Download ACCT 2810 Fundamentals of Accounting Exam 1 / 2025-2026 Verified Questions & Answers and more Exams Business Accounting in PDF only on Docsity!
ACCT 2810 Fundamentals of Accounting Exam 1 / 2025- 2026 Verified
Questions & Detailed Solutions | Auburn University
3 types of business-CORRECT ANSWER - service, merchandising, and manufacturing service business-CORRECT ANSWER - business that provides services rather than products to customers ex. delta airlines merchandising business-CORRECT ANSWER - business that purchases finishes products from other businesses to sell to its customers ex. walmart manufacturing business-CORRECT ANSWER - business that changes basic inputs into products that are sold to its customers 4 forms of business-CORRECT ANSWER - proprietorship, partnership, corporation, and limited liability company (LLC) proprietorship-CORRECT ANSWER - business owned by one individual, financial resources are limited to the individual owner’s resources nontaxable partnership-CORRECT ANSWER - business owned by two or more individuals, nontaxable corporation-CORRECT ANSWER - business organized under state or federal statues as a separate legal entity, has the ability to obtain large amounts of resources by issuing shares of stock, taxable limited liability company (LLC)-CORRECT ANSWER - form of corporation that combines attributes of a partnership and a corporation, operates similarly to a partnership, but its owners liability for the debts of the company is limited to their investment, nontaxable by election proprietorship and partnership have-CORRECT ANSWER - unlimited liability to creditors for the debts of the company
corporations have-CORRECT ANSWER - limited liability to creditors for debts of the company based on their investment business stakeholder-CORRECT ANSWER - person or entity with an interest in the economic performance and well-being of a company capital market stakeholders-CORRECT ANSWER - providers of major financing for the business to begin and continue its operations ex. banks, owners, stockholders product or service market stakeholders-CORRECT ANSWER - buyers of a product or services and vendors to the business ex. customers and suppliers government stakeholders-CORRECT ANSWER - collect taxes and fees from the business and its employees ex.federal, state and city governments internal stakeholders-CORRECT ANSWER - individuals employed by the business ex. employees and managers 3 business activities-CORRECT ANSWER - financing, investing, and operating financing activities-CORRECT ANSWER - business activities that involve obtaining funds to begin and operate a business ex. paying dividends, repaying loans, issuing common stock investing activities-CORRECT ANSWER - business activities that involve obtaining the necessary resources to start and operate the business ex. buying or selling property, plant, and equipment operating activities-CORRECT ANSWER - business activities that involve using the business’s resources to implement its business strategy
revenue-CORRECT ANSWER - increase in assets from selling products or services to customers sales-CORRECT ANSWER - revenue received from selling products fees earned-CORRECT ANSWER - revenues received from providing services expenses-CORRECT ANSWER - costs used to earn revenues cost of goods sold-CORRECT ANSWER - cost of products sold selling expenses-CORRECT ANSWER - costs directly related to the selling of a product or service net income-CORRECT ANSWER - revenue > expenses net loss-CORRECT ANSWER - revenue < expenses accounting-CORRECT ANSWER - information system that provides reports to stakeholders about the economic activities and condition of a business; language of a business financial accounting-CORRECT ANSWER - focuses on recording transactions and events so that general- purpose financial statements can be prepared managerial accounting-CORRECT ANSWER - aids management in making financing, investing, and operating decisions for the company financial statements-CORRECT ANSWER - financial reports that summarize the effects of events on a business income statement-CORRECT ANSWER - summary of the revenue and expenses for a specific period of time
statement of stockholders’ equity-CORRECT ANSWER - financial statement that reports the change in financial condition due to the changes in stockholders’ equity items for a specific period of time retained earnings-CORRECT ANSWER - net income retained in a corporation balance sheet-CORRECT ANSWER - list of the assets, liabilities, and owner’s equity as of a specific date stockholders’ equity-CORRECT ANSWER - stockholders’ rights to the assets of a business accounting equation-CORRECT ANSWER - assets = liabilities + stockholders’ equity statement of cash flows-CORRECT ANSWER - financial statement that provides a summary of the cash receipts and cash payments and reports the change in financial condition due to the change during a specific period of time oder of financial statements-CORRECT ANSWER - income statements statement of stockholders’ equity balance sheet statement of cash flows generally accepted accounting principles (GAAP)-CORRECT ANSWER - rules for the way financial statements should be prepared financial accounting standards board (FASB)-CORRECT ANSWER - authoritative body in the united states that has the primary responsibility for developing accounting principles securities and exchange commission (SEC)-CORRECT ANSWER - agency of the u.s. government that has authority over the accounting and financial disclosures for corporations whose stock is traded and sold to the public international accounting standards board (ISAB)-CORRECT ANSWER - authoritative body that establishes accounting principles and practices for companies in many countries outside of the united states
basic elements of a financial accounting system-CORRECT ANSWER - rules for determining what, when and the amount that should be recorded a framework for preparing financial statements controls to determine whether errors may have arisen in the recording process transaction-CORRECT ANSWER - economic event that under the GAAP affects the financial statements framework-CORRECT ANSWER - used to analyze, record, and summarize transactions, basis is accounting equation controls of the financial accounting system-CORRECT ANSWER - accounting equation must balance ending cash on the statement of cash flows must equal the cash on the balance sheet net income on the income statement must equal the net effects of revenues and expenses on retained earnings amounts invested by stockholders (common stock)-CORRECT ANSWER - increases stockholders’ equity revenue and expenses affect stockholders’ equity (retained earnings)-CORRECT ANSWER - by increasing and decreasing stockholders’ equity respectively dividends paid to stockholders-CORRECT ANSWER - decreases stockholders’ equity change in retained earnings-CORRECT ANSWER - net income - dividends change in retained earnings for a net loss-CORRECT ANSWER - net loss + dividends common-sized financial statement-CORRECT ANSWER - financial statement that express each amount as a percent of a base amount common-sized income statement-CORRECT ANSWER - income statement where each amount is expressed as a percent of sales
common-sized balance sheet-CORRECT ANSWER - balance sheet where each amount is expressed as a percent of total assets or total liabilities plus stockholders’ equity accrual basis accounting-CORRECT ANSWER - system of accounting in which revenue is recorded as it is earned and expenses are recorded and matched against the revenue they generate accounts-CORRECT ANSWER - record in which increases and decreases in a financial statement element are recorded quick assets-CORRECT ANSWER - cash and other current assets that can quickly be converted to cash Net Income—Accrual Basis-CORRECT ANSWER - profitability metric determined as the excess of revenues over expenses in an accounting system in which revenue is recorded as it is earned and expenses are recorded and matched against the revenue they generate deferred expenses-CORRECT ANSWER - items initially recorded as assets but are expected to become expenses over time ex. prepaid rent, prepaid insurance, prepaid advertising deferred revenues-CORRECT ANSWER - items initially recorded as liabilities but are expected to become revenues over time ex. subscriptions and memberships accrued expenses-CORRECT ANSWER - expenses that have been incurred at the end of an accounting period but have not been recorded in the accounts; used/owed now, but not paid yet ex. unpaid salaries and utility bills accrued revenues-CORRECT ANSWER - revenues that have been earned at the end of an accounting period but have not been recorded in the accounts; earned now, but not received yet ex. service provided to patients but not billed yet
inventory-CORRECT ANSWER - merchandise on hand at the end of an accounting period working capital-CORRECT ANSWER - excess of the current assets of a business over its current liabilities gross profit percent-CORRECT ANSWER - gross profit / net sales perpetual inventory system-CORRECT ANSWER - each purchase and sale of merchandise is recorded in an inventory account controlling account-CORRECT ANSWER - inventory account in perpetual inventory records that summarizes the balances of the accounts in a related subsidiary ledger periodic inventory system-CORRECT ANSWER - inventory method in which the inventory records do not show the amount available for sale or sold during the period credit terms-CORRECT ANSWER - terms for payment on account by the buyer to the seller credit period-CORRECT ANSWER - amount of time the buyer is allowed in which to pay the seller purchase returns and allowances-CORRECT ANSWER - result when merchandise received by a buyer is defective, damaged in shipment, or not what was ordered debit memorandum-CORRECT ANSWER - informs the seller of the amount the buyer proposes to decrease the accounts payable due to the seller and why rebate-CORRECT ANSWER - sales incentive or promotion that provides the customer a refund after the product is purchased customer refunds payable-CORRECT ANSWER - liability account recording the amount of refunds and allowances expected to be granted in the future
estimated returns inventory-CORRECT ANSWER - asset representing inventory expected to be returned in the future trade discounts-CORRECT ANSWER - discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers FOB (free on board) shipping point-CORRECT ANSWER - freight terms in which the buyer pays the transportation costs from the shipping point to the final destination FOB (free on board) destination-CORRECT ANSWER - freight terms in which the transportation costs from the shipping point to the final destination inventory shrinkage-CORRECT ANSWER - amount by which the merchandise for sale is larger than the total amount of merchandise counted during the physical inventory operating income-CORRECT ANSWER - excess of gross profit over total operating expenses markup percent-CORRECT ANSWER - amount expressed as a percentage that is added to the cost of a product to determine its selling gross profit / cost of goods sold normal quick ratio-CORRECT ANSWER - 1. operating income-CORRECT ANSWER - fees earned - operating expenses preparing financial statements-CORRECT ANSWER - final step of the accounting cycle use of integrated financial statement framework-CORRECT ANSWER - to focus on the effect of transactions on financial statements quick ratio is a better metric than quick assets for comapring companies-CORRECT ANSWER - true
