Accounting Chapter 2

Economic entity assumption – Requires that the activities of the entity be kept separate and distant from the activities of its owner and all other economic entities
Entity – Notional being for financial transactions accounts
Expense – A decrease in owners equity resulting from the operation of the business
Separate Economic Entity Assumption – This is the concept that a business is separate from its owner or owners and the financial statements reflect the affairs of the business, not those of the owner.
An entry on the debit side of the owners equity indicates that the account has been – Decreased
A method of calculating depreciation that accelerates the amount in the first years of the asset's life by use of a fixed percent applied to the book value of the asset is what depreciation method. – Straight line depreciation
14.Litigation – is the process of taking legal action.
Commercial paper – Company borrows from another company rather than the bank
Expenses – a decrease in assets, other than withdrawals by the owner, which result from efforts to produce revenues.
Debit Balance in Retained Earnings (Deficit) – arises when a corporation's lifetime losses and dividends exceed lifetime earnings (deficit)
Which of the following bases is found in bleach? (Select the appropriate answer.)   (A) Ammonia, NH3 (B) Sodium hypochlorite, NaClO (C) Calcium carbonate, CaCO3 (D) Magnesium hydroxide, Mg(OH)2 (E) Sodium hydroxide, NaOH
supplies expense – operating expense, IS, debit
Expenses – The cost of assets consumed or services used up in the process of earning revenue.
balance sheet – list of assets, liabilities, & owner's equity as of a specific date
stock split – a large stock dividend that includes a reduction in the par of stated value per share
accounting system – a system designed to collect, document, and report on business transactions
proxy ballot – a voting ballot that allows you to control what happens with the company you have stock in
Partnership – Business owned by two or more
Which оf the fоllоwing bаses is found in bleаch? (Select the аppropriate answer.)   (A) Ammonia, NH3 (B) Sodium hypochlorite, NaClO (C) Calcium carbonate, CaCO3 (D) Magnesium hydroxide, Mg(OH)2 (E) Sodium hydroxide, NaOH
Revenue – Money coming into the business. An increase in owners equity resulting from business activity
Accounting records – Organized summaries of a business's financial activities.
Hudson Company started its year with 600 units of beginning inventory at a cost of $4.00. During the year, the company made the following purchases: May, 900 units at $5.00 and July, 500 units at $6.00. A physical count of inventory at year-end indicates that there are 700 units in ending inventory. What is the cost of the ending inventory if Hudson Company uses the FIFO method for valuing inventory?
A. $2,900.
B. $4,000.
C. $3,465.
D. $5,900. – B

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