Financial Accounting Ch. 1-3 Exam Questions and Answers
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Course
Financial Accounting
Institution
Financial Accounting
accounting - Answer-information system that identifies, records, and communicates the economic events of an organization
annual report - Answer-report prepared by corporate management that presents financial information and an independent auditor's report
Assets - Answer-Resources owned by a ...
Financial Accounting Ch. 1-3 Exam
Questions and Answers
accounting - Answer-information system that identifies, records, and communicates the
economic events of an organization
annual report - Answer-report prepared by corporate management that presents
financial information and an independent auditor's report
Assets - Answer-Resources owned by a business
Auditor's report - Answer-A report prepared by an independent outside auditor stating
the auditor's opinion as to the fairness of the presentation of the financial position and
results of operations and their conformance with generally accepted accounting
standards.
Balance sheet - Answer-A financial statement that reports the assets and claims to
those assets at a specific point in time.
Certified Public Accountant (CPA) - Answer-An individual who has met certain criteria
and is thus allowed to perform audits of corporations.
Common stock - Answer-total amount paid in by stockholders for the shares they
purchase.
Comparative statements - Answer-A presentation of the financial statements of a
company for more than one year.
Corporation - Answer-A business organized as a separate legal entity having ownership
divided into transferable shares of stock.
Dividends - Answer-Payments of cash from a corporation to its stockholders.
Expenses - Answer-The cost of assets consumed or services used in the process of
generating revenues.
Income statement - Answer-A financial statement that presents the revenues and
expenses and resulting net income or net loss of a company for a specific period of
time.
Liabilities - Answer-The debts and obligations of a business. Liabilities represent the
amounts owed to creditors.
, Management discussion and analysis (MD&A) - Answer-A section of the annual report
that presents management's views on the company's ability to pay near-term
obligations, its ability to fund operations and expansion, and its results of operations.
Net income - Answer-The amount by which revenues exceed expenses.
Net Income = Revenues > Expenses
Net loss - Answer-The amount by which expenses exceed revenues.
Net Loss = Expenses > Revenue
Notes to the financial statements - Answer-Notes that clarify information presented in
the financial statements, as well as expand upon it where additional detail is needed.
Partnership - Answer-A business owned by two or more persons associated as
partners.
Retained earnings - Answer-The amount of net income retained in the corporation.
Retained earnings statement - Answer-A financial statement that summarizes the
amounts and causes of changes in retained earnings for a specific period of time.
Revenue - Answer-The increase in assets that result from the sale of a product or
service in the normal course of business.
Sarbanes-Oxley Act (SOX) - Answer-Regulations passed by Congress in 2002 to try to
reduce unethical corporate behavior.
Sole proprietorship - Answer-A business owned by one person.
Statement of cash flows - Answer-A financial statement that provides financial
information about the cash receipts and cash payments of a business for a specific
period of time.
Stockholders' equity - Answer-The owners' claim on total assets.
Classified balance sheet - Answer-A balance sheet that contains a number of standard
classifications and sections.
Comparability - Answer-Ability to compare the accounting information of different
companies because they use the same accounting principles.
Conservatism - Answer-The approach of choosing an accounting method, when
alternatives exist, that will least likely overstate assets and net income.
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