Test Bank For Accounting Principles 14th Edition Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell

Test Bank for Accounting Principles 14th Edition Jerry J.
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as Weygandt, Paul D. Kimmel, Jill E. Mitchell
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,Test Bank for Accounting Principles, 14th Edition by Jerry J. Weygandt, Paul D.Kimmel
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CHAPTER 1 a s




ACCOUNTING IN ACTION as as




CHAPTERLEARNING OBJECTIVES as as




1. Identify the activities and users associated with accounting. Accounting is an informat
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ion system that identifies, records, and communicates the economic events of an organi
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zation to interested users. The major users and uses of accounting are as follows: (a) M
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anagement uses accounting information to plan, organize, and run the business. (b) Inves
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tors (owners) decide whether to buy, hold, or sell their financial interests on the basis of acc
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ounting data. (c)Creditors (suppliers and bankers) evaluate the risks of granting credit or
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lending money onthe basis of accounting information. Other groups that use accounting
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information are taxing authorities, regulatory agencies, customers, and labor unions.
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2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are t
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he standards of conduct by which actions are judged as right or wrong. Effective financial re
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porting depends on sound ethical behavior. a s as as as as




Generally accepted accounting principles are a common set of standards used by account
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ants. The primary accounting standard-
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setting body in the United States is the Financial Accounting Standards Board.
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3. State the accounting equation, and define its components. The basic accounting equation is
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: Assets = Liabilities + Owner's Equity
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Assets are resources a business owns. Liabilities are creditorship claims on total assets.
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Owner's equity is the ownership claim on total assets. T
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he expanded accounting equation is:
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Assets Liabilities + Owner's Capital as as as as Owner's Drawings + Revenues as as as as



Expenses as




Investments by owners (assets the owner puts into the business) are recorded in a cat
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egory called owner’s capital. Owner’s drawings are the withdrawal of assets by the owner for
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spersonal use. Revenues are the gross increase in owner’s equity from business activities for th
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e purpose of earning income. Expenses are the costs of assets consumed or services used
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in the process of earning revenue. Owner’s equity is increased by an owner’s investments
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and by revenues from business operations. Owner’s equity is decreased by an owner’s wi
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thdrawals of assets and by expenses. a s a s a s a s a s




4. Analyze the effects of business transactions on the accounting equation. Each business t
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ransaction must have a dual effect on the accounting equation. For example, if an indiv
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idual asset increases, there must be a corresponding (1) decrease in another asset, or (2) incr
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ease in a specific liability, or (3) increase in owner's equity.
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5. Describe the four financial statements and how they are prepared. An income statem
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ent presents the revenues and expenses, and resulting net income or net loss for a spe
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cific period of time. An owner's equity statement summarizes the changes in owner's e
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quity for a specific period of time. A balance sheet reports the assets, liabilities, and o
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wner's equity at a specific date. A statement of cash flows summarizes information about the c
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ash inflows (receipts) and outflows (payments) for a specific period of time.
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,
, 1-2
as as Test Bank for Accounting Principles, Fourteenth Edition
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a6.a s Explaina s thea s careera s opportunitiesa s ina s accounting.a s Accountinga s offersa s manya s differenta s jobsa s ina s fiel

ds such as public and private accounting, governmental, and forensic accounting. Accoun
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ting is a popular major because there are many different types of jobs, with unlimited potenti
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al for career advancement.
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