Chapter 1-Lesson 1-1 Accounting in Action

What is the definition of Accounting?

• Processing numbers

• Recording financial transactions

• Planning and recording financial transactions.

• The process of planning, recording, analyzing and interpreting financial information.

What is an Accounting system?

• A planned process designed to compile financial data and summarize the results in accounting records and reports.

• A planned process designed to compile accounting records and reports.

• A process for counting money.

• A process designed to compile financial data and summarize the results in accounting records and reports.

Financial reports that summarize the financial condition and operations of a business are called:

• accounting principles

• financial statements

• accounting systems

• investment systems

True or False:

Business owners and managers use financial statements to make business decisions

• True

• False

Accounting can be used to make __________________ financial decisions as well as __________________ decisions.

• accurate - thorough

• rapid - professional

• personal - business

• important - personal

A net worth statement is a formal report that shows:

• what an individual owns.

• what an individual owes.

• what an individual owns and owes.

• what an individual owns and owes and the difference between the two of them.

True or False:

The net worth statement allows a person extending a loan to see the financial position of a borrower on a specific date and make a lending decision.

• True

• False

In order to calculate net worth, items that are owned must be:

• identified.

• identified and assigned a realistic value.

• assigned a realistic value.

• processed on paper.

What is an asset?

• A house (property)

• car

• Anything of value that is owned.

• Anything of value that you are considering purchasing.

Amounts that are owed to others are referred to as:

• an asset

• a liability

• an expense

• a debt