CBAD 201 - FINANCIAL ACCOUNTING FINAL REVIEW QUESTIONS ANSWERED CORRECTLY LATEST
UPDATE 2026
accounting is... - Answers The information system that identifies, records, and communicates the
economic events of an organization to interested users.
Who uses accounting information? - Answers Individuals, investors and creditors, regulatory bodies,
nonprofit organizations
Financial Accounting - Answers accounting information and analyses prepared for people outside the
organization
Managerial Accounting - Answers accounting used to provide information and analyses to managers
inside the organization to assist them in decision making
Proprietorship - Answers A business owned by one person
Partnership - Answers A business in which two or more persons combine their assets and skills
Limited Liability Company - Answers A business organization in which the business (not the owner) is
liable for the company's debts
Corporation - Answers A business owned by stockholders who share in its profits but are not
personally responsible for its debts
the entity assumption - Answers Organization stands apart from other organizations and individuals
as a separate economic unit
the continuity assumption - Answers States that businesses are assumed to continue to operate into
the foreseeable future.
Historical Cost Principle - Answers An accounting principle that states that companies should record
assets at their cost.
stable monetary unit assumption - Answers The reason for ignoring the effect of inflation in the
accounting records, based on the assumption that the dollar's purchasing power is relatively stable.
Accounting Equation - Answers An equation showing the relationship among assets, liabilities, and
owner's equity
assets - Answers money and other valuables belonging to an individual or business
liabilities - Answers Amounts owed to creditors
Stockholders' Equity - Answers The owners' claim to assets.
paid-in capital - Answers the amount stockholders have invested in the company
retained earnings - Answers An amount earned by a corporation and not yet distributed to
stockholders.
revenues - Answers The financial resources of the government. The individual income tax and Social
Security tax are two major sources of the federal government's revenue.
expenses - Answers The cost of assets consumed or services used in the process of generating
revenues.
dividends - Answers earnings distributed to stockholders
Income Statement - Answers A financial statement showing the revenue and expenses for a fiscal
period.
Statement of Retained Earnings - Answers Reports the way that net income and the distribution of
dividends affected the financial position of the company during the accounting period.
Balance Sheet - Answers A financial statement that reports assets, liabilities, and owner's equity on a
specific date.
Statement of Cash Flows - Answers A financial statement that provides financial information about
the cash receipts and cash payments of a business for a specific period of time.
Transaction Example - Answers amazon makes an online sale
transaction - Answers A business activity that changes assets, liabilities, or owner's equity
an account - Answers is a record of increases and decreases in a specific asset, liability, equity,
revenue, or expense item during a period
Asset Accounts - Answers cash, supplies, equipment
Liability Accounts - Answers Accounts Payable, Salaries Payable, Utilities Payable, and Taxes Payable
how does common stock effect equity - Answers increases equity
how does retained earnings effect equity - Answers increases equity
how do dividends effect equity - Answers decreases equity
how does revenue effect equity - Answers increases equity
how do expenses effect equity - Answers decreases equity
UPDATE 2026
accounting is... - Answers The information system that identifies, records, and communicates the
economic events of an organization to interested users.
Who uses accounting information? - Answers Individuals, investors and creditors, regulatory bodies,
nonprofit organizations
Financial Accounting - Answers accounting information and analyses prepared for people outside the
organization
Managerial Accounting - Answers accounting used to provide information and analyses to managers
inside the organization to assist them in decision making
Proprietorship - Answers A business owned by one person
Partnership - Answers A business in which two or more persons combine their assets and skills
Limited Liability Company - Answers A business organization in which the business (not the owner) is
liable for the company's debts
Corporation - Answers A business owned by stockholders who share in its profits but are not
personally responsible for its debts
the entity assumption - Answers Organization stands apart from other organizations and individuals
as a separate economic unit
the continuity assumption - Answers States that businesses are assumed to continue to operate into
the foreseeable future.
Historical Cost Principle - Answers An accounting principle that states that companies should record
assets at their cost.
stable monetary unit assumption - Answers The reason for ignoring the effect of inflation in the
accounting records, based on the assumption that the dollar's purchasing power is relatively stable.
Accounting Equation - Answers An equation showing the relationship among assets, liabilities, and
owner's equity
assets - Answers money and other valuables belonging to an individual or business
liabilities - Answers Amounts owed to creditors
Stockholders' Equity - Answers The owners' claim to assets.
paid-in capital - Answers the amount stockholders have invested in the company
retained earnings - Answers An amount earned by a corporation and not yet distributed to
stockholders.
revenues - Answers The financial resources of the government. The individual income tax and Social
Security tax are two major sources of the federal government's revenue.
expenses - Answers The cost of assets consumed or services used in the process of generating
revenues.
dividends - Answers earnings distributed to stockholders
Income Statement - Answers A financial statement showing the revenue and expenses for a fiscal
period.
Statement of Retained Earnings - Answers Reports the way that net income and the distribution of
dividends affected the financial position of the company during the accounting period.
Balance Sheet - Answers A financial statement that reports assets, liabilities, and owner's equity on a
specific date.
Statement of Cash Flows - Answers A financial statement that provides financial information about
the cash receipts and cash payments of a business for a specific period of time.
Transaction Example - Answers amazon makes an online sale
transaction - Answers A business activity that changes assets, liabilities, or owner's equity
an account - Answers is a record of increases and decreases in a specific asset, liability, equity,
revenue, or expense item during a period
Asset Accounts - Answers cash, supplies, equipment
Liability Accounts - Answers Accounts Payable, Salaries Payable, Utilities Payable, and Taxes Payable
how does common stock effect equity - Answers increases equity
how does retained earnings effect equity - Answers increases equity
how do dividends effect equity - Answers decreases equity
how does revenue effect equity - Answers increases equity
how do expenses effect equity - Answers decreases equity
