Exam (elaborations)
Accounting Exam 1 Questions with Complete Answers
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Accounting Exam 1 Questions with Complete Answers
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Accounting Exam 1 Questions withComplete Answers
Account Balance - Answer-Difference between total debits and total credits (including
the beginning balance) for an account.
Accounting - Answer-comprehensive system for collecting, analyzing, and
communicating financial information
Accounting Cycle - Answer-for a given time period, the cycle of recording accounting
data, adjusting the accounts, preparing the financial statements, and closing the
temporary accounts; when one accounting cycle ends a new one begins
Accounting Event - Answer-Economic occurrence that changes a company's assets,
liabilities, or equity
Accounting Period - Answer-Time span covered by the financial statements; normally
one year, but may be a quarter, month or some other time interval
Accrual - Answer-Accounting recognition of revenue or expense in a period before cash
is exchanged
Accrual Accounting - Answer-Accounting system which recognizes revenues when
earned and expenses when incurred regardless of when the related cash is exchanged
Adverse Opinion - Answer-Opinion issued by a certified public accountant that means
one or more departures from GAAP in a company's financial statements are so very
material the auditors believe the financial statements do not fairly represent the
company's status
Adjusting Entry - Answer-Entry that updates account balances prior to preparing
financial statements; a bookkeeping tool. Adjusting entries never affect the Cash
account
Allocations - Answer-Recognizing expenses by systematically assigning the cost of an
asset to periods of use
American Institute of CPA's - Answer-National association that serves the education
and professional interests of member of the public accounting profession; membership
is voluntary
Annual Reports - Answer-Document companies publish to provide information, including
financial statements, to stockholders
, Asset Exchange Transaction - Answer-A transaction that decreases one asset and
increases another asset; total asset remain unchanged.
Asset Source Transaction - Answer-A transaction that increases both an asset and a
claim on assets ; the three types of asset source transactions are aquisitions from
owners (equity), borrowing from creditors (liabilities), or earnings from operations
(revenues).
Asset Use Transaction - Answer-A transaction that decreases both an asset and a claim
on assets; 3 types are distributions, liability payments, or expenses
Asset - Answer-Economic resource used to produce revenue which is expected to
provide future benefit to the business
Audits - Answer-the verifying of facts or procedures
Balance Sheet - Answer-A financial statement that summarizes a company's assets,
liabilities and shareholders' equity at a specific point in time.
Books of original entry - Answer-A journal in which a transaction is first recorded.
Book Value - Answer-the asset's cost minus accumulated depreciation; carrying
amount; net amount of a plant asset
Claims - Answer-Owners' and creditors' interests in a business's assets
Claims Exchange Transaction - Answer-A transaction that decreases one claim and
increases another claim; total claims remain unchanged. for example, accruing interest
expense is a claims exchange transaction; liabilities increase, and the expense
recognition decreases retained earnings.
Code of Professional Conduct - Answer-Rules established by the American Institute of
Certified Public Accountants to govern the ethical performance of professional services
by CPAs
Closing Entries - Answer-Journal entries used to prepare temporary accounts for a new
fiscal period
Closing Process - Answer-The transfer process of converting temporary account
balances to zero by transferring the revenue and expense account balances to income
summary, transferring the income summary account balance to the retained earnings
account, and transferring the dividends account to the retained earnings account.
Common Stock - Answer-Represents ownership in a publicly held company which
entitles owners to dividends (if declared by the company's Board of Directors), voting
rights on matters affecting the company, and in the elections of Boards members.
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