Foundations of Financial Accounting - Exam 1 Questions & Answers
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Foundations of Financial Accounting
Institution
Foundations Of Financial Accounting
Asset - ANSWERSEconomic resources that are expected to benefit the business in the future
Example: cash, land, accounts receivable, prepaid rent, property, plant, equipment, building, furniture, and borrowing money from bank
Liability - ANSWERSDebt that are owed to creditors. Represents the c...
Foundations of Financial Accounting -
Exam 1 Questions & Answers
Asset - ANSWERSEconomic resources that are expected to benefit the business in the
future
Example: cash, land, accounts receivable, prepaid rent, property, plant, equipment,
building, furniture, and borrowing money from bank
Liability - ANSWERSDebt that are owed to creditors. Represents the creditors claim on
the business assets
Example: rent payable, notes payable, accounts payable, and unearned revenue
Managerial Accounting - ANSWERSProvides for external decision makers
Financial Accounting - ANSWERSProvides for internal decision makers (managers and
employers)
Creditor - ANSWERSAny person or business to whom a business owes money
Equity - ANSWERSOwners claim to the asset. Amount of assets left over after the
company has paid its liabilities. Equity = net worth
Two components: Contributed capital and retained earnings
Examples: common stock and revenues (credit) increase equity
Dividends and expenses (debit) decrease equity
Retained Earnings - ANSWERSCumulative net earnings or profit of a firm after
accounting for dividends
Stockholder's equity
Balance Sheet
Credit
common stock - ANSWERSContributed capital
Equity
Balance Sheet
Credit
Increase equity
, Notes Payable - ANSWERSNoncurrent liability
Balance Sheet
Credit
Written promise to pay
Land - ANSWERSNoncurrent asset
Balance Sheet
Debit
Balance Sheet - ANSWERS(Point in time) represents the basic equation for a particular
business. Reports the amount of assets and liabilities to stockholders
Records:
Current Assets (debits): cash, accounts receivable, office supplies, prepaid insurance,
total current assets
Property, Plant, and Equipment: land, and building
Less: accumulated depreciation- building
Total property, plant, and equipment
Total Assets
Current Liabilities: accounts payable, interest payable, salaries payable, unearned
revenue, total current
Long-Term Liabilities: notes payable
Total Liabilities
Stakeholder's Equity: common stock, retained earnings, total stockholder's equity, total
liabilities and stockholder's equity
Income Statement - ANSWERS(Period in time): The income statement is sometimes
called the statement of operations
Records:
Revenues (credit): service revenues, sales revenue, etc...
Statement of Retained Earnings - ANSWERSIs increased by net income. Component of
stockholder's equity. Represents earnings not distributed in the form of dividends. Fiscal
year
Records:
Retained Earnings (July 1, 2017)
Net loss for the year
Dividends
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