Accounting Fundamentals: Financial and Managerial Principles ACTUAL UPDATED QUESTIONS AND CORRECT ANSWERS

Accounting Fundamentals: Financial and
Managerial Principles ACTUAL UPDATED
QUESTIONS AND CORRECT ANSWERS

Accounting The process of recording, summarizing, and
reporting business transactions to help users make
decisions


Flow of Accounting Information Business transactions occur → recorded →
financial statements prepared → users make
decisions


Financial Accounting Provides information to external users (investors,
creditors, government)


Managerial Accounting Provides information to internal managers for
decision-making


5 Buckets of Accounts The five main account types: Assets, Liabilities,
Equity, Revenue, Expenses


Assets Resources owned by a business that provide future
economic benefit


Liabilities Obligations a business owes that require future
payment or sacrifice

, Equity Owner's claim on the assets of the business


Revenue Value earned from providing goods or services to
customers


Expenses Costs incurred in running the business to generate
revenue


Balance Sheet Accounts Assets, Liabilities, and Equity (point in time)


Income Statement Accounts Revenue and Expenses (period of time)


Accounting Equation Assets = Liabilities + Equity


Expanded Accounting Equation Assets = Liabilities + Equity + Revenues − Expenses −
Dividends


Paid-in Capital Amount invested in the business by owners
(common stock)


Retained Earnings Accumulated net income kept in the business


Dividends Distributions of profits to shareholders that reduce
retained earnings


Financial Statements Reports that summarize financial performance and
position


Income Statement Reports revenues, expenses, and net income over
a period


Net Income Revenues minus expenses