Chapter 2 Accounting

Entrepreneur

A(n) ____ is an individual who transforms ideas for products or services into real-world businesses.

A business has the ability to operate indefintely

An example of an accounting assumption is ____.

going concern

Following the ____ accounting assumption, the accountant prepares reports as though the business will operate indefinitely.

loss

If a business spends more money to operate than it earns from the sale of goods or services, it is operating at a(n) ____.

willing to take risks and organize venture

In a business, it is the entrepreneur who ____.

free enterprise system

In a(n) ____, people are free to produce the goods and services they choose.

accounting system

The ____ is designed to collect, document, and report on the financial transactions affecting the business.

accounting period

The ____ is the period of time covered by an accounting report.

Profit

The amount of money earned after the costs of operating a business are paid is ____.

Sole proprietorship

The most common form of business organization is the ____.

Service, merchandising and manufacturing

The type of business that provides a product or a service, makes sales to customers, and incurs expenses is

business entity

Under the ____ accounting assumption, a business owner must keep the financial records for the business separate from personal records.

GAAP

____ are the rules accountants follow when recording and reporting accounting information.

management accounting

____ is concerned with preparing information for internal users.

financial accounting

____ is concerned with preparing reports for external users such as investors or creditors.

capital

____ is money invested in a business by its owner(s) or the money provided by banks or investors.

Financial reports

____ summarize information about the financial status of a business.

Accounting is often call the "language of business" because

it is fundamental to the communication of financial information

The most common time period covered by an accounting report is one ____.

one year

An example of an internal user of accounting information is ____.

the manager in charge of a specific product line

The assumption that requires accounting reports to be prepared for a specific period of time is

accounting period