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Financial Accounting Chapters 1-4 Exam
Questions and answers 2025
Business - ANS ✓✓ -Consists of all activities necessary to provide the members of an economic system with goods and services Sole Proprietorship - ANS ✓✓ -Businesses owned and operated by one single owner Economic Entity - ANS ✓✓ -Requires that a single indentifyable unit of organization be accounted for in all situations Partnership - ANS ✓✓ -A business owned by two or more individuals Corporation - ANS ✓✓ -An entity organized under the laws of a particular state Share of stock - ANS ✓✓ -A certificate that acts as evidence of ownership in a corporation Bond - ANS ✓✓ -A certificate that represents a corporation's promise to repay a certain amount of money and interest in the future Nonbusiness Entity - ANS ✓✓ -An organization operated for some purpose other than to earn profit Liability - ANS ✓✓ -An obligation of a business Capital Stock - ANS ✓✓ -Indicates the owner's contributions to a corporation
Stockholder - ANS ✓✓ -One of the owners of a corporation Creditor - ANS ✓✓ -Someone to whome a company or a person has a debt Asset - ANS ✓✓ -A future economic benefit Revenue - ANS ✓✓ -An inflow of assets resulting from the sale of goods and services Expense - ANS ✓✓ -An outflow of assets resulting from the sale of goods and services Accounting - ANS ✓✓ -The process of identifying, measuring, and communicating economic information to various users Financial Accounting - ANS ✓✓ -The branch of accounting concerned with the preparation of financial statements Owners Equity - ANS ✓✓ -The owners' claims on the assets of an entity Stockholders' Equity - ANS ✓✓ -The owners equity in a corporation Retained Earnings - ANS ✓✓ -The part of owners' equity that represents the income earned, less dividends paid over the life of an entity Net Income - ANS ✓✓ -The excess of revenues over expenses Dividends - ANS ✓✓ -Distributions of the net income of a business to its owners Statement of Retained Earnings - ANS ✓✓ -The statement that summarizes the income earned and dividends paid over the life of a business
Faithful Representation - ANS ✓✓ -The quality of information that makes it complete, neutral, and free from error Comparability - ANS ✓✓ -The quality that allows a user to analyze two or more companies and look for similarities and differences Depreciation - ANS ✓✓ -The process of allocating the cost of a long-term tangible asset over its useful life Materiality - ANS ✓✓ -The magnitude of an accounting information ommission or misstatement that will affect the judgement of someone relying on the information Operating Cycle - ANS ✓✓ -The period of time between the purchase of inventory and the collection of any recieveable from the sale of the inventory (Most businesses have one less than one year) Current Assets - ANS ✓✓ -Cash and other assets that are reasonably expected to be realized in cash or sold or consumed diring the normal operating cycle of a business or within one year if the operating cycle is less than one year Investments - ANS ✓✓ -Securities not expected to be sold within the next year Property, Plant and Equiptment - ANS ✓✓ -Consists of the various tangible, productive assets used in the operation of a business Intangible Assets - ANS ✓✓ -Lack Physical Substance (Trademarks, copyrights, franchise rights, patents, and goodwill) Current Liability - ANS ✓✓ -An obligation that will be satisfied within the next operating cycle or within one year if the cycle is shorter than one year Capital Stock - ANS ✓✓ -Indicates the owner's investment in the business
Common Stock - ANS ✓✓ -Single class of capital stock that most companies have Preferred Stock - ANS ✓✓ -A form of capital stock that carries with it certain preferences Liquidity - ANS ✓✓ -The ability of a company to pay its debts as they come due Working Capital - ANS ✓✓ -Current Assets minus current liabilities Current Ratio - ANS ✓✓ -Current Assets divided by current liabilites Single Step Income Statement - ANS ✓✓ -An income statement in which all expenses are added together and subtracted from all revenues Multiple Step Income Statement - ANS ✓✓ -An income statement that shows classifications of revenues and expenses as well as important subtotals Gross Profit - ANS ✓✓ -Sales minus cost of goods sold Profit Margin - ANS ✓✓ -Net Income divided by sales Operating Activities - ANS ✓✓ -Concern the purchase and sale of a product Investment Activities - ANS ✓✓ -Involve the aquisition and sale of long-term or noncurrent assets such as long-term investments (Property, plant, and equiptment) Financing Activities - ANS ✓✓ -Result from the issuance and repayment, or retirment, of longterm liabilities and capital stock and the payment of dividends External Event - ANS ✓✓ -An event involving interaction between the entity and its environment Internal Event - ANS ✓✓ -An event occuring entirely within an entity
Cash Basis - ANS ✓✓ -A system of accounting in which revenues are recognized when cash is recieved and expenses are recognized when cash is paid Accrual Basis - ANS ✓✓ -A system of accounting in which revenues are recognized when earned and expenses are recognized when paid Revenue recognition principle - ANS ✓✓ -Revenues are recorded in the income statement when they are realized or realizable and earned
