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Accounting 101 Final Study guide || Questions and 100% Verified Answers.
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Know the 3 forms of business entities correct answers Sole proprietorship- A single owner Partnership- has two or more parties as co-owners each is an owner Corporation- Owned by stockholders, or shareholders, who own stock representing share of ownership in the corporation. Definition of Reve...

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  • August 9, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • know the 3 forms of business entities

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  • Accounting 101
  • Accounting 101

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Accounting 101 Final Study guide || Questions and 100%
Verified Answers.
Know the 3 forms of business entities correct answers Sole proprietorship- A single owner
Partnership- has two or more parties as co-owners each is an owner
Corporation- Owned by stockholders, or shareholders, who own stock representing share of
ownership in the corporation.

Definition of Revenues correct answers Increase in retained earnings from delivering goods or
services to customers or clients.

Definition of Expenses correct answers Decrease in retained earnings that results from
operations; the cost of doing business

Internal Users correct answers Users of accounting information are those individuals directly
involved in managing and operating the organization

External Users correct answers Users of accounting information are NOT directly involved in
running the organization

FASB - responsible for GAAP (accounting principles) correct answers Financial Accounting
Standards Board -set accounting standards

Accounting Equation correct answers Assets=Liabilities + Stockholder's equity

Know the 3 activities that business engage in and give examples of each activity. correct answers
Financing: creates revenues, stocks

Investing: increase/decrease long-term activities, plants equipment

Operating: loans, pay dividends, repurchase its own stock, selling

The International Accounting Standards Board is responsible for developing a single set of
worldwide accountings standards (IFRS) correct answers ...

These standards will help companies to reduce accounting costs, make it easier to acquire foreign
companies, and facilitate comparisons between foreign companies. correct answers IFRS-
International Accounting Standards Board

Know the primary objective of financial reporting correct answers Provide financial information
about the reporting entity that is useful to existing and potential investors, lenders, and other
creditors in making decision.

What makes information relevant? correct answers Comparability, verifiability, timeliness, and
understandability.

, It must be capable of making a difference to the decision maker, having predictive or confirming
value. It must be material, which means it must be important enough to the informed user.

Financial information should be understandable to whom correct answers Existing and potential
investors, lenders and other creditors, those willing to spend the necessary time to understand it.

Balance Sheet correct answers lists assets, liabilities and owners' equity
Tells what obligations will be due in the future

Income Statement correct answers revenues minus expenses equal net income
Summarizes results, operations for a period of time

Net Income = correct answers Revenues - Expenses
Single most important item on financial statement

Assets are recorded at historical/original cost because correct answers it is objective and
verifiable

Review various source documents. Source documents indicate a transaction has occurred. Ex:
Invoice, check, time card, shipping/receiving documents. correct answers A piece of paper that
has been used to record a transaction

Owner invests in business correct answers Cash increases, Stockholders equity (common stock)
increases

Purchases supplies for cash correct answers Cash Decreases, Supplies increase

Purchase supplies on account correct answers Supplies increase, Accounts payable (liabilities)
increases

Earn a revenue and receive a promise of cash at a later date correct answers Accounts receivable
increases, retained earnings increase

Left Side correct answers Debit

Right Side correct answers Credit

Initial recording of transaction is made in a journal/general journal (called journal entry,
journalizing). correct answers The entry is then posted to ledger/general ledger.

Know what is meant by a double-entry accounting system correct answers Accounting records
the dual effects on the entity. Each transaction affects at least two accounts.
You give something, you receive something in return.

What is the purpose of a trial balance? correct answers A trial balance lists all accounts with their
balances, assets first, then liabilities and stockholders' equity.

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