Accounting 201 Test Questions And Answers

Accounting 201 Test Questions And Answers Accounting - ANSWER- The art of recording, classifying, reporting, and interpreting the financial data of an organization. Accounting equation - ANSWER- An expression in dollar amounts of the equivalency of the assets and equities of an enterprise, stated as Assets=Liabilities+Owner's equity. Accounting principle - ANSWER- A broad rule adopted by the accounting profession as a guide in measuring, recording, and reporting the financial affairs and activities of a business. Account payable - ANSWER- A debt owed to a creditor for goods or services purchases on credit. Account receivable - ANSWER- An amount receivable from a debtor for goods or services sold on credit. Asset - ANSWER- A property or economic resource owned by an individual or enterprise. Balance sheet - ANSWER- A financial report showing the assets, liabilities, and owner's equity of an enterprise on a specefic date. Business entity concept - ANSWER- The idea that a business is separate and distinct from its owner or owners and from every other business. Capital stock - ANSWER- Ownership equity in a corporation resulting from the sale of shares of the corportion's stock to its stockholders. Continuing-concern concept - ANSWER- The idea that a business is a going concern that will continue to operate, using its assets to carry on its operation and, with the exception of merchandise, not offering the assets for sale. Corporation - ANSWER- A business incorporated under the laws of a state or other jurisdiction. Equity - ANSWER- A right, claim, or interest in property. Expense - ANSWER- Goods or services consumed in operating an enterprise. Income statement - ANSWER- A financial statement showing revenues earned by a business, the expenses incurred in earning the revenues, and the resulting net income or net loss. Liability - ANSWER- A debt owed. Net assets - ANSWER- Assets minus liablities. Net income - ANSWER- The excess of revenue over expenses. Net loss - ANSWER- The excess of expenses over revenues. Objectivity principle - ANSWER- The accounting rule requiring that wherever possible, the amounts used in recording transactions be based on objective evidence rather than on sujective arguments. Proprietorship - ANSWER- A sole owner of a business who is liable for all debt. Partnership - ANSWER- An association of two or more persons to co-own and operate a business for profit. Realization principle - ANSWER- The accounting rule that defines a revenue as an inflow of assets, not necessarily cash, in exchange for goods or services and required the revenue to be recognized at the time, but not before, it is earned. Revenue - ANSWER- An inflow of assets, not necessarily cash, in exchange for goods and services sold. Stable-dollar concept - ANSWER- The idea that the purchasing power of the unit of measure used in accounting, the dollar, does no change. External users - ANSWER- Investors, creditors, government, unions, and the general public. Internal users - ANSWER- Managers and board of directors. GAAP - ANSWER- General accepted accounting practices. FASB - ANSWER- Financial accounting standards board. IFRS - ANSWER- International financial reporting standards, issued by the IASB (International Accounting Standards Board). Journal - ANSWER- A book of original entry in which transactions are first recorded and from which transaction amounts are posted to the ledger accounts