Test Bank for Accounting Principles 14th Edition by Jerry J. Weygandt, Paul D. Kimmel All Chapters Fully Covered 9781119707110 Newest Latest Version

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

,TestBankforAccountingPrinciples,14thEditionbyJerryJ.Weygandt,PaulD.Kimmel
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CHAPTER 1 h t




ACCOUNTING IN ACTION ht ht




CHAPTERLEARNINGOBJECTI th th




VES
1. Identify the activities and users associated with accounting. Accounting is an information system th
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at identifies, records, and communicates the economic events of an organization to interested
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users. The major users and uses of accounting are as follows: (a) Management uses accounting i
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nformation to plan, organize, and run the business. (b) Investors (owners) decide whether to bu h t h t h t h t h t h t h t h t h t h t h t h t h t ht




y, hold, or sell their financial interests on the basis of accounting data. (c)Creditors (suppliers and ban
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kers) evaluate the risks of granting credit or lending money onthe basis of accounting informati
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on. Other groups that use accounting information are taxing authorities, regulatory agencies, cu
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stomers, and labor unions. ht ht ht




2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are the standards o
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f conduct by which actions are judged as right or wrong. Effective financialreporting depends on sou
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nd ethical behavior. ht ht




Generally accepted accounting principles are a common set of standards used by accountants. h t h t h t h t h t h t h t h t h t h t h t h t h t




The primary accounting standard- h t h t h t




setting body in the United States is the Financial Accounting Standards Board. h t h t h t h t h t h t h t h t h t h t ht




3. State the accounting equation, and define its components. The basic accounting equation is: Assets=Lia
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bilities +Owner's Equity ht th ht




Assets are resources a business owns. Liabilities are creditorship claims on total assets.
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Owner's equity isthe ownership claimon totalassets. Theex ht ht ht ht ht ht ht ht h t th




panded accountingequationis: ht th ht




Assets Liabilities + Owner'sCapital ht ht ht ht Owner's Drawings +Revenues ht ht ht ht




Expenses ht




Investments by owners (assets the owner puts into the business) are recorded in a category ca h t h t h t h t h t h t h t h t h t h t h t h t h t h t h t




lled owner’s capital. Owner’s drawings are the withdrawal of assets by the owner for personal use. Re
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venues are the gross increase in owner’s equity from business activities for the purpose of earning inco
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me. Expenses are the costs of assets consumed or services used in the process of earning revenue.
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Owner’s equity is increased by an owner’s investmentsand by revenues from business operations. h t h t h t h t h t h t h t ht ht ht h t h t




hOwner’s equity is decreased 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 transaction musth t h t h t h t h t h t h t h t h t h t h t h t h t




have a dual effect on the accounting equation. For example, if an individual asset increases, t
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here must be a corresponding (1) decrease in another asset, or (2) increase in a specific liability, or (3) i
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ncrease in owner's equity. ht ht ht




5. Describe the four financial statements and how they are prepared. An income statement presents th h t h t h t htht h t h t ht h t h t ht ht h t h t h t




e revenues and expenses, and resulting net income or net loss for a specific period of time. An
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owner's equity statement summarizes the changes in owner's equity for a specific period of ti h t h t h t h t h t h t h t h t h t h t h t h t h t h t




me. A balance sheet reports the assets, liabilities, and owner's equity at a specific date. A statem
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ent of cashflows summarizes information about thecash inflows (receipts) and outflows(payments) for
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a specific period of time.
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a6. h t Explain the career opportunities in accounting. Accounting offers many different jobs in fields such as
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public and private accounting, governmental, and forensic accounting. Accounting is a popular
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major because there are many different types of jobs, with unlimited potential for career advancement.
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