Entrepreneurship - Ch. 12 - PreQuiz & Course Objectives

Formal summaries of the content of an accounting system's records of transactions are called financial instruments.

FALSE

Cash flow statements can be either direct statements or indirect statements.

TRUE

Fixed asset accounting automatically calculates and accumulates depreciation.

TRUE

To ensure your accounting information is accurate, reliable, and useful, the accounting system you choose should easily and efficiently maintain an internal "audit trail".

TRUE

Summarize the elements of various financial statements.

1. Income statement - Primary source of information about a Business's Profitability. 2. Statement of retained earnings - Sum of all profits & losses minus paid Dividends. 3. Statement of owners' equity - 4. Balance sheet - Statement Showing Assets, Liabilities, and Equity. 5. Cash flow statement - Statement of Sources & Uses of Cash in a Business.

Describe Basic Accounting Concepts (5):

1. The idea that a business has an existence that is separate from its owner, called "business entity concept." 2. The expectation that a successful business will stay in business, or the "going concern concept." 3. An extremely simple equation called the "accounting equation." 4. The premise of revenue and expense. 5. The principle that accounting information must be useful to the owners and managers of businesses.

Regardless of your business's size, the one essential element of an accounting system is ________ that is accurate, easy to use, and tracks all checks written and all deposits made. A.) Cash accounting B.) Financial accounting C.) Tax accounting D.) Managerial accounting E.) None of the above

A.) Cash accounting

Regular and systematic reduction in income that transfers asset value to expense over time is called _____. A.) Depreciation B.) Appreciation C.) Benchmarking D.) Contribution margin E.) None of the above

A.) Depreciation

Larry owns a successful business called Super Car-Hire. He plans to sell it to Bob. Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well. Which of the following basic accounting concepts is reflected in Bob's assumption? A.) The going concern expectation B.) The business entity idea C.) The accounting equation D.) The revenue and expense premise E.) None of the above

A.) The going concern expectation

Which of the following does the accounting equation state? A.) Assets = Liabilities - Owners' Equity B.) Revenue = Expense + COGS C.) Net income = Revenues - Expenses D.) Assets = Liabilities + Owners' Equity E.) None of the above

D.) Assets = Liabilities + Owners' Equity

Legal obligations to give up things of value in the future are known as _____. A.) Borrowings B.) Owners' equity C.) Assets D.) Liabilities E.) None of the above

D.) Liabilities

The difference between assets and liabilities of a business is called its: A.) Net income. B.) Cost of capital. C.) Current ratio. D.) Owners' equity. E.) None of the above

D.) Owners' equity.