the factories are built
Liabilities - Answer-the company's debts or obligations
Accounts Payable - Answer-- on the balance sheet under liabilities
- amounts owed to suppliers for prior purchases
- Result from the purchase of goods or services from suppliers on credit without a
formal written contract (or a note).
Notes Payable - Answer-- on the balance sheet under liabilities
- amounts owed on written debt contracts
- result from cash borrowings based on a formal written debt contract with lending
institutions such as banks
Stockholders' Equity - Answer-indicates the amount of financing provided by owners of
the business and earnings.
Contributed Capital - Answer-- On the balance sheet under stockholders equity
- amounts invested in the business by stockholders
- the investment of cash and other assents in the business by the owners
Retained Earnings - Answer-- On the balance sheet under stockholders equity
- past earnings not distributed to stockholders
- the amount of earnings (profits) reinvested n the business (and thus not distributed to
stockholders in the form of dividends)
The *Income Statement* (Statement of Income, Statement of Earnings, Statement of
Operation) - Answer-- reports the revenues less the expenses of the accounting period
(Revenue - Expenses = Net Income)
- reports the accountant's primary measure of performance in a business (profit, net
income in accounting)
*Accounting Period* - Answer-- is the time period covered by the financial statements
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