ACCOUNTING 2301 - CHAPTER 1 EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
Account Form - Answers The form of balance sheet that resembles the basic format of the accounting
equation, with assets on the left side and Liabilities and Stockholders' Equity sections on the right
side.
Account Payable - Answers The liability created by a purchase on account.
Account Receivable - Answers A claim against the customer created by selling merchandise or
services on credit.
Accounting - Answers An information system that provides reports to stakeholders about the
economic activities and condition of a business.
Accounting Equation - Answers Assets = Liabilities + Owner's Equity.
Assets - Answers The resources owned by a business.
Balance Sheet - Answers A list of the assets, liabilities, and stockholders' equity as of a specific date,
usually at the close of the last day of a month or a year.
Business - 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 - 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 - Answers An economic event or condition that directly changes an entity's
financial condition or directly affects its results of operations.
Capital Stock - Answers The portion of a corporation's stockholders' equity contributed by investors
(owners) in exchange for shares of stock.
Certified Public Accountant (CPA) - Answers Public accountants who have met a state's education,
experience, and examination requirements.
Corporation - Answers A business organized under state or federal statutes as a separate legal entity.
Cost Concept - Answers A concept of accounting that determines the amount initially entered into
the accounting records for purchases.
Dividends - Answers Distribution of a corporation's earning to stockholders.
Ethics - Answers Moral principles that guide the conduct of individuals.
Expenses - Answers Assets used up or services consumed in the process of generating revenues.
Fees Earned - Answers Revenue from providing services.
Financial Accounting - 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 Accounting Standards Board (FASB) - Answers The authoritative body that has the primary
responsibility for developing accounting principles.
Financial Statements - Answers Financial reports that summarize the effects of events on a business.
General-Purpose Financial Statements - Answers A type of financial accounting report that is
distributed to external users. The term "general purpose" refers to the wide range of decision-making
needs that the reports are designed to serve.
Generally Accepted Accounting Principles (GAAP) - Answers Generally accepted guidelines for the
preparation of financial statements.
Income Statement - Answers A summary of the revenue and expenses for a specific period of time,
such as a month or a year.
Interest Revenue - Answers Money received for interest.
International Accounting Standards Board (IASB) - Answers An organization that issues International
Financial Reporting Standards for many countries outside the United States.
Liabilities - Answers The rights of creditors that represent debts of the business.
Limited Liability Company (LLC) - Answers A business form consisting of one or more persons or
entities filing an operating agreement with a state to conduct business with limited liability to the
owners, yet treated as a partnership for tax purposes.
Management (Or Managerial) Accounting - Answers The branch of accounting that uses both
historical and estimated data in providing information that management uses in conducting daily
operations, in planning future operations, and in developing overall business strategies.
Manufacturing Business - Answers A type of business that changes basic inputs into products that are
sold to individual customers.
Account Form - Answers The form of balance sheet that resembles the basic format of the accounting
equation, with assets on the left side and Liabilities and Stockholders' Equity sections on the right
side.
Account Payable - Answers The liability created by a purchase on account.
Account Receivable - Answers A claim against the customer created by selling merchandise or
services on credit.
Accounting - Answers An information system that provides reports to stakeholders about the
economic activities and condition of a business.
Accounting Equation - Answers Assets = Liabilities + Owner's Equity.
Assets - Answers The resources owned by a business.
Balance Sheet - Answers A list of the assets, liabilities, and stockholders' equity as of a specific date,
usually at the close of the last day of a month or a year.
Business - 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 - 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 - Answers An economic event or condition that directly changes an entity's
financial condition or directly affects its results of operations.
Capital Stock - Answers The portion of a corporation's stockholders' equity contributed by investors
(owners) in exchange for shares of stock.
Certified Public Accountant (CPA) - Answers Public accountants who have met a state's education,
experience, and examination requirements.
Corporation - Answers A business organized under state or federal statutes as a separate legal entity.
Cost Concept - Answers A concept of accounting that determines the amount initially entered into
the accounting records for purchases.
Dividends - Answers Distribution of a corporation's earning to stockholders.
Ethics - Answers Moral principles that guide the conduct of individuals.
Expenses - Answers Assets used up or services consumed in the process of generating revenues.
Fees Earned - Answers Revenue from providing services.
Financial Accounting - 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 Accounting Standards Board (FASB) - Answers The authoritative body that has the primary
responsibility for developing accounting principles.
Financial Statements - Answers Financial reports that summarize the effects of events on a business.
General-Purpose Financial Statements - Answers A type of financial accounting report that is
distributed to external users. The term "general purpose" refers to the wide range of decision-making
needs that the reports are designed to serve.
Generally Accepted Accounting Principles (GAAP) - Answers Generally accepted guidelines for the
preparation of financial statements.
Income Statement - Answers A summary of the revenue and expenses for a specific period of time,
such as a month or a year.
Interest Revenue - Answers Money received for interest.
International Accounting Standards Board (IASB) - Answers An organization that issues International
Financial Reporting Standards for many countries outside the United States.
Liabilities - Answers The rights of creditors that represent debts of the business.
Limited Liability Company (LLC) - Answers A business form consisting of one or more persons or
entities filing an operating agreement with a state to conduct business with limited liability to the
owners, yet treated as a partnership for tax purposes.
Management (Or Managerial) Accounting - Answers The branch of accounting that uses both
historical and estimated data in providing information that management uses in conducting daily
operations, in planning future operations, and in developing overall business strategies.
Manufacturing Business - Answers A type of business that changes basic inputs into products that are
sold to individual customers.
