ACCY 201 BARTON EXAM 1 || QUESTIONS WITH A+
GRADED SOLUTIONS!!
Accounting correct answers An information system that provides reports to users about the
economic activities and condition of a business.
GAAP (Generally Accepted Accounting Principles) correct answers Defines how financial
information will be reported.
- Accounting Standards: rules that determine the accounting for individual business
transactions.
- Accounting Principles and Assumptions: provide the framework upon which accounting
standards are constructed.
Financial Information correct answers - Primary goal of financial accounting is to provide
information that is useful for decision making.
- Two Important Characteristics:
(1) Relevance: Relevant information has the potential to impact decision making.
(2) Faithful Representation: The information accurately reflects an entity's economic activity
or condition.
Assumptions correct answers Financial accounting and GAAP are based upon the
assumptions:
- Monetary Unit
- Time Period
- Business Entity
- Going Concern
Monetary Unit (Assumptions) correct answers requires that financial reports be expressed in
a single money unit or currency.
Time Period (Assumptions) correct answers allows a company to report its economic
activities on a regular basis for a specific period of time.
Business Entity (Assumptions) correct answers limits the economic data in financial reports
to that directly related to the activities of the business.
Going Concern (Assumptions) correct answers requires that financial reports be prepared
assuming that the entity will continue operating into the future.
Principles correct answers - Measurement
- Historical Cost
- Revenue Recognition
- Expense Recognition
Measurement (Principles) correct answers - Determines the amount that will be recorded and
reported
- Requires that amounts be objective and verifiable
- Objective: based upon independent, unbiased evidence
- Verifiable: can be confirmed by a third party
, Historical Cost (Principles) correct answers An item recorded at its initial transaction price.
- Also called cost principles
Amounts do not normally change until another transaction occurs.
Revenue Recognition (Principles) correct answers Determines when revenue is recorded in
the accounting records.
Normally, revenue is recorded when the services have been performed or goods are delivered
to the customer.
Expense Recognition (Principles) correct answers - Requires expenses to be recorded in the
same period as the related revenue.
- Allows the reporting of a profit r loss for the period.
Arm's-Length Transactions correct answers Transactions between two independent parties
that provide amounts which are objective and verifiable.
Revenue correct answers - the amount earned for selling goods or services to customers.
- money coming in.
Expenses correct answers - amounts used to generate revenue
- reduces assets and stockholder's equity
- an expense is reported on the income statement for the period when the cost is used up or
expires
Assets correct answers Resources owned by a business.
Ex: cash, land, buildings, & equipment.
Rights or Claims to Assets:
(1) the rights of creditors: liabilities
(2) the rights of owners: equity
Liabilities correct answers The debts of the business owed to outsiders.
- often identified on the balance sheet by titles that include payable
- The right of creditors
Stockholder's Equity correct answers (1) Common Stock, increases SE
(2) Retained Earnings
Net Income (Net Loss): revenues increase SE & expenses decrease SE
(3) Dividends, decrease SE
Owner's Equity correct answers Equity for a proprietorship, partnership, or limited liability
company.
The Accounting Equation correct answers ⭐︎ Assets= Liabilities + Stockholder's Equity
* Stockholder's Equity= Assets- Liabilities
- Liabilities are usually shown before equity because creditors have first rights to the assets.
Business Transaction correct answers An economic event or condition that directly changes
an entity's financial condition or its results of operations.
GRADED SOLUTIONS!!
Accounting correct answers An information system that provides reports to users about the
economic activities and condition of a business.
GAAP (Generally Accepted Accounting Principles) correct answers Defines how financial
information will be reported.
- Accounting Standards: rules that determine the accounting for individual business
transactions.
- Accounting Principles and Assumptions: provide the framework upon which accounting
standards are constructed.
Financial Information correct answers - Primary goal of financial accounting is to provide
information that is useful for decision making.
- Two Important Characteristics:
(1) Relevance: Relevant information has the potential to impact decision making.
(2) Faithful Representation: The information accurately reflects an entity's economic activity
or condition.
Assumptions correct answers Financial accounting and GAAP are based upon the
assumptions:
- Monetary Unit
- Time Period
- Business Entity
- Going Concern
Monetary Unit (Assumptions) correct answers requires that financial reports be expressed in
a single money unit or currency.
Time Period (Assumptions) correct answers allows a company to report its economic
activities on a regular basis for a specific period of time.
Business Entity (Assumptions) correct answers limits the economic data in financial reports
to that directly related to the activities of the business.
Going Concern (Assumptions) correct answers requires that financial reports be prepared
assuming that the entity will continue operating into the future.
Principles correct answers - Measurement
- Historical Cost
- Revenue Recognition
- Expense Recognition
Measurement (Principles) correct answers - Determines the amount that will be recorded and
reported
- Requires that amounts be objective and verifiable
- Objective: based upon independent, unbiased evidence
- Verifiable: can be confirmed by a third party
, Historical Cost (Principles) correct answers An item recorded at its initial transaction price.
- Also called cost principles
Amounts do not normally change until another transaction occurs.
Revenue Recognition (Principles) correct answers Determines when revenue is recorded in
the accounting records.
Normally, revenue is recorded when the services have been performed or goods are delivered
to the customer.
Expense Recognition (Principles) correct answers - Requires expenses to be recorded in the
same period as the related revenue.
- Allows the reporting of a profit r loss for the period.
Arm's-Length Transactions correct answers Transactions between two independent parties
that provide amounts which are objective and verifiable.
Revenue correct answers - the amount earned for selling goods or services to customers.
- money coming in.
Expenses correct answers - amounts used to generate revenue
- reduces assets and stockholder's equity
- an expense is reported on the income statement for the period when the cost is used up or
expires
Assets correct answers Resources owned by a business.
Ex: cash, land, buildings, & equipment.
Rights or Claims to Assets:
(1) the rights of creditors: liabilities
(2) the rights of owners: equity
Liabilities correct answers The debts of the business owed to outsiders.
- often identified on the balance sheet by titles that include payable
- The right of creditors
Stockholder's Equity correct answers (1) Common Stock, increases SE
(2) Retained Earnings
Net Income (Net Loss): revenues increase SE & expenses decrease SE
(3) Dividends, decrease SE
Owner's Equity correct answers Equity for a proprietorship, partnership, or limited liability
company.
The Accounting Equation correct answers ⭐︎ Assets= Liabilities + Stockholder's Equity
* Stockholder's Equity= Assets- Liabilities
- Liabilities are usually shown before equity because creditors have first rights to the assets.
Business Transaction correct answers An economic event or condition that directly changes
an entity's financial condition or its results of operations.
