Test Bank for Accounting what
the numbers mean Chapters 1-
12 Covered
account - answers A record in which transactions affecting individual assets, liabilities,
owners' equity, revenues, and expenses are recorded.
accounting equation - answers Assets = Liabilities + Owners' Equity (A = L + OE). The
fundamental relationship represented by the Balance Sheet and the foundation of the
bookkeeping process.
accounts payable - answers A liability representing an amount payable to another entity,
usually arising because of the purchase of goods or services on credit.
accounts receivable - answers A liability representing an amount payable to another
entity, usually arising from selling goods or services on credit.
accrual accounting - answers Accounting that recognizes revenues and expenses as
they occur, even though the cash receipt from the revenue or the cash disbursement
related to the expense may occur before or after the the event that causes the revenue
or expense recognition.
accrued liabilities - answers Amounts that are owed by an entity on the balance sheet
date.
accumulated depreciation - answers The sum of the depreciation expense that has
been recognized over time. Accumulated depreciation is a contra-asst---an amount that
is subtracted from the cost of the related asset on the balance sheet.
additional paid-in capital - answers The excess of the amount received from the sale of
stock over the par value of the shares sold.
assets - answers Probable future economic benefits obtained or controlled by an entity
as a result of past transactions or events.
balance sheet - answers The financial statement that is a listing of the entity's assets,
liabilities and owners' equity at a point in time.
balance sheet equation - answers Another term for the "accounting equation".
cash - answers An asset on the balance sheet that represents that amount of cash on
hand an balances in bank accounts maintained by the entity.
, common stock - answers The class of stock that represents residual ownership if the
corporation.
corporation - answers A form of organization in which ownership is evidences by shares
of stock owned by stockholders; its features, such as limited liability of the stockholders,
make this the principal form of business activity.
cost of goods sold - answers Cost of merchandise sold during the period; an expense
deducted from net sales to arrive at gross profit. A frequently used synonym is "cost of
sales".
current assets - answers Cash and those assets that are likely to be converted into cash
or used to benefit the entity within one year of the balance sheet date.
current liabilities - answers Those liabilities due to be paid within one year of the
balance sheet date.
depreciation - answers The accounting process of recognizing the cost of an asset that
is used up over its useful life to the entity.
depreciation expense - answers The expense recognized in a fiscal period for the
depreciation of an asset.
dividend - answers A distribution of earnings to the owners of a corporation.
earnings per share of common stock outstanding (EPS) - answers Net income available
to the common stockholders divided by the number of shares outstanding during the
period. Usually referred to simply as "EPS".
equity - answers The ownership right associated with an asset. See "owners' equity".
expenses - answers Outflows or other using up of assets, or incurring a liability during a
period from delivering or producing goods, rendering services, or carrying out other
activities the constitute the entity's major operations (e.g. Income Statement title "selling
general, and administrative expense".)
fiscal year - answers The annual period used for reporting to owners (or governmental
agencies).
gains - answers Increases in net assets from incidental transactions that are not
revenues or investments by owners.
going concern concept - answers A presumption that the firm will continue in existence
for the indefinite future.
the numbers mean Chapters 1-
12 Covered
account - answers A record in which transactions affecting individual assets, liabilities,
owners' equity, revenues, and expenses are recorded.
accounting equation - answers Assets = Liabilities + Owners' Equity (A = L + OE). The
fundamental relationship represented by the Balance Sheet and the foundation of the
bookkeeping process.
accounts payable - answers A liability representing an amount payable to another entity,
usually arising because of the purchase of goods or services on credit.
accounts receivable - answers A liability representing an amount payable to another
entity, usually arising from selling goods or services on credit.
accrual accounting - answers Accounting that recognizes revenues and expenses as
they occur, even though the cash receipt from the revenue or the cash disbursement
related to the expense may occur before or after the the event that causes the revenue
or expense recognition.
accrued liabilities - answers Amounts that are owed by an entity on the balance sheet
date.
accumulated depreciation - answers The sum of the depreciation expense that has
been recognized over time. Accumulated depreciation is a contra-asst---an amount that
is subtracted from the cost of the related asset on the balance sheet.
additional paid-in capital - answers The excess of the amount received from the sale of
stock over the par value of the shares sold.
assets - answers Probable future economic benefits obtained or controlled by an entity
as a result of past transactions or events.
balance sheet - answers The financial statement that is a listing of the entity's assets,
liabilities and owners' equity at a point in time.
balance sheet equation - answers Another term for the "accounting equation".
cash - answers An asset on the balance sheet that represents that amount of cash on
hand an balances in bank accounts maintained by the entity.
, common stock - answers The class of stock that represents residual ownership if the
corporation.
corporation - answers A form of organization in which ownership is evidences by shares
of stock owned by stockholders; its features, such as limited liability of the stockholders,
make this the principal form of business activity.
cost of goods sold - answers Cost of merchandise sold during the period; an expense
deducted from net sales to arrive at gross profit. A frequently used synonym is "cost of
sales".
current assets - answers Cash and those assets that are likely to be converted into cash
or used to benefit the entity within one year of the balance sheet date.
current liabilities - answers Those liabilities due to be paid within one year of the
balance sheet date.
depreciation - answers The accounting process of recognizing the cost of an asset that
is used up over its useful life to the entity.
depreciation expense - answers The expense recognized in a fiscal period for the
depreciation of an asset.
dividend - answers A distribution of earnings to the owners of a corporation.
earnings per share of common stock outstanding (EPS) - answers Net income available
to the common stockholders divided by the number of shares outstanding during the
period. Usually referred to simply as "EPS".
equity - answers The ownership right associated with an asset. See "owners' equity".
expenses - answers Outflows or other using up of assets, or incurring a liability during a
period from delivering or producing goods, rendering services, or carrying out other
activities the constitute the entity's major operations (e.g. Income Statement title "selling
general, and administrative expense".)
fiscal year - answers The annual period used for reporting to owners (or governmental
agencies).
gains - answers Increases in net assets from incidental transactions that are not
revenues or investments by owners.
going concern concept - answers A presumption that the firm will continue in existence
for the indefinite future.
