Accounting Principles, 14th Edition by Jerry J. Weygandt, Paul D. Kimmel & Jill E. Mitchell – Complete Test Bank

Test Bank for Accounting Principles 14th Edition Jerry J.
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Weygandt, Paul D. Kimmel, Jill E. Mitchell
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,Test Bank for Accounting Principles, 14th Edition by Jerry J. Weygandt, Paul D.Kimmel


CHAPTER 1 Q




ACCOUNTING IN ACTION Q Q




CHAPTER LEARNING OBJECTIVES Q Q




1. Identify the activities and users associated with accounting. Accounting is an
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Qinformation system that identifies, records, and communicates the economic events of
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Q an organization to interested users. The major users and uses of accounting are as
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Qfollows: (a) Management uses accounting information to plan, organize, and run the
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Q business. (b) Investors (owners) decide whether to buy, hold, or sell their financial
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Qinterests on the basis of accounting data. (c)Creditors (suppliers and bankers) evaluate
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Q the risks of granting credit or lending money onthe basis of accounting information.
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Q Other groups that use accounting information are taxing authorities, regulatory
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Qagencies, customers, and labor unions. Q Q Q Q



2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are
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Qthe standards of conduct by which actions are judged as right or wrong. Effective
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Qfinancial reporting depends on sound ethical behavior. Q Q Q Q Q



Generally accepted accounting principles are a common set of standards used by
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Qaccountants. The primary accounting standard-setting body in the United States is the
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QFinancial Accounting Standards Board. Q Q Q




3. State the accounting equation, and define its components. The basic accounting equation
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Q is: Assets = Liabilities + Owner's Equity
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Assets are resources a business owns. Liabilities are creditorship claims on total assets.
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Owner's equity is the ownership claim on total assets.
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Q The expanded accounting equation is:
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Assets Liabilities + Owner's Capital Q Q Q Q Owner's Drawings + Revenues Q Q Q


Q Expenses Q



Investments by owners (assets the owner puts into the business) are recorded in a
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Qcategory called owner’s capital. Owner’s drawings are the withdrawal of assets by the
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Qowner for personal use. Revenues are the gross increase in owner’s equity from business
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Qactivities for the purpose of earning income. Expenses are the costs of assets consumed
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Qor services used in the process of earning revenue. Owner’s equity is increased by an
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Qowner’s investmentsand by revenues from business operations. Owner’s equity is
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Qdecreased 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
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Qtransaction must have a dual effect on the accounting equation. For example, if an
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Qindividual asset increases, there must be a corresponding (1) decrease in another asset, or
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(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
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Qstatement presents the revenues and expenses, and resulting net income or net loss
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Qfor a specific period of time. An owner's equity statement summarizes the changes
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Qin owner's equity for a specific period of time. A balance sheet reports the assets,
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Qliabilities, and owner's equity at a specific date. A statement of cash flows summarizes
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information about the cash inflows (receipts) and outflows (payments) for a specific period
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of time.
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, 1-2 Test Bank for Accounting Principles, Fourteenth Edition

a6. Q Explain the career opportunities in accounting. Accounting offers many different jobs in
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Qfields such as public and private accounting, governmental, and forensic accounting.
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QAccounting is a popular major because there are many different types of jobs, with
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unlimited potential for career advancement.
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