ECU Accounting Exam 1 Chapters 1–3 Study Guide | Financial Accounting Review & Practice
Questions
What is the accounting equation? - ANS ✔✔Assets= liabilities + owners equity
What are assets? - ANS ✔✔economic resources owned by the business used to operate the
business
What are liabilities? - ANS ✔✔the creditors claim to the business
What is owners equity? - ANS ✔✔owners claim/residual claim (whatever is leftover)
What are revenues? - ANS ✔✔increases in assets or extinguishment of liabilities stemming from
delivery of goods or from providing services; it increases retained earnings
What are expenses? - ANS ✔✔the cost of doing business and/or a used up asset; decreases
retained earnings
What are dividends? - ANS ✔✔profit that we don't retain; is given to the owners in their
personal pocket; decreases retained earnings
What does GAAP stand for and do? - ANS ✔✔generally accepted accounting principles; make
the rules that we use to do data
What does FASB stand for and do? - ANS ✔✔financial accounting standards board; a group of
accountants that modify the gaaps
What are the 4 financial statements in order? - ANS ✔✔Income statement, retained earnings,
balance sheet, and cash flow
, What does the income statement show? - ANS ✔✔how your operating your business
What does the statement of retained earnings show? - ANS ✔✔shows what you did with your
earnings
What does the balance sheet show? - ANS ✔✔financial position of business on certain day
What does cash flow statement show? - ANS ✔✔the inflows and outflows of cash
How do you calculate net income? - ANS ✔✔revenues - expenses
What are the types of accounts and their normal balances? - ANS ✔✔assets (D), liabilities (C),
equity (C), revenues (C), expenses (D), and dividends (D)(debit bc they decrease equity)
What is the definition of debit and credit? - ANS ✔✔debit means left, credit means right
What is a journal? - ANS ✔✔a chronological listing of your events that occur of the business and
analyzing
What is a ledger? - ANS ✔✔group of accounts all in one place; physically show
increases/decreases of stuff
What is a trial balance? - ANS ✔✔a list of all ledger accounts and their balances at a point in
time
What is a posting? - ANS ✔✔transferring data from the journal into the ledger
Questions
What is the accounting equation? - ANS ✔✔Assets= liabilities + owners equity
What are assets? - ANS ✔✔economic resources owned by the business used to operate the
business
What are liabilities? - ANS ✔✔the creditors claim to the business
What is owners equity? - ANS ✔✔owners claim/residual claim (whatever is leftover)
What are revenues? - ANS ✔✔increases in assets or extinguishment of liabilities stemming from
delivery of goods or from providing services; it increases retained earnings
What are expenses? - ANS ✔✔the cost of doing business and/or a used up asset; decreases
retained earnings
What are dividends? - ANS ✔✔profit that we don't retain; is given to the owners in their
personal pocket; decreases retained earnings
What does GAAP stand for and do? - ANS ✔✔generally accepted accounting principles; make
the rules that we use to do data
What does FASB stand for and do? - ANS ✔✔financial accounting standards board; a group of
accountants that modify the gaaps
What are the 4 financial statements in order? - ANS ✔✔Income statement, retained earnings,
balance sheet, and cash flow
, What does the income statement show? - ANS ✔✔how your operating your business
What does the statement of retained earnings show? - ANS ✔✔shows what you did with your
earnings
What does the balance sheet show? - ANS ✔✔financial position of business on certain day
What does cash flow statement show? - ANS ✔✔the inflows and outflows of cash
How do you calculate net income? - ANS ✔✔revenues - expenses
What are the types of accounts and their normal balances? - ANS ✔✔assets (D), liabilities (C),
equity (C), revenues (C), expenses (D), and dividends (D)(debit bc they decrease equity)
What is the definition of debit and credit? - ANS ✔✔debit means left, credit means right
What is a journal? - ANS ✔✔a chronological listing of your events that occur of the business and
analyzing
What is a ledger? - ANS ✔✔group of accounts all in one place; physically show
increases/decreases of stuff
What is a trial balance? - ANS ✔✔a list of all ledger accounts and their balances at a point in
time
What is a posting? - ANS ✔✔transferring data from the journal into the ledger
