ACTG 244 EXAM 1 QUESTIONS AND 100% CORRECT SOLUTIONS
A+
What are two types of income statement accounts
- correct answer: revenues and expenses
Define each of the following terms:
a business - correct answer: an organization that attempts to earn a return over the cost of
providing services or goods that satisfy the needs or wants of others; typically categorized
into 2 groups: service, manufacturing, and merchandising companies
a current asset - correct answer: cash or any other asset that will be converted into cash, sold
or used up w/in the next year or the normal business operating cycle, whichever is longer
a patent - correct answer: an intangible asset that represents an exclusive right to manufacture
a specific product or to use a specific process
accounting cycle - correct answer: the set of recurring accounting procedures that must be
completed for a business each accounting period
accounting equation - correct answer: assets = liabilities + equity
accounting is... - correct answer: a cyclical process
accounts payable - correct answer: a liability account; amounts owed by a business to its
suppliers
accounts receivable - correct answer: an asset account; amounts owed to a company by its
customers
accruals - correct answer: cash has not been paid or received but the expense or revenue has
been recognized
accrued asset - correct answer: a receivable resulting from revenue that has been earned but
has not yet been received in cash, i.e. AR
, accrued liability - correct answer: an expense that has been incurred but has not yet been paid
in cash
accrued liability - correct answer: at the end of an accounting period, a company must
determine if there are any amounts that it currently owes but has not yet recorded
accumulated depreciation - correct answer: a contra asset account; the total amount of
depreciation that has been recorded on a depreciable asset since its acquisition; aka the
amount that's been "used up" by the company
annual financial report - correct answer: the primary communication of financial info to
external users; contains 4 major financial statements and their related footnotes: balance
sheet, income statement, statement of cash flows, statement of stockholders' equity
assets - correct answer: resources the organization owns; probable future economic benefits
obtained or controlled by an entity bc of past transactions or events
balance sheet - correct answer: also known as statement of financial position; it summarizes
the assets, liabilities and equity of an entity at a specific time
book value - correct answer: the value of security or asset as entered in a company's books
common stock - correct answer: the total par value of the number of shares of stock that the
corporation has issued
contra-accounts - correct answer: accounts are designed to show offsets to or reductions in
other related accounts, i.e. accumulated depreciation
corporation - correct answer: a legal "being" that exists separately from its owners, called
stockholders
current assets - correct answer: cash or anything being converted into cash; it includes cash,
ST investments, accounts receivable, inventory, and prepaid assets
A+
What are two types of income statement accounts
- correct answer: revenues and expenses
Define each of the following terms:
a business - correct answer: an organization that attempts to earn a return over the cost of
providing services or goods that satisfy the needs or wants of others; typically categorized
into 2 groups: service, manufacturing, and merchandising companies
a current asset - correct answer: cash or any other asset that will be converted into cash, sold
or used up w/in the next year or the normal business operating cycle, whichever is longer
a patent - correct answer: an intangible asset that represents an exclusive right to manufacture
a specific product or to use a specific process
accounting cycle - correct answer: the set of recurring accounting procedures that must be
completed for a business each accounting period
accounting equation - correct answer: assets = liabilities + equity
accounting is... - correct answer: a cyclical process
accounts payable - correct answer: a liability account; amounts owed by a business to its
suppliers
accounts receivable - correct answer: an asset account; amounts owed to a company by its
customers
accruals - correct answer: cash has not been paid or received but the expense or revenue has
been recognized
accrued asset - correct answer: a receivable resulting from revenue that has been earned but
has not yet been received in cash, i.e. AR
, accrued liability - correct answer: an expense that has been incurred but has not yet been paid
in cash
accrued liability - correct answer: at the end of an accounting period, a company must
determine if there are any amounts that it currently owes but has not yet recorded
accumulated depreciation - correct answer: a contra asset account; the total amount of
depreciation that has been recorded on a depreciable asset since its acquisition; aka the
amount that's been "used up" by the company
annual financial report - correct answer: the primary communication of financial info to
external users; contains 4 major financial statements and their related footnotes: balance
sheet, income statement, statement of cash flows, statement of stockholders' equity
assets - correct answer: resources the organization owns; probable future economic benefits
obtained or controlled by an entity bc of past transactions or events
balance sheet - correct answer: also known as statement of financial position; it summarizes
the assets, liabilities and equity of an entity at a specific time
book value - correct answer: the value of security or asset as entered in a company's books
common stock - correct answer: the total par value of the number of shares of stock that the
corporation has issued
contra-accounts - correct answer: accounts are designed to show offsets to or reductions in
other related accounts, i.e. accumulated depreciation
corporation - correct answer: a legal "being" that exists separately from its owners, called
stockholders
current assets - correct answer: cash or anything being converted into cash; it includes cash,
ST investments, accounts receivable, inventory, and prepaid assets
