Chapter 1 Class Exercise

ACC 2070 – Chapter #1 Class Exercise.
1) Match the following terms with the appropriate definition.
a. Financial accounting
b. Ethics
c. Recordkeeping
d. Internal users
e. Accounting
f. Certified Public Accountant (CPA)
g. Fraud triangle
h. Managerial accounting
i. External users
____ 1. An information and measurement system that identifies, records and communicates
relevant reliable and comparable information about an organization's business activities.
____ 2. The part of accounting that involves recording transactions and events, either
electronically or manually.
____ 3. Persons using accounting information who are not directly involved in running the
organization.
____ 4. Persons using accounting information who are directly involved in managing and
operating the organization.
____ 5. The area of accounting that serves the decision-making needs of internal users.
____ 6. The area of accounting aimed at serving external users by providing them with general-
purpose financial statements.
____ 7. Accounting specialists that have met educational and experience requirements, passed an
examination and exhibit ethical characteristics to achieve a professional certification.
____ 8. Beliefs that distinguish right from wrong, considered accepted standards of good and bad
behavior.
____ 9. A model that asserts the factors that must exist for a person to commit fraud.
2) Match each of the following terms with the most appropriate definition.
a. Return on assets
b. Assets
c. Expenses
d. Risk
e. Liabilities
f. Dividends
g. Accounting equation
h. Contributed capital
____ 1. The uncertainty about the return to be earned.

____ 2. Resources such as cash that a stockholder puts into the company.
____ 3. A financial ratio stated as income divided by assets invested.
____ 4. Creditor's claims on a company's assets.
____ 5. Decreases in equity from costs of providing products or services to customers.
____ 6. Resources such as cash that a company distributes to stockholders for personal use.
____ 7.Resources a company owns or controls that are expected to yield future benefit.
____ 8. Expresses the relation of assets, liabilities and equity in a company, comparing the
resources the company owns to the sources of funds to acquire the resources.
3) Match the following definitions with terms 1 through 8. Place the letter that identifies the best
definition in the blank space next to the term.
____ 1. Generally accepted accounting principles

____ 2. Time period assumption
____ 3. Statement of retained earnings
____ 4. Balance sheet
____ 5. Income statement
____ 6. Measurement (Cost) principle
____ 7. Securities and Exchange Commission
____ 8. IASB
____ 9. Full disclosure principle
____ 10. Statement of cash flows
a. Prescribes that assets and services to be recorded initially on a cash or equal-to-cash basis.
b. Describes a company's revenues and expenses and computes net income or loss over a period
of time.
c. An independent group consisting of individuals from many countries that identify preferred
accounting practices.
d. Presumes that the life of a company can be divided into periods for reporting purposes.
e. The concepts and rules that govern financial accounting.
f. A financial statement that reports the changes in equity over the reporting period, excluding
stockholder investments.
g. A report that identifies cash receipts and cash payments over a period of time.
h. Prescribes that a company report the details behind financial statements that would impact
user decisions.
i. The governmental agency that has the legal authority to establish accounting rules.
j. A report that describes a company's financial position at a point in time.
4) Match the following definitions with the terms 1 through 9. Place the letter that identifies the
best definition in the blank space next to the term.
____ 1. Statement of cash flows

____ 2. Events
____ 3. Monetary unit principle
____ 4. Business entity principle
____ 5. Revenue recognition principle
____ 6. Accounting equation
____ 7. Income statement
____ 8. Expenses
____ 9. Liabilities
a. The relation between a company's assets, liabilities, and equity.

b. Happenings, such as changes in market value, that effect the accounting equation and are
reliably measured.
c. The principle that assumes transactions and events can be expressed in money units.
d. Describes a company's revenues and expenses along with the resulting net income or loss over
a period of time.
e. A financial statement that lists cash inflows (receipts) and cash outflows (payments); the cash
flows are arranged by operating, investing, and financing activities.
f. Creditor's claims on assets.
g. The cost of assets or services used to earn revenue.
h. The principle that requires a business to be accounted for separately from its owners.
i. The principle that revenue is recorded when earned through providing goods or services.
5) Match each of the following items 1 through 8 with the financial statement a through d in
which each item would most likely appear. An item may appear on more than one statement.
a. Income statement
b. Statement of retained earnings.
c. Balance sheet
d. Statement of cash flows
____ 1. Assets.
____ 2. Dividends
____ 3. Revenues.
____ 4. Cash from investing activities.
____ 5. Expenses.
____ 6. Liabilities.
____ 7. Cash from operating activities.
____ 8. Cash from financing activities.
6) The characteristics below apply to at least one of the forms of business organization.
a. Is a separate legal entity.

b. Is allowed to be owned by one person only.
c. Owner or owners are personally liable for debts of the business.
d. Is a separately taxable entity.
e. Is a business entity.
f. May have a contract specifying the division of profits among the owners.
g. Has an unlimited life
Use the following format to indicate (with a "yes" or "no") whether or not a characteristic applies
to each type of business organization.
Proprietorship Partnership Corporation LLC

a.
b.
c.
d.
e.
f.
g.
7) From the information given below, prepare a November income statement, a November
statement of retained earnings, and a November 30 balance sheet. On November 1 of the current
year, Victoria Garza, the sole stockholder, began Garza Décor with an initial investment of
$50,000 cash. On November 30, her records showed the following (alphabetically arranged)
items and amounts.
Accounts payable……………. $12,000 Notes payable……………… 4,250

Accounts receivable………. 19,000 Office furnishings……….. $40,000
Cash……………………… 21,200 Rent expense…………… 9,600
Dividends………………. 6,000 Salaries expense………. 4,200
Fees earned………………. 34,000 Telephone expense……. 250

Chapter 1 Class Exercise

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ACC 2070 – Chapter #1 Class Exercise.

1) Match the following terms with the appropriate definition.

____ 1. The uncertainty about the return to be earned.

____ 1. Generally accepted accounting principles

____ 1. Statement of cash flows

a. The relation between a company's assets, liabilities, and equity.

a. Is a separate legal entity.

Proprietorship Partnership Corporation LLC

Accounts payable……………. $12,000 Notes payable……………… 4,250

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