Accounting Principles (14th Edition) by Jerry J. Weygandt & Paul D. Kimmel – Test Bank – Practice Questions with Answers

TESTBANK
Accounting Principles 14th Edition
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by Jerry J. Weygandt, Paul D. Kimmel Chapter
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s 1 - 27, Complete
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,TABLE OF CONTENTS it it




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 Transaction
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s

14 Corporations: Dividends, Retained Earnings, and Income
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Reporting

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 i t




ACCOUNTING IN ACTION it it




CHAPTER LEARNING OBJECTIVES it it




1. Identify the activities and users associated with accounting. Accounting is an information system that ide
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ntifies, records, and communicates the economic events of an organization to interested users. The major users
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and uses of accounting are as follows: (a) Management uses accounting information to plan, organize, and run t
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he business. (b) Investors (owners) decide whether to buy, hold, or sell their financial interests on the basis of ac
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counting data. (c)Creditors (suppliers and bankers) evaluate the risks of granting credit or lending money on t
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he basis of accounting information. Other groups that use accounting information are taxing authorities, regula
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tory agencies, customers, and labor unions.
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2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are the standard
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s of conduct by which actions are judged as right or wrong. Effective financial reporting depends on sound ethi
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cal behavior. it




Generally accepted accounting principles are a common set of standards used by accountants. The primary acc
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ounting standard-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 it it it it it




Assets are resources a business owns. Liabilities are creditorship claims on total assets.Owner's equity is
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the ownership claim on total assets.
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The expanded accounting equation is:
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Assets  Liabilities + Owner's Capital  Owner's Drawings + Revenues 
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Expenses
Investments by owners (assets the owner puts into the business) are recorded in a category called owner‘s capita
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l. Owner‘s drawings are the withdrawal of assets by the owner for personal use. Revenues are the gross increase i
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n owner‘s equity from business activities for the purpose of earning income. Expenses are the costs of assets co
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nsumed or services used in the process of earning revenue. Owner‘s equity is increased by an owner‘s i
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nvestmentsand by revenues from business operations. Owner‘s equity is decreased by an owner‘s withdrawals
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of assets and by expenses.
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4. Analyze the effects of business transactions on the accounting equation. Each businesstransaction must
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have a dual effect on the accounting equation. For example, if an individual asset increases, there must be a corr
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esponding (1) decrease in another asset, or (2) increase 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 statement presents the rev
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enues and expenses, and resulting net income or net loss for a specific period of time. An owner's equity state
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ment summarizes the changes in owner's equity for a specific period of time. A balance sheet reports the assets, l
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iabilities, and owner's equity at a specific date. A statement of cash flows summarizes information about the cas
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h inflows (receipts) and outflows (payments) for a specific period of time.
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