Financial Accounting 15E (Warren) Chapter 1 Exam verified solutions and explanations.

Financial Accounting 15E (Warren) Chapter 1 Exam verified solutions and explanations Account payable - Correct Answers: The liability created by a purchase on account account receivable - Correct Answers: A claim against the customer created by selling merchandise or services on credit. Accounting - Correct Answers: An information system that provides reports to stakeholders about the economic activities and condition of a business. Accounting Equation - Correct Answers: Assets = Liabilities + Owner's Equity Assets - Correct Answers: resources owned by a business Balance Sheet - Correct Answers: A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a month or a year. business - Correct Answers: An organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers. Business Entity Concept - Correct Answers: A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business. business transaction - Correct Answers: An economic event or condition that directly changes an entity's financial condition or directly affects its results of operations. Certified Public Accountant (CPA) - Correct Answers: Public accountants who have met a state's education, experience, and examination requirements. Corporation - Correct Answers: A business organized under state or federal statutes as a separate legal entity. cost concept - Correct Answers: A concept of accounting that determines the amount initially entered into the accounting records for purchases. earnings - Correct Answers: The amount by which revenues exceed expenses. Ethics - Correct Answers: moral principles that guide the conduct of individuals Expenses - Correct Answers: Assets used up or services consumed in the process of generating revenues. fees earned - Correct Answers: revenue from providing services Financial Accounting - Correct Answers: The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records. Financial Statements - Correct Answers: Financial reports that summarize the effects of events on a business. Generally Accepted Accounting Principles (GAAP) - Correct Answers: Generally accepted guidelines for the preparation of financial statements. Income Statement - Correct Answers: A summary of the revenue and expenses for a specific period of time, such as a month or a year. Interest Revenue - Correct Answers: Money received for interest. International Accounting Standards Board (IASB) - Correct Answers: An organization that issues International Financial Reporting Standards for many countries outside the United States. Liablities - Correct Answers: the rights of creditors that represent debts of the business matching concept - Correct Answers: A concept of accounting in which expenses are matched with the revenue generated during a period by those expenses. Net income (net profit) - Correct Answers: The amount by which revenues exceed expenses. net loss - Correct Answers: The amount by which expenses exceed revenues. Owner's Equity - Correct Answers: The owner's right to the assets of the business. prepaid expenses - Correct Answers: Items such as supplies that will be used in the business in the future. profit - Correct Answers: The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services. Proprietorship - Correct Answers: A business owned by one individual. Rent Revenue - Correct Answers: Money received for rent. revenues - Correct Answers: increases in assets from performing services or delivering products to customers sales - Correct Answers: The total amount charged customers for merchandise sold, including cash sales and sales on account. service business - Correct Answers: A business providing services rather than products to customers. Statement of Cash Flows - Correct Answers: A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year. Statement of Owner's Equity - Correct Answers: A summary of the changes in owner's equity that have occurred during a specific period of time, such as a month or a year. unit of measure concept - Correct Answers: A concept of accounting requiring that economic data be recorded in dollars.