Exam (elaborations)
ACG 2021 Exam 1_ Chapters 1, 2, & 3 (1)
ACG 2021 Exam 1_ Chapters 1, 2, & 3 (1)
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ACG 2021 Exam 1: Chapters 1, 2, & 3The purpose of Financial Accounting - ANS-To measure business activities of a company and
communicate that information to external parties for decision-making purposes
Auditors - ANS-trained individuals hired by a company as an independent party to express a
professional opinion of the accuracy of that company's financial statements
Accrual-basis Accounting - ANS-record revenue when we earn them and record expenses with
related expenses, regardless of when cash is received or paid
Cash-basis Accounting - ANS-record revenues at the time cash received and expenses at the
time cash is paid.
GAAP - ANS-Generally Accepted Accounting Principles: the rules of financial accounting
Revenue Recognition Principal - ANS-record revenue in the period in which we earn it
Matching Principal - ANS-recognizing expenses in the same period as the revenues they help
generate
Accounting Equation - ANS-A = L + SE
A company's assets = that company's liabilities and stock-holders' equity
Assets - ANS-resources owned by a company
(cash, land, equipment, accounts receivable...)
Liabilities - ANS-amounts owed to creditors
(accounts payable, notes payable)
Stockholders' Equity - ANS-owners' claims to resources
(common stock, retained earnings)
Revenues - ANS-the amounts earned from selling products or services to customers
Expenses - ANS-the costs of providing products and services
Net Income - ANS-the difference between revenues and expenses
, Account - ANS-summary of the effects of all transactions related to a particular item over a
period of time.
Chart of Accounts - ANS-a list of all account names used to record transactions of a company.
Operating Cycle - ANS-the average time between purchasing or acquiring inventory and
receiving cash proceeds from its sale.
General Ledger - ANS-all accounts used to record the company's transactions
Journal - ANS-a chronological record of all the transactions affecting a firm
Posting - ANS-the process of transferring the debit and credit informations from the journal to
individual accounts in the general ledger
Trial Balance - ANS-a list of all accounts and their balances at a particular date, showing the
total debits and credits
Adjusting Entries - ANS-to record events that have occurred but that have not been recorded,
such as recording insurance expense at the end of the month from a prepaid policy
Adjusted Trial Balance - ANS-list of all accounts and their balances after we have updated
account balances for adjusting entries.
Financial Statements - ANS-periodic reports published by the company for the purpose of
providing interval of time to external parties
Income Statement - ANS-Revenues + Expenses = Net Income
(financial statement that reports the company's revenues and expenses over an interval of time)
Statement of Stockholders' Equity - ANS-Common Stock + Retained Earnings
(financial statement that summarizes the changes in stockholders' equity over an interval of
time)
Balance Sheet - ANS-Accounting Equation used to check all balances (Assets, Liabilities, S.E.)
(financial statement that presents the financial position of the company on a particular date)
Statement of Cash Flows - ANS-financial statement that measures activities involving cash
receipts and cash payments over an interval of time.
Operating
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