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Questions and Answers
What is the term for planning, recording, analyzing, and interpreting financial information?
What is the term for planning, recording, analyzing, and interpreting financial information?
accounting
What are financial reports that summarize the financial condition and operations of a business called?
What are financial reports that summarize the financial condition and operations of a business called?
statements
What is a business that performs an activity for a fee called?
What is a business that performs an activity for a fee called?
service business
What is a business owned by one person called?
What is a business owned by one person called?
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What do we call anything of value that is owned?
What do we call anything of value that is owned?
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Financial rights to the assets of a business are called liens.
Financial rights to the assets of a business are called liens.
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Each part of the accounting equation consists of one or more accounts.
Each part of the accounting equation consists of one or more accounts.
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What is the amount remaining after the value of all liabilities is subtracted from the value of all assets called?
What is the amount remaining after the value of all liabilities is subtracted from the value of all assets called?
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What do we call a business activity that changes assets, liabilities, or owner's equity?
What do we call a business activity that changes assets, liabilities, or owner's equity?
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An account balance is a term applied when both sides of the accounting equation are equal, or, in balance.
An account balance is a term applied when both sides of the accounting equation are equal, or, in balance.
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What is the account used to summarize the owner's equity in a business called?
What is the account used to summarize the owner's equity in a business called?
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When a business pays cash for supplies, what happens?
When a business pays cash for supplies, what happens?
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A sale for which cash will be received at a later date is called accounts payable.
A sale for which cash will be received at a later date is called accounts payable.
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Which of the following is not a transaction that will affect owner's equity: Paid cash for supplies?
Which of the following is not a transaction that will affect owner's equity: Paid cash for supplies?
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The account used to summarize the owner's equity in a business is called capital.
The account used to summarize the owner's equity in a business is called capital.
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A decrease in owner's equity resulting from the operation of a business is called an expense.
A decrease in owner's equity resulting from the operation of a business is called an expense.
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What happens when a company receives cash from a customer for a prior sale?
What happens when a company receives cash from a customer for a prior sale?
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Understanding accounting helps managers and owners make better business decisions.
Understanding accounting helps managers and owners make better business decisions.
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Inaccurate accounting records are used to make the business appear to be more successful than it really is, and thereby can help the business really succeed.
Inaccurate accounting records are used to make the business appear to be more successful than it really is, and thereby can help the business really succeed.
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Suppliers that extend credit to a business and institutions have no stake in that organization's success or failure.
Suppliers that extend credit to a business and institutions have no stake in that organization's success or failure.
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Study Notes
Accounting Fundamentals
- Accounting involves planning, recording, analyzing, and interpreting financial information.
- Financial statements summarize a business's financial condition and operations.
- A service business provides activities for a fee, distinguishing it from product-based businesses.
Business Ownership Types
- A proprietorship is a business owned by a single individual.
- Assets are defined as anything of value that is owned by a business.
Financial Statements & Equations
- Financial rights to a business’s assets are not referred to as liens; this statement is false.
- Each component of the accounting equation comprises one or more accounts, making this statement true.
- Owner's equity is the residual value after all liabilities are subtracted from total assets.
Transactions & Their Impact
- A transaction is any business activity that alters assets, liabilities, or owner's equity.
- An account balance indicates that both sides of the accounting equation are not necessarily equal; this statement is false.
Owner's Equity and Capital
- The account summarizing a business's owner's equity is called capital.
- If a business pays cash for supplies, it results in an increase in supplies, reflecting the flow of resources.
True/False Concepts in Accounting
- Accounts payable refers to sales where cash will be received at a future date; this statement is false.
- Cash payments for supplies do not affect owner's equity directly, which is a key understanding.
- A decrease in owner's equity due to business operations is termed an expense, affirming its true status.
Cash Transactions
- When a company receives cash for a prior sale, its cash increases while accounts receivable decreases, showing the dual effect of transactions.
Importance of Accurate Accounting
- Knowledge of accounting principles aids managers and owners in making better business decisions, highlighting its significance in effective management.
- Inaccurate records create a deceptive portrayal of a business's success and can negatively impact its viability; this statement is false.
- Suppliers extending credit to businesses retain an interest in their success or failure, countering the notion that they lack stakes in business outcomes.
Studying That Suits You
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Description
Test your knowledge of key accounting concepts with these flashcards from Chapter 1 of AA. Each card provides definitions and terms essential for understanding the fundamentals of accounting. Perfect for beginners or anyone looking to refresh their knowledge.
