FINANCIAL ACCOUNTING AND ACCOUNTING
STANDARDS TEST BANK 2023 Download To Score A+
Assets - ANSWER: Economic resources that the business plans to use in the future to
make money.
Balance sheet - ANSWER: The financial report that shows business assets, liabilities,
and owner's equity as of a particular day.
Balanced books - ANSWER: When "Where did it go?" equals "Where did it come
from?" or wen a company's assets equal its liabilities plus owner's equity.
Capital - ANSWER: Assets that help a business or a person make money.
Capitalizer - ANSWER: When money is changed into another asset that helps the
business make money.
Creditors - ANSWER: Outsiders to whom the company owes money.
Current assets - ANSWER: Assets that can be used to pay current liabilities.
Current liabilities - ANSWER: Debts that must be paid within one year or one
operating cycle, whichever is longer.
Financial accounting - ANSWER: The skill of producing financial statements from
business transactions.
Fiscal Year - ANSWER: The 12-month period a business uses to report the results of
its operations.
Heading - ANSWER: All financial statement have a standard 3-line heading as follows:
1. Name of Company
2. Name of the Report
3. Date (balance sheet) or Period of Time (all other statements)
Liabilities - ANSWER: Debts owed to people outside the company.
Liquid - ANSWER: The easier it is to change an asset into cash, the more liquid that
asset is.
Operating cycle - ANSWER: The natural period of time before certain business
activities tend to repeat- normally one year.
Owner's equity - ANSWER: The portion of the business the owner gets to keep after
paying off all creditors.
,Sole proprietor - ANSWER: The individual owner (without partners) of an
unincorporated business.
Basic accounting equation - ANSWER: Assets = liabilities + Owner's equity
OR
Owner's equity = Assets - Liabilities
OR
Liabilities = Assets - Owner's equity
Business entity - ANSWER: The financial statements report about a single business.
Every business gets its own set of books. Accountants do not mix in the owner's
personal financial info.
Current - ANSWER: "Current" liabilities are those debts that must be paid within one
year of one operating cycle, whichever is longer.
Current ratio - ANSWER: (Current assets)/(Current liabilities)= Current ratio
Debt Ratio - ANSWER: (Total liabilities)/(Total assets)= debt ratio or 100%- equity
ratio= debt ratio
Double entry accounting - ANSWER: Recording business transactions twice: once to
show where the money came from , and another time to show where the money
went.
Equity ratio - ANSWER: (Total equity)/(Total assets)= Equity ratio
OR
100% - Debt ratio = Equity ratio
Liability account - ANSWER: Payable or Deferred
Equity Account - ANSWER: Owner's name, Withdrawal, Dividend, Stock.
Expense Account - ANSWER: Expense. (Every expense account on the CLEP exam
should have "exp." at then end, such as "rent exp.")
Income Account - ANSWER: Sales, income or revenue.
Asset account - ANSWER: Receivable, prepaid, investment, inventory. Many asset
accounts merely list the name of the asset, such as "land" and "equipment" without
any special identifying word. Whenever CLEP questions list an account without one
of these key words, you should assume that it is an asset account.
Account - ANSWER: A place on the financial books to keep track of financial
information that the owner wants to know.
, Accumulated depreciation - ANSWER: The contra-asset account that accumulates all
the depreciation of long-lived assets over the years.
Chart of accounts - ANSWER: An account that gets subtracted from its related
account. Contra accounts always get reported as negative numbers.
Contra-asset account - ANSWER: An account that gets subtracted from an asset
account. (IE Accumulated depreciation or Allowance for Doubtful Accounts.)
Cost of goods sold - ANSWER: The cost to the business of the goods that it sells.
Depreciation expense - ANSWER: The amount of long-lived assets used up during
operations.
Expensed - ANSWER: Money is "expensed" if it is gone forever- if there remains no
useful asset as a result of the spending. The opposite of capitalized.
Expenses - ANSWER: Accounts that explain why assets went down from operations.
Income - ANSWER: Accounts that explain why assets went up from operations.
Income Statement - ANSWER: The financial report that shows the result of business
operations over a period of time.
Inventory - ANSWER: A supply of items a business has on hand
Net - ANSWER: A word that means a subtraction has occured
Net income - ANSWER: Income-Expenses=Net Income
Netted - ANSWER: When numbers are "netted" they combine so that the negative
number get subtracted from the positive numbers.
Percentage analysis - ANSWER: A financial statement analysis thecnique in which
one number is assigned as 100% and all other numbers are expressed as a
percentage of the first number. IN balance sheets, the key number is total assets. In
income statements, the key number is sales.
Sales - ANSWER: An income account that explains the increase in business assets as a
result of selling goods.
Statement of owner's equity - ANSWER: A financial statement that calculates an end-
of-period balance of the owner's equity account.
T-account - ANSWER: A tool to keep track of the ups and downs in accounts. The ups
go on one side of the T and the downs on the other side.
STANDARDS TEST BANK 2023 Download To Score A+
Assets - ANSWER: Economic resources that the business plans to use in the future to
make money.
Balance sheet - ANSWER: The financial report that shows business assets, liabilities,
and owner's equity as of a particular day.
Balanced books - ANSWER: When "Where did it go?" equals "Where did it come
from?" or wen a company's assets equal its liabilities plus owner's equity.
Capital - ANSWER: Assets that help a business or a person make money.
Capitalizer - ANSWER: When money is changed into another asset that helps the
business make money.
Creditors - ANSWER: Outsiders to whom the company owes money.
Current assets - ANSWER: Assets that can be used to pay current liabilities.
Current liabilities - ANSWER: Debts that must be paid within one year or one
operating cycle, whichever is longer.
Financial accounting - ANSWER: The skill of producing financial statements from
business transactions.
Fiscal Year - ANSWER: The 12-month period a business uses to report the results of
its operations.
Heading - ANSWER: All financial statement have a standard 3-line heading as follows:
1. Name of Company
2. Name of the Report
3. Date (balance sheet) or Period of Time (all other statements)
Liabilities - ANSWER: Debts owed to people outside the company.
Liquid - ANSWER: The easier it is to change an asset into cash, the more liquid that
asset is.
Operating cycle - ANSWER: The natural period of time before certain business
activities tend to repeat- normally one year.
Owner's equity - ANSWER: The portion of the business the owner gets to keep after
paying off all creditors.
,Sole proprietor - ANSWER: The individual owner (without partners) of an
unincorporated business.
Basic accounting equation - ANSWER: Assets = liabilities + Owner's equity
OR
Owner's equity = Assets - Liabilities
OR
Liabilities = Assets - Owner's equity
Business entity - ANSWER: The financial statements report about a single business.
Every business gets its own set of books. Accountants do not mix in the owner's
personal financial info.
Current - ANSWER: "Current" liabilities are those debts that must be paid within one
year of one operating cycle, whichever is longer.
Current ratio - ANSWER: (Current assets)/(Current liabilities)= Current ratio
Debt Ratio - ANSWER: (Total liabilities)/(Total assets)= debt ratio or 100%- equity
ratio= debt ratio
Double entry accounting - ANSWER: Recording business transactions twice: once to
show where the money came from , and another time to show where the money
went.
Equity ratio - ANSWER: (Total equity)/(Total assets)= Equity ratio
OR
100% - Debt ratio = Equity ratio
Liability account - ANSWER: Payable or Deferred
Equity Account - ANSWER: Owner's name, Withdrawal, Dividend, Stock.
Expense Account - ANSWER: Expense. (Every expense account on the CLEP exam
should have "exp." at then end, such as "rent exp.")
Income Account - ANSWER: Sales, income or revenue.
Asset account - ANSWER: Receivable, prepaid, investment, inventory. Many asset
accounts merely list the name of the asset, such as "land" and "equipment" without
any special identifying word. Whenever CLEP questions list an account without one
of these key words, you should assume that it is an asset account.
Account - ANSWER: A place on the financial books to keep track of financial
information that the owner wants to know.
, Accumulated depreciation - ANSWER: The contra-asset account that accumulates all
the depreciation of long-lived assets over the years.
Chart of accounts - ANSWER: An account that gets subtracted from its related
account. Contra accounts always get reported as negative numbers.
Contra-asset account - ANSWER: An account that gets subtracted from an asset
account. (IE Accumulated depreciation or Allowance for Doubtful Accounts.)
Cost of goods sold - ANSWER: The cost to the business of the goods that it sells.
Depreciation expense - ANSWER: The amount of long-lived assets used up during
operations.
Expensed - ANSWER: Money is "expensed" if it is gone forever- if there remains no
useful asset as a result of the spending. The opposite of capitalized.
Expenses - ANSWER: Accounts that explain why assets went down from operations.
Income - ANSWER: Accounts that explain why assets went up from operations.
Income Statement - ANSWER: The financial report that shows the result of business
operations over a period of time.
Inventory - ANSWER: A supply of items a business has on hand
Net - ANSWER: A word that means a subtraction has occured
Net income - ANSWER: Income-Expenses=Net Income
Netted - ANSWER: When numbers are "netted" they combine so that the negative
number get subtracted from the positive numbers.
Percentage analysis - ANSWER: A financial statement analysis thecnique in which
one number is assigned as 100% and all other numbers are expressed as a
percentage of the first number. IN balance sheets, the key number is total assets. In
income statements, the key number is sales.
Sales - ANSWER: An income account that explains the increase in business assets as a
result of selling goods.
Statement of owner's equity - ANSWER: A financial statement that calculates an end-
of-period balance of the owner's equity account.
T-account - ANSWER: A tool to keep track of the ups and downs in accounts. The ups
go on one side of the T and the downs on the other side.
