TESTBANK
Accounting Principles 14th Edition
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by Jerry J. Weygandt, Paul D. Kimmel Chapters
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z 1 - 27, Complete
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,TABLE OF CONTENTS z z
1 Accounting in Action
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2 The Recording Process
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3 Adjusting the Accounts
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4 Completing the Accounting Cycle
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5 Accounting for Merchandising Operations
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6 Inventories
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7 Accounting Information Systems
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8 Fraud, Internal Control, and Cash
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9 Accounting for Receivables
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10 Plant Assets, Natural Resources, and Intangible Assets
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11 Current Liabilities and Payroll Accounting
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12 Accounting for Partnerships
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13 Corporations: Organization and Capital Stock Transactions
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14 Corporations: Dividends, Retained Earnings, and Income
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Reporting
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,15 Long-Term Liabilities
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16 Investments
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17 Statement of Cash Flows
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18 Financial Analysis: The Big Picture
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19 Managerial Accounting
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20 Job Order Costing
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21 Process Costing
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22 Cost-Volume-Profit
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23 Incremental Analysis
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24 Budgetary Planning
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25 Budgetary Control and Responsibility Accounting
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26 Standard Costs and Balanced Scorecard
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27 Planning for Capital Investments
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, CHAPTER 1 z
ACCOUNTING IN ACTION z z
CHAPTER LEARNING OBJECTIVES z z
1. Identify the activities and users associated with accounting. Accounting is an information system
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that identifies, records, and communicates the economic events of an organization to interested
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users. The major users and uses of accounting are as follows: (a) Management uses accounting
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information to plan, organize, and run the business. (b) Investors (owners) decide whether to buy,
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hold, or sell their financial interests on the basis of accounting data. (c) Creditors (suppliers and
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bankers) evaluate the risks of granting credit or lending money on the basis of accounting
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information. Other groups that use accounting information are taxing authorities, regulatory
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agencies, customers, and labor unions.
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2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are the
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standards of conduct by which actions are judged as right or wrong. Effective financial reporting
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depends on sound ethical behavior.
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Generally accepted accounting principles are a common set of standards used by accountants. The
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primary accounting standard-setting body in the United States is the Financial Accounting Standards
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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
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zassets.Owner's equity is the ownership claim on total assets.
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The expanded accounting equation is:
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Assets Liabilities + Owner's Capitalz z z z z z z Owner's Drawings + Revenues z z z z
Expenses
Investments by owners (assets the owner puts into the business) are recorded in a category called
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zowner‘s capital. Owner‘s drawings are the withdrawal of assets by the owner for personal use.
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zRevenues are the gross increase in owner‘s equity from business activities for the purpose of earning
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zincome. Expenses are the costs of assets consumed or services used in the process of earning
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z revenue. Owner‘s equity is increased by an owner‘s investmentsand by revenues from business
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zoperations. Owner‘s equity is decreased by an owner‘s withdrawals of assets and by expenses.
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4. Analyze the effects of business transactions on the accounting equation. Each business transaction
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must have a dual effect on the accounting equation. For example, if an individual asset increases,
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there must be a corresponding (1) decrease in another asset, or (2) increase in a specific liability, or
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(3) increase in owner's equity.
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5. Describe the four financial statements and how they are prepared. An income statement presents
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the revenues and expenses, and resulting net income or net loss for a specific period of time. An
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owner's equity statement summarizes the changes in owner's equity for a specific period of time. A
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balance sheet reports the assets, liabilities, and owner's equity at a specific date. A statement of cash
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flows summarizes information about the cash inflows (receipts) and outflows (payments) for a
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specific period of time.
z z z z
Accounting Principles 14th Edition
z z z
by Jerry J. Weygandt, Paul D. Kimmel Chapters
z z z z z z z
z 1 - 27, Complete
z z z
,TABLE OF CONTENTS z z
1 Accounting in Action
z z z z
2 The Recording Process
z z z z
3 Adjusting the Accounts
z z z
4 Completing the Accounting Cycle
z z z z
5 Accounting for Merchandising Operations
z z z z
6 Inventories
z z
7 Accounting Information Systems
z z z z
8 Fraud, Internal Control, and Cash
z z z z z z
9 Accounting for Receivables
z z z z
10 Plant Assets, Natural Resources, and Intangible Assets
z z z z z z z
11 Current Liabilities and Payroll Accounting
z z z z z
12 Accounting for Partnerships
z z z
13 Corporations: Organization and Capital Stock Transactions
z z z z z z
14 Corporations: Dividends, Retained Earnings, and Income
z z z z z z
Reporting
z
,15 Long-Term Liabilities
z z
16 Investments
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17 Statement of Cash Flows
z z z z
18 Financial Analysis: The Big Picture
z z z z z z
19 Managerial Accounting
z z z
20 Job Order Costing
z z z z
21 Process Costing
z z z
22 Cost-Volume-Profit
z z
23 Incremental Analysis
z z z
24 Budgetary Planning
z z
25 Budgetary Control and Responsibility Accounting
z z z z z z
26 Standard Costs and Balanced Scorecard
z z z z z z
27 Planning for Capital Investments
z z z z z
, CHAPTER 1 z
ACCOUNTING IN ACTION z z
CHAPTER LEARNING OBJECTIVES z z
1. Identify the activities and users associated with accounting. Accounting is an information system
z z z z z z z z z z z z
that identifies, records, and communicates the economic events of an organization to interested
z z z z z z z z z z z z z
users. The major users and uses of accounting are as follows: (a) Management uses accounting
z z z z z z z z z z z z z z z
information to plan, organize, and run the business. (b) Investors (owners) decide whether to buy,
z z z z z z z z z z z z z z z
hold, or sell their financial interests on the basis of accounting data. (c) Creditors (suppliers and
z z z z z z z z z z z z z z z z
bankers) evaluate the risks of granting credit or lending money on the basis of accounting
z z z z z z z z z z z z z z z
information. Other groups that use accounting information are taxing authorities, regulatory
z z z z z z z z z z z
agencies, customers, and labor unions.
z z z z z
2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are the
z z z z z z z z z z z z
standards of conduct by which actions are judged as right or wrong. Effective financial reporting
z z z z z z z z z z z z z z z
depends on sound ethical behavior.
z z z z z
Generally accepted accounting principles are a common set of standards used by accountants. The
z z z z z z z z z z z z z
primary accounting standard-setting body in the United States is the Financial Accounting Standards
z z z z z z z z z z z z z
Board.
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3. State the accounting equation, and define its components. The basic accounting equation is:
z z z z z z z z z z z z
Assets = Liabilities + Owner's Equity
z z z z z
Assets are resources a business owns. Liabilities are creditorship claims on total
z z z z z z z z z z z
zassets.Owner's equity is the ownership claim on total assets.
z z z z z z z z z
The expanded accounting equation is:
z z z z
Assets Liabilities + Owner's Capitalz z z z z z z Owner's Drawings + Revenues z z z z
Expenses
Investments by owners (assets the owner puts into the business) are recorded in a category called
z z z z z z z z z z z z z z z
zowner‘s capital. Owner‘s drawings are the withdrawal of assets by the owner for personal use.
z z z z z z z z z z z z z z
zRevenues are the gross increase in owner‘s equity from business activities for the purpose of earning
z z z z z z z z z z z z z z z
zincome. Expenses are the costs of assets consumed or services used in the process of earning
z z z z z z z z z z z z z z z
z revenue. Owner‘s equity is increased by an owner‘s investmentsand by revenues from business
z z z z z z z z z z z z z
zoperations. Owner‘s equity is decreased by an owner‘s withdrawals of assets and by expenses.
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4. Analyze the effects of business transactions on the accounting equation. Each business transaction
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must have a dual effect on the accounting equation. For example, if an individual asset increases,
z z z z z z z z z z z z z z z z
there must be a corresponding (1) decrease in another asset, or (2) increase in a specific liability, or
z z z z z z z z z z z z z z z z z z
(3) increase in owner's equity.
z z z z z
5. Describe the four financial statements and how they are prepared. An income statement presents
z z z z z z z z z z z z z
the revenues and expenses, and resulting net income or net loss for a specific period of time. An
z z z z z z z z z z z z z z z z z z
owner's equity statement summarizes the changes in owner's equity for a specific period of time. A
z z z z z z z z z z z z z z z z
balance sheet reports the assets, liabilities, and owner's equity at a specific date. A statement of cash
z z z z z z z z z z z z z z z z z
flows summarizes information about the cash inflows (receipts) and outflows (payments) for a
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specific period of time.
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