ACG 2021 EXAM 1 REVIEW VERIFIED ANSWERS AND
QUESTIONS - MOST RECENT EDITION 2026/2027
1. What is accounting? the information system that measures business
activities, processes that information into reports and financial statements,
and communicates the results to decision makers
2. What is the accounting equation? ASSETS = LIABILITIES + STOCKHOLDER'S
EQUITY
3. What is a Balance Sheet? (Statement of Financial Position) list of an entity's
assets, liabilities, and owner's equity as of a specific date.
Dated at a specific time
-accounts payable -inventory -long-term debt -cash -retained earnings -
common stock
4. What is the Continuity Assumption or Going-Concern Assumption? holds
that the entity will remain in operation for the foreseeable future
5. What is a Corporation? a business owned by stockholders. A legal entitiy
6. What is a current liability? a debt due to be paid within one year or within
the entity's operating cycle if the cycle is longer than a year
7. What is a current asset? an asset that is expected to be converted to cash
sold, or consumed during the next 12 months, or within the business's normal
cylce if the cycle is longer than a year
8. What is a deficit? negative balance in retained earnings caused by net losses
over a period of years
9. What are dividends? distributions (usually cash) by a corporation to its
stockholders
10. What is fair value? the amount that a business could sell an asset for, or
the amount that a business could pay to settle a liability
, 11. What is financial accounting? the branch of accounting that provides
information
12. What are Generally Accepted Accounting Principles? Accounting guidelines
, formulated by the Financial Accounting Standards Board, that govern hoe
accounting is practiced
13. What is the Historical Cost Principle? Principle that states that assets
should be recorded at their actual cost
14. What is an Income Statement (Statement of Operations)? A financial
statement listing an entity's revenues, expenses, and net income or net loss for
a specific period of time.
15. What is an account? the record of the changes that have occurred in a
particular asset, liability, or stockholders equity during a period of time. The
basic summary device of accounting
16. What is an accrued liability? a liability for an expense that has not yet been
paid by the company
17. What is a Credit? right side of an account
18. What is a Debit? the left side of an account
19. What is a Journal? the chronological accounting record of an entity's
transactions
20. What is a ledger? the book of accounts and their balances
21. What is Posting? Copying amounts from the journal to the ledger
22. What is a transaction? any event that has a financial impact on the
business and can be measured reliably
23. What is a Trial Balance? a list of all the ledger accounts with their balancces
24. What is the Account Format? a BS format that lists assets on the left and
liabilities on the right
25. What is an accrual? an expense or a revenue that occurs before the
business pays or receives cash. An accrual is the opposite of a deferral
26. What is accrual accounting? accounting that records the impact of a
business event as it occurs, regardless of whether the transaction affected cash
QUESTIONS - MOST RECENT EDITION 2026/2027
1. What is accounting? the information system that measures business
activities, processes that information into reports and financial statements,
and communicates the results to decision makers
2. What is the accounting equation? ASSETS = LIABILITIES + STOCKHOLDER'S
EQUITY
3. What is a Balance Sheet? (Statement of Financial Position) list of an entity's
assets, liabilities, and owner's equity as of a specific date.
Dated at a specific time
-accounts payable -inventory -long-term debt -cash -retained earnings -
common stock
4. What is the Continuity Assumption or Going-Concern Assumption? holds
that the entity will remain in operation for the foreseeable future
5. What is a Corporation? a business owned by stockholders. A legal entitiy
6. What is a current liability? a debt due to be paid within one year or within
the entity's operating cycle if the cycle is longer than a year
7. What is a current asset? an asset that is expected to be converted to cash
sold, or consumed during the next 12 months, or within the business's normal
cylce if the cycle is longer than a year
8. What is a deficit? negative balance in retained earnings caused by net losses
over a period of years
9. What are dividends? distributions (usually cash) by a corporation to its
stockholders
10. What is fair value? the amount that a business could sell an asset for, or
the amount that a business could pay to settle a liability
, 11. What is financial accounting? the branch of accounting that provides
information
12. What are Generally Accepted Accounting Principles? Accounting guidelines
, formulated by the Financial Accounting Standards Board, that govern hoe
accounting is practiced
13. What is the Historical Cost Principle? Principle that states that assets
should be recorded at their actual cost
14. What is an Income Statement (Statement of Operations)? A financial
statement listing an entity's revenues, expenses, and net income or net loss for
a specific period of time.
15. What is an account? the record of the changes that have occurred in a
particular asset, liability, or stockholders equity during a period of time. The
basic summary device of accounting
16. What is an accrued liability? a liability for an expense that has not yet been
paid by the company
17. What is a Credit? right side of an account
18. What is a Debit? the left side of an account
19. What is a Journal? the chronological accounting record of an entity's
transactions
20. What is a ledger? the book of accounts and their balances
21. What is Posting? Copying amounts from the journal to the ledger
22. What is a transaction? any event that has a financial impact on the
business and can be measured reliably
23. What is a Trial Balance? a list of all the ledger accounts with their balancces
24. What is the Account Format? a BS format that lists assets on the left and
liabilities on the right
25. What is an accrual? an expense or a revenue that occurs before the
business pays or receives cash. An accrual is the opposite of a deferral
26. What is accrual accounting? accounting that records the impact of a
business event as it occurs, regardless of whether the transaction affected cash
