Chapter 1: Introduction to Accounting
and Business
1. Describe the nature of business and the role of accounting and ethics in business.
2. Describe generally accepted accounting principles, including the underlying
assumptions and principles.
3. State the accounting equation and define each element of the equation.
4. Describe and illustrate how business transactions can be recorded in terms of the
resulting change in the elements of the accounting equation.
5. Describe the financial statements of a corporation and explain how they interrelate.
6. Describe and illustrate the use of the ratio of liabilities to stockholders' equity in
evaluating a company's financial condition. - correct answer6 objectives
accounting - correct answerdefined as an information system that provides reports to
users about the economic activities and condition of a business.
accounting equation - correct answerAssets = Liabilities + Equity
accounting principles & assumptions - correct answerprovide the framework upon which
accounting standards are construction
accounting standards - correct answerare the rules that determine the accounting for
individual business transactions
accounting standards codification - correct answerthat contains all the accounting
standards that make up GAAP
arm's length transaction - correct answera transaction between two independent parties,
providing amounts that are objective and variable
business - correct answeran organization in which basic resources, such as materials
and labor, are assembled and processed to provide goods or services to customers.
business entity assumption - correct answerlimits the economic data in financial reports
to that directly related to the activities of the business
business transaction - correct answerAn economic event or condition that directly
changes an entity's financial condition or directly affects its results of operations.
comparability - correct answerallows users to identify similarities and differences among
reported items, includes consistent reporting
culture of greed and ethical indifference - correct answerby their behavior and attitude,
senior managers set the company culture
and Business
1. Describe the nature of business and the role of accounting and ethics in business.
2. Describe generally accepted accounting principles, including the underlying
assumptions and principles.
3. State the accounting equation and define each element of the equation.
4. Describe and illustrate how business transactions can be recorded in terms of the
resulting change in the elements of the accounting equation.
5. Describe the financial statements of a corporation and explain how they interrelate.
6. Describe and illustrate the use of the ratio of liabilities to stockholders' equity in
evaluating a company's financial condition. - correct answer6 objectives
accounting - correct answerdefined as an information system that provides reports to
users about the economic activities and condition of a business.
accounting equation - correct answerAssets = Liabilities + Equity
accounting principles & assumptions - correct answerprovide the framework upon which
accounting standards are construction
accounting standards - correct answerare the rules that determine the accounting for
individual business transactions
accounting standards codification - correct answerthat contains all the accounting
standards that make up GAAP
arm's length transaction - correct answera transaction between two independent parties,
providing amounts that are objective and variable
business - correct answeran organization in which basic resources, such as materials
and labor, are assembled and processed to provide goods or services to customers.
business entity assumption - correct answerlimits the economic data in financial reports
to that directly related to the activities of the business
business transaction - correct answerAn economic event or condition that directly
changes an entity's financial condition or directly affects its results of operations.
comparability - correct answerallows users to identify similarities and differences among
reported items, includes consistent reporting
culture of greed and ethical indifference - correct answerby their behavior and attitude,
senior managers set the company culture
