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What is the Measurement Principle also known as?
What is the Measurement Principle also known as?
When should revenue be recognized according to the Revenue Recognition Principle?
When should revenue be recognized according to the Revenue Recognition Principle?
What does the Expense Recognition Principle require a company to do?
What does the Expense Recognition Principle require a company to do?
What is the purpose of the Full Disclosure Principle?
What is the purpose of the Full Disclosure Principle?
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Which principle is concerned with the timing of revenue recognition?
Which principle is concerned with the timing of revenue recognition?
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What does the term 'objective' refer to in the context of the Measurement Principle?
What does the term 'objective' refer to in the context of the Measurement Principle?
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Why is the Expense Recognition Principle sometimes referred to as the Matching Principle?
Why is the Expense Recognition Principle sometimes referred to as the Matching Principle?
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Which of the following is NOT a general principle of accounting?
Which of the following is NOT a general principle of accounting?
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What does the expanded accounting equation emphasize about a business's financial position?
What does the expanded accounting equation emphasize about a business's financial position?
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In the first transaction, what is the total contribution made by Chas Taylor to the business?
In the first transaction, what is the total contribution made by Chas Taylor to the business?
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What accounts are affected in Transaction 2 when supplies are purchased for $2,500 cash?
What accounts are affected in Transaction 2 when supplies are purchased for $2,500 cash?
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When equipment is purchased for $26,000 cash, how does this transaction affect the accounting equation?
When equipment is purchased for $26,000 cash, how does this transaction affect the accounting equation?
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Which of the following represents the correct analysis of the investment made by the owner?
Which of the following represents the correct analysis of the investment made by the owner?
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In the context of accounting transactions, which statement about equity is true?
In the context of accounting transactions, which statement about equity is true?
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After the second transaction, how does the accounting equation balance if cash is decreased by a purchase?
After the second transaction, how does the accounting equation balance if cash is decreased by a purchase?
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Which of the following accounts would NOT be impacted by an equipment purchase for cash?
Which of the following accounts would NOT be impacted by an equipment purchase for cash?
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What is the effect on total equity when rent and salaries are paid?
What is the effect on total equity when rent and salaries are paid?
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Which accounts are involved when consulting services are provided on credit?
Which accounts are involved when consulting services are provided on credit?
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What is the total amount paid by the client in transaction 9 related to consulting services?
What is the total amount paid by the client in transaction 9 related to consulting services?
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What is the classification of the account 'Accounts Receivable'?
What is the classification of the account 'Accounts Receivable'?
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What impact do expenses have on equity when incurred?
What impact do expenses have on equity when incurred?
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Which of the following describes the account 'Consulting Revenues'?
Which of the following describes the account 'Consulting Revenues'?
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What accounts are affected when cash is received from accounts receivable?
What accounts are affected when cash is received from accounts receivable?
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What is the total amount of expenses incurred from paying rent and salaries in the given transactions?
What is the total amount of expenses incurred from paying rent and salaries in the given transactions?
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What accounts are affected when FastForward makes a $900 partial payment for supplies?
What accounts are affected when FastForward makes a $900 partial payment for supplies?
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How does the owner's withdrawal of $200 cash affect equity?
How does the owner's withdrawal of $200 cash affect equity?
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In the context of business transactions, how is equity impacted when expenses are incurred?
In the context of business transactions, how is equity impacted when expenses are incurred?
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If a company makes a cash withdrawal for personal use by the owner, which accounting equation component is directly affected?
If a company makes a cash withdrawal for personal use by the owner, which accounting equation component is directly affected?
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What is the nature of the Withdrawals account in accounting?
What is the nature of the Withdrawals account in accounting?
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Which transaction type reduces the owner's equity in a business?
Which transaction type reduces the owner's equity in a business?
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What effect does a $900 payment of accounts payable have on the accounting equation?
What effect does a $900 payment of accounts payable have on the accounting equation?
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Which financial statement is likely affected by owner withdrawals?
Which financial statement is likely affected by owner withdrawals?
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What is the main purpose of accounting in a business context?
What is the main purpose of accounting in a business context?
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Which group primarily uses accounting information to make investment decisions?
Which group primarily uses accounting information to make investment decisions?
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What is the role of ethics in accounting?
What is the role of ethics in accounting?
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Which principle is NOT part of generally accepted accounting principles (GAAP)?
Which principle is NOT part of generally accepted accounting principles (GAAP)?
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Which financial statement shows an organization's financial position at a specific point in time?
Which financial statement shows an organization's financial position at a specific point in time?
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What does the accounting equation represent?
What does the accounting equation represent?
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What is a primary reason organizations prepare financial statements?
What is a primary reason organizations prepare financial statements?
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Which of the following is NOT considered an external user of financial information?
Which of the following is NOT considered an external user of financial information?
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What is the accounting equation impact of purchasing equipment for $26,000 cash?
What is the accounting equation impact of purchasing equipment for $26,000 cash?
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Which accounts are affected when supplies are purchased on credit for $7,100?
Which accounts are affected when supplies are purchased on credit for $7,100?
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What is the result of providing services for $4,200 cash?
What is the result of providing services for $4,200 cash?
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When rent of $1,000 is paid, which of the following accounts is affected?
When rent of $1,000 is paid, which of the following accounts is affected?
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What accounts are affected when salaries of $700 are paid to employees?
What accounts are affected when salaries of $700 are paid to employees?
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What is the effect on the accounting equation when equipment is purchased?
What is the effect on the accounting equation when equipment is purchased?
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If supplies are purchased on credit, what is the overall effect on the accounting equation?
If supplies are purchased on credit, what is the overall effect on the accounting equation?
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Which of the following transactions directly impacts equity?
Which of the following transactions directly impacts equity?
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Study Notes
Accounting in Business
- The textbook is Fundamental Accounting Principles 3rd edition by Wild, Kwok, Venkatesh, and Shaw
- Copyright is ©2022 McGraw Hill
Chapter 1 Learning Objectives
-
Conceptual:
- Explain the purpose and importance of accounting
- Identify users and uses of, and opportunities in, accounting
- Explain why ethics are crucial to accounting
- Explain generally accepted accounting principles (GAAP) and define and apply several accounting principles
- Identify and describe the three major activities (operating, investing, and financing) of organizations
-
Analytical:
- Define and interpret the accounting equation and its components
- Compute and interpret return on assets (ROA)
- Explain the relation between return and risk
-
Procedural:
- Analyze business transactions using the accounting equation
- Identify and prepare basic financial statements and explain how they interrelate
Learning Objective C1
- Accounting is a system that identifies, records, and communicates an organization's business activities
- The importance of accounting is centered around identifying, recording, and communicating activities to improve decision-making
Learning Objective C2
- External users: Lenders, external auditors, shareholders, regulators, and customers
- Internal users: Research and development managers, purchasing managers, human resource managers, marketing managers, production managers, and distribution managers
Learning Objective C3
- Ethics are crucial in accounting for the trustworthiness of information
- Steps to making ethical decisions: identify ethical concerns, analyze options, and make ethical decisions
Learning Objective C4
- Generally accepted accounting principles (GAAP) govern financial accounting
- GAAP ensures relevance and faithful representation of information
- International accounting standards are issued by the International Accounting Standards Board (IASB)
- Principles, assumptions, and constraints govern the preparation of financial statements.
Learning Objective A1
- Assets = Liabilities + Equity is the accounting equation
- Expanded equation: Assets = Liabilities + Owner's Capital - Owner's Withdrawals + Revenues + Expenses
Learning Objective P1
- Business transactions affect the accounting equation
- Owner investment increases assets and equity
- Purchase of supplies for cash decreases cash and increases supplies
- Purchase of equipment for cash decreases cash and increases equipment
- Purchase supplies on credit increases supplies and accounts payable
- Providing services for cash increases cash and revenues
- Paying expenses in cash decreases cash and increases expenses. Examples include rent and salaries
- Cash receipt from receivables increases cash and decreases accounts receivable.
- Owner withdrawal of cash decreases cash and equity
Learning Objective P2
- Financial Statements: Used to summarize and report the financial position and activities.
- Income Statement: Summarizes revenues and expenses to determine profit/loss for a period.
- Statement of changes in equity: Shows changes in equity over a period through capital contributions and withdrawals.
- Balance Sheet: Lists assets = liabilities + equity at a specific date.
- Statement of cash flows: Shows the movement of cash into and out of a company over a period.
Learning Objective A2
- Return on assets (ROA) is a measure of profitability relative to the amount of assets a company employs. ROA = Net Profit / Average Total Assets
Learning Objective A3
- Risk is the uncertainty about the return on an investment.
- Return on assets (ROA) and other investment returns depend on the level of risk. The riskier the investment the higher the expected return.
Learning Objective C5
- The three major activities of organizations are operating, investing, and financing.
- Financing activities: Raising capital for funds
- Investing activities: Acquiring resources and disposing of resources to execute business strategy
- Operating activities: Using resources for business strategy, research, development, purchase, production, distribution, and marketing.
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Description
This quiz focuses on the foundational concepts presented in Chapter 1 of Fundamental Accounting Principles. It covers the purpose of accounting, key users and uses, GAAP, and basic accounting principles. Additionally, it explores the accounting equation and its importance in financial analysis.
