FINAL Accounting Exam #1 Questions with Correct Answers
Accounting - ✔✔An information system that measures business activities,
processes data into reports, and communicates results to decision-makers.
External users - ✔✔Investors, creditors, regulators, analysts who rely on financial
accounting.
Internal users - ✔✔Managers and employees who rely on managerial accounting.
Financial Accounting - ✔✔Provides historical information to external users, must
follow GAAP, focuses on reliability and comparability.
Managerial Accounting - ✔✔Provides future-oriented information to internal
users, not required to follow GAAP, focuses on relevance and decision-making.
Accounting Equation - ✔✔Assets = Liabilities + Stockholders' Equity
Assets - ✔✔Resources owned or controlled by the business that provide future
economic benefit.
Liabilities - ✔✔Obligations owed to creditors.
Stockholders' Equity - ✔✔Owners' claims on the business, including common
stock and retained earnings.
, Retained Earnings Formula - ✔✔Beginning RE + Net Income - Dividends = Ending
RE
Asset Source - ✔✔Increases assets and increases claims (liabilities or equity).
Asset Use - ✔✔Decreases assets and decreases claims.
Asset Exchange - ✔✔One asset increases while another decreases.
Claims Exchange - ✔✔One claim increases while another decreases.
Balance Sheet - ✔✔Reports assets, liabilities, and equity at a point in time.
Income Statement - ✔✔Reports revenues and expenses over a period, measures
profitability.
Statement of Cash Flows - ✔✔Reports cash inflows and outflows from operating,
investing, and financing activities.
Accrual Accounting - ✔✔Recognizes revenue when earned and expenses when
incurred, regardless of cash timing.
Accrued Revenue - ✔✔Revenue earned but not yet collected, recorded as
Accounts Receivable.
Accounting - ✔✔An information system that measures business activities,
processes data into reports, and communicates results to decision-makers.
External users - ✔✔Investors, creditors, regulators, analysts who rely on financial
accounting.
Internal users - ✔✔Managers and employees who rely on managerial accounting.
Financial Accounting - ✔✔Provides historical information to external users, must
follow GAAP, focuses on reliability and comparability.
Managerial Accounting - ✔✔Provides future-oriented information to internal
users, not required to follow GAAP, focuses on relevance and decision-making.
Accounting Equation - ✔✔Assets = Liabilities + Stockholders' Equity
Assets - ✔✔Resources owned or controlled by the business that provide future
economic benefit.
Liabilities - ✔✔Obligations owed to creditors.
Stockholders' Equity - ✔✔Owners' claims on the business, including common
stock and retained earnings.
, Retained Earnings Formula - ✔✔Beginning RE + Net Income - Dividends = Ending
RE
Asset Source - ✔✔Increases assets and increases claims (liabilities or equity).
Asset Use - ✔✔Decreases assets and decreases claims.
Asset Exchange - ✔✔One asset increases while another decreases.
Claims Exchange - ✔✔One claim increases while another decreases.
Balance Sheet - ✔✔Reports assets, liabilities, and equity at a point in time.
Income Statement - ✔✔Reports revenues and expenses over a period, measures
profitability.
Statement of Cash Flows - ✔✔Reports cash inflows and outflows from operating,
investing, and financing activities.
Accrual Accounting - ✔✔Recognizes revenue when earned and expenses when
incurred, regardless of cash timing.
Accrued Revenue - ✔✔Revenue earned but not yet collected, recorded as
Accounts Receivable.
