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Exam 4: The Accounting System: Concepts and Applications

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Question 1

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Assets are economic resources that will provide future benefits to the business.

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Question 2

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The three broad forms of business structure include all of the following except:

A) Sole proprietorships
B) Dual proprietorships
C) Partnerships
D) Companies / corporations

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Question 3

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Due to the dual effect of transactions, a business must make at least______________________ changes in its assets, liabilities and/or owners' equity when it records each transaction.

An income statement normally includes all of the following except:

Explain the entity concept.

Because of the dual effect of transactions, every transaction will change both sides of the accounting equation.

Describe the effect on the accounting equation of the receipt of cash from the sale of product on credit to a customer.

An ____________________ is considered to be separate from its owners and from any other business.

Each business is an entity and has its own accounting ____________________ and accounting records.

The monetary total of a business' resources must equal the sum of the claims on resources by creditors and residual claimants.

A = L + OE represents the income position for a business.

Which of the following best describes depreciation?

_________________________ are the amounts owed to the business by customers.

Provide a brief explanation of owner's equity.

Example 4.1 The following information applies to the following questions. The accountant for Big Stores has compiled the following information about the business and its accounts: $\begin{array} { l r l r } \text { Cash } & \$ 1000 & \text { Inventory } & \$ 10000 \\\text { Revenues } & 5000 & \text { Expenses } & 3000 \\\text { Accounts Payable } & 3000 & \text { Equipment } & 15000 \\\text { Wages Payable } & 2000 & \text { Notes payable } & 12000\end{array}$ -Refer to Example 4.1. What is the total amount that Big Stores owes to creditors?

A = L + OE represents the balance sheet for a business.

The liabilities and owner's equity of an entity are claims on the economic ____________of the entity.

____________________ are the costs of providing the goods or services to customers.

Creditor is a term that refers to an outside investor in the business.

GAAP provides rules for entities to follow when preparing financial statements which assist external users with: