ACG 2071 EXAM 1 PRACTICE SOLUTION
STUDY SHEET QUESTIONS AND DETAILED
ANSWERS
●● Recordkeeping/Bookkeeping
Answer: the recording of transactions and events, either manually or
electronically
●● External Users
Answer: not directly involved in running the organization, need to all
coincide with one method
●● Internal Information Users
Answer: those directly involved in managing and operating an
organization, not so concerned with others
●● Ethics
Answer: beliefs that distinguish right from wrong
●● Measurement Principle (cost principle)
Answer: accounting information is based on actual cost
,●● Revenue (sales) Recognition
Answer: provides guidance on when a company must recognize revenue
●● Expense Recognition Principle (matching principle)
Answer: record the expenses it incurred to generate the revenue reported
●● Full Disclosure
Answer: prescribes that a company report the details behind financial
statements that would impact users' decisions.
●● Accounting Equation (simple)
Answer: Assets = Liabilities + Equity
●● Assets
Answer: resources a company owns or controls
●● Liabilities
Answer: creditors' claims on assets (reflect company obligations to
provide assets, products or services to others)
●● Equity (net assets/residual equity)
Answer: the owner's claim on assets, has two parts: -contributed capital
-retained earnings
, ●● Contributed Capital
Answer: amount that stockholders invest in the company included under
common stock
●● Retained Earnings
Answer: refer to income (revenues less expenses) that has not been
distributed to its stockholders
net income - cash dividends = retained earnings
●● Dividends
Answer: distribution of assets to stockholders
●● Revenues
Answer: Increase retained earnings and are resources generated from a
company's earnings activities
●● Expenses
Answer: decrease retained earnings and are the cost of assets or services
used to earn revenues
●● Accounting Equation (full and complicated)
STUDY SHEET QUESTIONS AND DETAILED
ANSWERS
●● Recordkeeping/Bookkeeping
Answer: the recording of transactions and events, either manually or
electronically
●● External Users
Answer: not directly involved in running the organization, need to all
coincide with one method
●● Internal Information Users
Answer: those directly involved in managing and operating an
organization, not so concerned with others
●● Ethics
Answer: beliefs that distinguish right from wrong
●● Measurement Principle (cost principle)
Answer: accounting information is based on actual cost
,●● Revenue (sales) Recognition
Answer: provides guidance on when a company must recognize revenue
●● Expense Recognition Principle (matching principle)
Answer: record the expenses it incurred to generate the revenue reported
●● Full Disclosure
Answer: prescribes that a company report the details behind financial
statements that would impact users' decisions.
●● Accounting Equation (simple)
Answer: Assets = Liabilities + Equity
●● Assets
Answer: resources a company owns or controls
●● Liabilities
Answer: creditors' claims on assets (reflect company obligations to
provide assets, products or services to others)
●● Equity (net assets/residual equity)
Answer: the owner's claim on assets, has two parts: -contributed capital
-retained earnings
, ●● Contributed Capital
Answer: amount that stockholders invest in the company included under
common stock
●● Retained Earnings
Answer: refer to income (revenues less expenses) that has not been
distributed to its stockholders
net income - cash dividends = retained earnings
●● Dividends
Answer: distribution of assets to stockholders
●● Revenues
Answer: Increase retained earnings and are resources generated from a
company's earnings activities
●● Expenses
Answer: decrease retained earnings and are the cost of assets or services
used to earn revenues
●● Accounting Equation (full and complicated)
