ACC 101 Chapter 1 Exam with 100%
Correct Answers
What iis accounting? - ANS-An information and measurement system that identifies,
records, and communicates information about business information. Also known as the
language of business
3 parts of accounting - ANS-Identifying: select transactions and events
Recording: input, measure, and log
Communicating: prepare, analyze, and interpret
Record/Bookkeeping - ANS-most common with accounting, the recording part of acc.,
technology helps reduce time and effort and gives more accuracy (credit approvals,
checking accounts, tax forms, and payroll)
External Users - ANS-Do not directly run the organization and have limited access to
the bus. info. Financial accountants are used for this. Ex. users: Lenders, shareholders,
directors, external auditors, labor unions, regulators, gov't, contributers, suppliers,
consumers
Financial Accounting - ANS-aimed at external users by providing them with general
purpose financial statements.
Internal Users - ANS-Directly manage and operate the organization, CEO etc. uses
managerial accounting. Int. users: research and development managers, purchasing
managers, human resource managers, production managers,
distribution/marketing/service managers
Managerial Accounting - ANS-area that serves decision making needs of internal users.
internal reports are not subject to the same rules as external.
Four broad opportunities of accounting - ANS-Financial, managerial, taxation, and
accounting related
Private Accounting - ANS-employees working for businesses
Public Accounting - ANS-services such as auditing and taxing
Types of business entities - ANS-sole proprietorship, partnership, corporation
Sole Proprietorship - ANS-business owned by one person and not a seperate legal
entity from its owner (unlimited liability), and the owner is only taxed once.
, Partnership - ANS-a business owned by two or more people, jointly liable for tax etc, not
a legal seperate entity from owner, unlimited liability for partners. 3 types limit liability-
limited partnership(LP), limited liability company(LLC) most common, and limited liability
partnership(LLP)
Corporation - ANS-business legally seperate from owner, its responsible for its own acts
and debt, acts through its managers stock/shareholders. limited liability, double
taxation-to corporation and owners income. S corporations do not owe corporate
income tax.
Share/Stockholder - ANS-owners of a corporation and aren't personally liable for acts
and debts
Shares/stock - ANS-units of ownership in a corporation
common/capital stock - ANS-when a corporation issues only one class of stock
Accounting Constraints - ANS-1. Materiality- says that only info affecting decsions
should be enclosed
2. Cost-Benefit- only info with benefits greater than costs of proviiding should be
disclosed
Accounting system reflects - ANS-what it owes and what it owns
Accounting Equation - ANS-Assets = Liabilities + Owner's Equity
(liabiites and O.E are source of funds)
Assets - ANS-resources a company owns or controls, expected to have future benefit
Recievables - ANS-asset that promises a future inflow of resources, (on credit)
Liabilities - ANS-creditors' claims on assets, companies obligations to provide assets or
services to others
Payable - ANS-a liability that promises a future outflow of resources, anything that
includes "payable"
Equity - ANS-The owners' claim to assets. a.k.a net assets or residual activity.
increases with owners investments and decreases with withdrawals
4 elements of equity - ANS-1. Owner capital/investment- inflow of resources (cash or
assets) from owner
2. Owner withdrawal- outflow of resources from owner
3. Revenues- increase equity from sales of products and services, etc
4. Expenses- decrease equity from costs of produing products or services
Correct Answers
What iis accounting? - ANS-An information and measurement system that identifies,
records, and communicates information about business information. Also known as the
language of business
3 parts of accounting - ANS-Identifying: select transactions and events
Recording: input, measure, and log
Communicating: prepare, analyze, and interpret
Record/Bookkeeping - ANS-most common with accounting, the recording part of acc.,
technology helps reduce time and effort and gives more accuracy (credit approvals,
checking accounts, tax forms, and payroll)
External Users - ANS-Do not directly run the organization and have limited access to
the bus. info. Financial accountants are used for this. Ex. users: Lenders, shareholders,
directors, external auditors, labor unions, regulators, gov't, contributers, suppliers,
consumers
Financial Accounting - ANS-aimed at external users by providing them with general
purpose financial statements.
Internal Users - ANS-Directly manage and operate the organization, CEO etc. uses
managerial accounting. Int. users: research and development managers, purchasing
managers, human resource managers, production managers,
distribution/marketing/service managers
Managerial Accounting - ANS-area that serves decision making needs of internal users.
internal reports are not subject to the same rules as external.
Four broad opportunities of accounting - ANS-Financial, managerial, taxation, and
accounting related
Private Accounting - ANS-employees working for businesses
Public Accounting - ANS-services such as auditing and taxing
Types of business entities - ANS-sole proprietorship, partnership, corporation
Sole Proprietorship - ANS-business owned by one person and not a seperate legal
entity from its owner (unlimited liability), and the owner is only taxed once.
, Partnership - ANS-a business owned by two or more people, jointly liable for tax etc, not
a legal seperate entity from owner, unlimited liability for partners. 3 types limit liability-
limited partnership(LP), limited liability company(LLC) most common, and limited liability
partnership(LLP)
Corporation - ANS-business legally seperate from owner, its responsible for its own acts
and debt, acts through its managers stock/shareholders. limited liability, double
taxation-to corporation and owners income. S corporations do not owe corporate
income tax.
Share/Stockholder - ANS-owners of a corporation and aren't personally liable for acts
and debts
Shares/stock - ANS-units of ownership in a corporation
common/capital stock - ANS-when a corporation issues only one class of stock
Accounting Constraints - ANS-1. Materiality- says that only info affecting decsions
should be enclosed
2. Cost-Benefit- only info with benefits greater than costs of proviiding should be
disclosed
Accounting system reflects - ANS-what it owes and what it owns
Accounting Equation - ANS-Assets = Liabilities + Owner's Equity
(liabiites and O.E are source of funds)
Assets - ANS-resources a company owns or controls, expected to have future benefit
Recievables - ANS-asset that promises a future inflow of resources, (on credit)
Liabilities - ANS-creditors' claims on assets, companies obligations to provide assets or
services to others
Payable - ANS-a liability that promises a future outflow of resources, anything that
includes "payable"
Equity - ANS-The owners' claim to assets. a.k.a net assets or residual activity.
increases with owners investments and decreases with withdrawals
4 elements of equity - ANS-1. Owner capital/investment- inflow of resources (cash or
assets) from owner
2. Owner withdrawal- outflow of resources from owner
3. Revenues- increase equity from sales of products and services, etc
4. Expenses- decrease equity from costs of produing products or services
