Exam Prep For;
Intermediate Accounting
9th Ed - McGraw Hill
Ch:2 - Vocabulary
** Expert-Verified Explanation
** Questions with Verified Answer
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, Financial Position Comprises assets, liabilities, and owners' equity
External Events Involve an exchange between the company and a separate economic entity.
i.e. purchasing merchandise inventory for cash, borrowing cash for a bank,
paying salaries.
In each instance, the company receives something (merchandise, cash,
services) in exchange for something else (cash, assumption of liability, or both)
Economic Events Any event that DIRECTLY affects the financial position of a company
Economic events are classified as either external or internal events.
Broad and Specific Accounting Prinicples Determines which events should be recorded, when the events should be
recorded, and the dollar amount at which they should be measured.
Internal Events Directly affect the financial position of the company but don't involve an
exchange transaction with another entity.
i.e. depreciation of equipment and the use of supplies.
These events must be recorded to properly reflect a company's financial position
and results of operations in accordance with the accrual accounting model.
Accounting Equation Underlines the process used to capture the effect of economic events.
Assets = Liabilities + Owners' Equity
The equation portrays the equality between the total economic resources of an
entity (CASH) - shown on the left side of the equation - and the total claims
against the entity (LIABILITIES and EQUITY) - shown on the right side.
The resources of an enterprise are provided by creditors and owners.
The equation implies that each event affecting this equation will have a dual
effect because resources always must equal claims.
Shareholders' Equity Owners of a corporation are shareholders
Is classified by sources as either paid-in capital, invested by shareholders or
retained earnings, amounts earned by the corporation (on behalf of its
shareholders).
Assets = Liabilities + Shareholders' Equity
Shareholders' Equity = Paid-in Capital and Retained Earnings
Paid-in Capital Amounts invested by shareholders
The RIGHT side of the accounting equation
Assets = Liabilities + Shareholders' Equity
Debit entries decreases (-)
Credit entries increases (+)
Intermediate Accounting
9th Ed - McGraw Hill
Ch:2 - Vocabulary
** Expert-Verified Explanation
** Questions with Verified Answer
** New Edition |Updated
** Guaranteed Pass
** 100% Correct Answers | Graded A+
, Financial Position Comprises assets, liabilities, and owners' equity
External Events Involve an exchange between the company and a separate economic entity.
i.e. purchasing merchandise inventory for cash, borrowing cash for a bank,
paying salaries.
In each instance, the company receives something (merchandise, cash,
services) in exchange for something else (cash, assumption of liability, or both)
Economic Events Any event that DIRECTLY affects the financial position of a company
Economic events are classified as either external or internal events.
Broad and Specific Accounting Prinicples Determines which events should be recorded, when the events should be
recorded, and the dollar amount at which they should be measured.
Internal Events Directly affect the financial position of the company but don't involve an
exchange transaction with another entity.
i.e. depreciation of equipment and the use of supplies.
These events must be recorded to properly reflect a company's financial position
and results of operations in accordance with the accrual accounting model.
Accounting Equation Underlines the process used to capture the effect of economic events.
Assets = Liabilities + Owners' Equity
The equation portrays the equality between the total economic resources of an
entity (CASH) - shown on the left side of the equation - and the total claims
against the entity (LIABILITIES and EQUITY) - shown on the right side.
The resources of an enterprise are provided by creditors and owners.
The equation implies that each event affecting this equation will have a dual
effect because resources always must equal claims.
Shareholders' Equity Owners of a corporation are shareholders
Is classified by sources as either paid-in capital, invested by shareholders or
retained earnings, amounts earned by the corporation (on behalf of its
shareholders).
Assets = Liabilities + Shareholders' Equity
Shareholders' Equity = Paid-in Capital and Retained Earnings
Paid-in Capital Amounts invested by shareholders
The RIGHT side of the accounting equation
Assets = Liabilities + Shareholders' Equity
Debit entries decreases (-)
Credit entries increases (+)
