What is common stock in accounting terminology?

Common stock is the basic ownership of every corporation.

Common stock is a type of corporate liability.

Common stock refers to short-term loans taken by a company.

Common stock is a form of government bond.

What is retained earning in accounting terminology?

Retained earning is equity earned from profitable operations that is not distributed to stockholders.

Retained earning is the total amount of cash held by a company at year end.

Retained earning is the amount paid as dividends to shareholders.

Retained earning is the value of company’s physical assets.

What are dividends in accounting terminology?

Dividends are distributed earnings to stockholders or paying stockholders.

Dividends are the total assets of a company.

Dividends are the debts owed by a company to creditors.

Dividends are the profits retained in the business for future use.

The difference between external and internal accounting lies in their users. Who uses each type?

External accounting is used by external stakeholders, while internal accounting is used by management.

External accounting is used by management, while internal accounting is used by external stakeholders.

Both external and internal accounting are only used by government agencies.

External accounting and internal accounting are both used exclusively by employees.

Who are the external decision makers in financial accounting?

Investors, creditors, lenders, and taxing authorities.

Company employees and managers.

Internal auditors and board members.

Who are the internal decision makers in managerial accounting?

Managers, employees, individuals, and businesses.

Government agencies and regulators.

External auditors and investors.

Define Generally Accepted Accounting Principles (GAAP).

GAAP are the accounting guidelines or rulebook that are relevant, allow users to make decisions, and have faithful representation (free from error, neutral, and honest).

GAAP are a set of tax regulations used by government agencies to collect revenue from corporations.

GAAP are international standards for financial reporting used exclusively outside the United States.

GAAP are guidelines for ethical behavior in the workplace, unrelated to financial reporting.

Define Financial Accounting Standard Board [FASB]: (1 OUT OF 2 organization that govern accounting)

oversees creation & governance of accounting standards

manages corporate tax collection

Define Securities and Exchange Commission [SEC]: (2 OUT OF 2 organizations that govern accounting) • A governmental agency that ________. • Is there to make sure people who are investing money into the company are given true information and is not lied to

oversees the U.S financial market

regulates international trade agreements

manages corporate mergers and acquisitions

Define Faithful Representation: • They must be ________.

complete, neutral, and free from error

Define cost principles: [Principles a part of GAAP] • States that acquired assets and services should be ________.

recorded at their estimated value

recorded at their replacement cost

Define going concern assumption: • Assumes that the ________. Every intention is staying in the business.

entity will remain in operation for the foreseeable future

entity will close down immediately

entity will merge with another company soon

entity will change its business model next year

Define monetary unit assumption: • Requires ________. Everyone thinks about the American currency which would be the dollar.

items on the financial statement to be measured in terms of a monetary unit

all transactions to be recorded in physical units only

the use of multiple currencies in one statement

financial statements to ignore currency values

Define audit: • An ________. Businesses must have to have an external firm to come in and do the reports once and a while. Essentially double checking numbers.

examination of a company’s financial statements and records

advertisement for a company’s products and services

summary of a company’s marketing strategies

list of a company’s employees and their roles

Define Sarbanes-Oxley Act (SOX): • Requires companies to ________. The government pushed for this act to ________.

review internal controls; make sure no one is committing fraud

increase employee benefits; improve workplace morale

expand global operations; boost international trade

reduce product prices; enhance customer satisfaction

Define Public Company Accounting Oversight Board (PCAOB): • is the one who ________.

oversees the sub-contracted public firms that do external info for the board

regulates the stock market directly

prepares financial statements for all public companies

What is the accounting equation?

basic tool accounting, measuring the resources of the business and the claims to those resources

a method for calculating company profits only

a formula for determining employee salaries

a process for recording only cash transactions

An asset is defined as which of the following?

A resource owned or controlled by an entity that provides future economic benefits.

A liability that must be paid in the future.

A form of revenue generated from sales.

Liabilities are defined as which of the following, along with their characteristics?

Obligations of an entity arising from past events, expected to result in an outflow of resources

Assets owned by a company that generate income

Revenues earned by providing goods or services

Equity is defined as:

The residual interest in the assets of an entity after deducting liabilities.

A fixed amount of money owed to creditors.

The total value of an entity's liabilities.

A type of short-term loan provided by banks.

Select the correct order of steps for preparing the financial statements.

Journalizing, Posting, Trial Balance, Adjustments, Financial Statements

Financial Statements, Adjustments, Posting, Journalizing, Trial Balance

Trial Balance, Journalizing, Financial Statements, Adjustments, Posting

Adjustments, Posting, Journalizing, Financial Statements, Trial Balance

Define Return on asset (ROA):

Measures how profitably a company uses its assets; ROA is calculated by dividing net income by average total assets

Measures the total revenue generated by a company; ROA is calculated by dividing total revenue by total assets

Measures the market value of a company; ROA is calculated by dividing market capitalization by total assets

Measures the company's debt level; ROA is calculated by dividing total liabilities by total assets

A detailed record of all increases and decreases that have occurred in an account during a specific period

A summary of a company's annual profits only

A list of all employees in a company

A document used to record only cash transactions

Identify the asset accounts and define them:

Cash is a business's money, including bank balance, bills, coins, and checks.

Revenue is the total income earned from sales of goods or services.

Liabilities are obligations owed to outsiders or creditors.

Expenses are the costs incurred in the process of earning revenue.

Identify the asset accounts and define them:

Accounts receivable is money you have earned but not have collected yet (normally in 30 days).

Accounts payable is money you owe to suppliers for goods or services purchased on credit.

Revenue is the total income generated from sales of goods or services.

Owner's equity is the owner's claim on the assets of the business.

Identify the asset accounts and define them:

Note receivable is lending money for a longer period of time, a written promise and an interest by a certain date in the future.

Accounts payable is money owed to suppliers for goods or services purchased on credit.

Revenue is the income generated from normal business operations.

Owner's equity is the owner's claim on the assets of the business.

Identify the asset accounts and define them:

Prepaid expenses are payments made in advance, such as car insurance paid today to last for the whole year.

Accounts payable are amounts a company owes to suppliers for items or services purchased on credit.

Unearned revenue is money received by an individual or company for a service or product that has yet to be provided or delivered.

Accrued expenses are expenses that have been incurred but not yet paid.

Identify the asset accounts and define them:

Land is an asset account representing property owned by the business.

Rent Expense is an asset account representing monthly payments.

Sales Revenue is an asset account representing income from sales.

Accounts Payable is an asset account representing amounts owed to suppliers.

Identify the asset accounts and define them:

Building is an asset account representing structures owned by the business.

Salary Expense is an asset account representing employee payments.

Accounts Payable is an asset account representing money owed to suppliers.

Capital is an asset account representing owner's investment.

Identify the asset accounts and define them:

Equipment, furniture, and fixtures are asset accounts representing tangible items used in business operations.

Accounts payable and accrued expenses are asset accounts representing amounts owed to suppliers.

Revenue and sales are asset accounts representing income earned from business activities.

Notes payable and loans are asset accounts representing borrowed funds.

Identify the liability accounts and define them:

Accounts payable is a liability account representing amounts the business owes to others in the short term.

Accounts receivable is a liability account representing amounts the business expects to receive from customers.

Inventory is a liability account representing goods available for sale.

Prepaid expenses is a liability account representing payments made in advance for services.

Identify the liability accounts and define them:

Notes payable is a liability account for long-term debts, usually involving interest, with a written promise to pay.

Accounts receivable is a liability account for money owed to customers.

Prepaid expenses is a liability account for future payments made in advance.

Inventory is a liability account for goods held for sale.

Identify the liability accounts and define them:

Accrued liability is an amount owed but not yet paid, such as taxes payable or rent payable.

Asset liability is an amount received in advance for services yet to be performed.

Revenue liability is the income earned but not yet received.

Owner's equity liability is the owner's claim on the business assets.

Identify the liability accounts and define them:

Unearned revenue is a liability account for cash received before services are provided or goods are delivered.

Accounts receivable is a liability account for money owed to customers.

Prepaid expenses are a liability account for future payments.

Inventory is a liability account for goods held for sale.

Identify the equity accounts and define it: - Common stock: ______ - Dividends: ______ - Revenues: ______ - Expenses: ______

Common stock: represents the net contributions of the stockholders in the business. Increases the equity Dividends: distributions cash or other assets to the stockholders. Decreases the equity. Revenues: earnings in result from delivering a service or goods to customers. Increases the owners equity Expenses: the cost of selling goods or services. Decreases the equity.

Common stock: represents the total liabilities of the business. Decreases the equity Dividends: are the profits earned by the company. Increases the equity. Revenues: are the loans taken by the business. Decreases the owners equity Expenses: the income from investments. Increases the equity.

Common stock: is the amount borrowed from banks. Increases the equity Dividends: are the taxes paid to the government. Decreases the equity. Revenues: are the penalties paid by the business. Decreases the owners equity Expenses: the bonuses given to employees. Increases the equity.

Common stock: represents the assets owned by the business. Increases the equity Dividends: are the interest received from customers. Increases the equity. Revenues: are the expenses incurred by the business. Decreases the owners equity Expenses: the revenue from sales. Increases the equity.

Define Charts of Accounts: ______

Is used to organize a company’s accounts

Is a type of financial statement

Is a method of inventory valuation

Define Ledger: ______

Is a record of holding all the accounts of a business, the changes in those accounts, and their balances

Is a document used to record only cash transactions

Is a summary of all the invoices issued by a business

Is a list of employees and their salaries

Define Journal: ______

Is a chronological/written record of all the business transactions. “The record of transactions in date order”

Is a summary of all the assets and liabilities of a business.

Is a document used to authorize payments.

Is a report showing the profit or loss of a business.

Define the double entry system: ______

Records the dual effects of each transactions

Records only credit transactions

Records only one side of transactions

Define T-Accounts: ______

A shortened form of the ledger. Left side is debit and right side is credit.

A type of financial statement used to report company profits.

A method for calculating interest on loans.

A document used to record company policies.

Define normal balance: ______

Appears on the increased side of the accounts. Assets increase with debits so the normal side is debit. All accounts are summarized on one side of the T-account which is called normal balance.

Appears only on the credit side of all accounts regardless of type.

Is the side where liabilities decrease in value.

Refers to the balance after closing entries are made.

Define source documents: ______

Provides evidence and data for recording transactions. These documents help determine how to record the transactions. Examples: purchase invoice, bank checks, and sales invoices.

Are documents used to forecast future sales and profits for a business.

Are internal memos used for employee communication only.

Are documents that summarize annual financial statements for shareholders.

Define posting: ______

The data from the journal is then transferred to the ledger.

The process of recording transactions in the journal.

The act of preparing financial statements.

The calculation of net profit for the year.

Identify the five steps of journalizing and posting:

1) Identify the accounts and the account types (assets, liability, or equity)

1) Calculate the interest for each account involved

1) Prepare a bank reconciliation statement

1) Close all temporary accounts at the end of the period

Financial Accounting Exam 1 review

Authored by Emelyn Monterroso

Business

University

Used 2+ times

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55 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Define accounting:

Accounting is the process that measures business activities, processes the information, and communicates the results to decision makers.

Accounting is the process of selling goods and services to customers.

Accounting is the process of hiring employees for a business.

Accounting is the process of advertising products to increase sales.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is an asset in accounting terminology?

An asset is an economic resource that is expected to benefit the company.

An asset is a liability owed to creditors.

An asset is a type of expense incurred during operations.

An asset is a form of revenue earned by the business.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a liability in accounting terminology?

A liability is a debt owed to the creditors.

A liability is an asset owned by the business.

A liability is the profit earned by the business.

A liability is the capital invested by the owner.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is equity in accounting terminology?

Equity is what you saved or what someone gave you.

Equity is the total amount of cash in a business.

Equity is the sum of all liabilities.

Equity is the revenue generated from sales.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are expenses in accounting terminology?

Expenses are the cost of selling goods/services.

Expenses are the profits earned from investments.

Expenses are the total assets owned by a business.

Expenses are the amount of cash received from customers.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is revenue in accounting terminology?

Revenue is money earned from completing or selling a good/service.

Revenue is the total amount of expenses incurred by a business.

Revenue is the value of assets owned by a company.

Revenue is the amount of money borrowed by a business.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is contributed capital or paid in capital in accounting terminology?

Contributed capital or paid in capital is the amount invested in the corporation by its owners/stockholders.

Contributed capital or paid in capital is the total revenue earned by the corporation.

Contributed capital or paid in capital is the amount of loans taken by the corporation.

Contributed capital or paid in capital is the total expenses incurred by the corporation.

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