TCU FUNDAMENTALS OF ACCOUNTING
CH 1 & 2 (LAWS) EXAM QUESTIONS AND
VERIFIED DETAILED ANSWERS GRADED
A+
QUESTIONS AND ANSWERS
Accounting. ANSWER -A system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers.
Financial Accounting Standards Board (FASB). ANSWER -The private sector body given
the primary responsibility to work out the detailed rules that become generally accepted
accounting principles.
Financial Accounting. ANSWER -Accounting area focused on providing financial
information to external users such as investors, creditors, and regulators.
Balance Sheet (Statement of Financial Position). ANSWER -Reports the amount of assets,
liabilities, and stockholders' equity of an accounting entity at a point in time.
Accounting Entity. ANSWER -The organization for which financial data are to be
collected.
Accounting Period. ANSWER -The time period covered by the financial statements.
Basic Accounting Equation. ANSWER -Assets = Liabilities + Stockholder's Equity
Assets. ANSWER -Probable future economic benefits owned by the entity as a result of
past transactions.
Audit. ANSWER -An examination of the financial reports to ensure that they represent
what they claim and conform with generally accepted accounting principles.
, Liabilities. ANSWER -Probable debts or obligations of the entity that result from past
transactions, which will be paid with assets or services.
Stockholders' Equity (Owners' Equity or Shareholders' Equity). ANSWER -The financing
provided by the owners and the operations of the business.
Sunk Cost. ANSWER -Cost incurred in the past; is not relevant to future decisions.
Income Statement (Statement of Income, Statement of Earnings, Statement of Operations).
ANSWER -Reports the revenues less the expenses of the accounting period.
Revenues. ANSWER -Increases in assets or settlements of liabilities from ongoing
operations.
Expenses. ANSWER -Decreases in assets or increases in liabilities from ongoing
operations incurred to generate revenues during the period.
Securities and Exchange Commission (SEC). ANSWER -The U.S. government agency that
determines the financial statements that public companies must provide to stockholders
and the measurement rules that they must use in producing those statements.
Statement of Cash Flows (Cash Flow Statement). ANSWER -Reports inflows and outflows
of cash during the accounting period in the categories of operating, investing, and
financing.
Statement of Retained Earnings. ANSWER -Reports the way that net income and the
distribution of dividends affected the financial position of the company during the
accounting period.
Generally Accepted Accounting Principles (GAAP). ANSWER -The measurement rules
used to develop the information in financial statements.
CH 1 & 2 (LAWS) EXAM QUESTIONS AND
VERIFIED DETAILED ANSWERS GRADED
A+
QUESTIONS AND ANSWERS
Accounting. ANSWER -A system that collects and processes (analyzes, measures, and
records) financial information about an organization and reports that information to
decision makers.
Financial Accounting Standards Board (FASB). ANSWER -The private sector body given
the primary responsibility to work out the detailed rules that become generally accepted
accounting principles.
Financial Accounting. ANSWER -Accounting area focused on providing financial
information to external users such as investors, creditors, and regulators.
Balance Sheet (Statement of Financial Position). ANSWER -Reports the amount of assets,
liabilities, and stockholders' equity of an accounting entity at a point in time.
Accounting Entity. ANSWER -The organization for which financial data are to be
collected.
Accounting Period. ANSWER -The time period covered by the financial statements.
Basic Accounting Equation. ANSWER -Assets = Liabilities + Stockholder's Equity
Assets. ANSWER -Probable future economic benefits owned by the entity as a result of
past transactions.
Audit. ANSWER -An examination of the financial reports to ensure that they represent
what they claim and conform with generally accepted accounting principles.
, Liabilities. ANSWER -Probable debts or obligations of the entity that result from past
transactions, which will be paid with assets or services.
Stockholders' Equity (Owners' Equity or Shareholders' Equity). ANSWER -The financing
provided by the owners and the operations of the business.
Sunk Cost. ANSWER -Cost incurred in the past; is not relevant to future decisions.
Income Statement (Statement of Income, Statement of Earnings, Statement of Operations).
ANSWER -Reports the revenues less the expenses of the accounting period.
Revenues. ANSWER -Increases in assets or settlements of liabilities from ongoing
operations.
Expenses. ANSWER -Decreases in assets or increases in liabilities from ongoing
operations incurred to generate revenues during the period.
Securities and Exchange Commission (SEC). ANSWER -The U.S. government agency that
determines the financial statements that public companies must provide to stockholders
and the measurement rules that they must use in producing those statements.
Statement of Cash Flows (Cash Flow Statement). ANSWER -Reports inflows and outflows
of cash during the accounting period in the categories of operating, investing, and
financing.
Statement of Retained Earnings. ANSWER -Reports the way that net income and the
distribution of dividends affected the financial position of the company during the
accounting period.
Generally Accepted Accounting Principles (GAAP). ANSWER -The measurement rules
used to develop the information in financial statements.
