Tuesday, August 20, 2013

Chapter 1 What is Accounting?

What is Accounting?
Accounting is an information system that identifies, records, and communicates economic data of an enterprise to interested users.

What are the two types of Interested Users of Accounting information?
The two types of interested users are Internal users and External users.
Give examples of Internal Users and External Users: Examples of Internal Users are: Marketing managers, production supervisors, finance directors, and company officers

Examples of External Users are: Investors, Creditors, Taxing authorities, Regulatory agencies, Customers, Labor unions, and Economic planners.

In What year did Luca Pacioli publish his Summa de Arithmetica?
Luca Pacioli published his textbook in 1494.

Who was a good friend of Pacioli?
A good friend of Luca Pacioli was Leonardo DaVinci.

What do we understand by Ethics?
Ethics is the knowledge of what is right and wrong; it deals with a society’s morals.

What are the three organizations that establish accounting rules and guidelines?
The two organizations are FASB (Financial Accounting Standards Board), the SEC (The Securities and Exchange Commission, and the IRS.

What is the Cost principle?
The cost principle requires that Plant Assets be carried at the original price for which they were purchased. Therefore, the ledger for the asset cannot be changed, altered, or distorted.

What are assets? Name at least 4 assets
Assets are properties or resources owned by the business. Four examples of assets are: Cash, accounts receivable, supplies, and prepaid insurance.

What are liabilities? Name at least one liability
Liabilities are debts, obligations, or claims by creditors. In sum liabilities are what a company owes.

What is Owner’s Equity? Name at least one Owner’s Equity account
The owner’s equity is the residual amount or what is leftover for the owner after all the liabilities of a business are paid. Owner’s equity may also be defined as claims by the owner. An example of Owner’s Equity account is: R. Neal, Capital.

What are the 4 activities that change the Owner’s Equity?
They are (1) Investments of capital by the owner (2) Revenues (3) Expenses, and (4) Withdrawals by the Owner.

What are the two rules of Bookkeeping?
The two rules of Bookkeeping are: (1) Each transaction affects at least two accounts (2) In a journal entry the debits must always equal the credits.

What is the difference between Bookkeeping and Accounting?
Bookkeeping deals with the recording part of accounting, whereas Accounting deals with all three aspects: identification of transactions, recording, and communication.

How many rules of Accounting are there?
There are three rules of accounting.

Rule of Accounting Number 1 for Assets:
Increases in assets are recorded by debits to the asset accounts. Decreases in assets are recorded by credits to the asset account.

Rule of Accounting Number 2 for Liabilities:
Increases in liabilities are recorded by credits to the liability accounts. Decreases in liabilities are recorded by debits to the liability accounts.

Rule of Accounting Number 3 for Owner’s Equity
Increases in owner’s equity accounts are recorded by credits to the owner’s equity accounts. Decreases in owner’s equity accounts are recorded by debits to the owner’s equity accounts.

How many financial statements are there?
There four and only four financial statements: Balance Sheet, Income Statement, Statement of Owner’s Equity, and Statement of Cash Flows.

How many sections does the balance sheet have?
The Balance Sheet has three sections: Assets, liabilities, and owner’s equity

How many sections does the income statement have?The income statement has three sections: Revenues, Expenses, and net income.

What are revenues?
Revenues are increases in owner’s equity.

What are expenses?
Expenses are decreases in owner's equity.

What are transactions?
Transactions are economic events of an enterprise that are recorded by accountants. A transaction must be expressed in dollars.

What is net income
Net income is the difference between revenues and expenses. It is also called the “Bottom Line.”
Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll

Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci

The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers

Lindsey Vonn after winning the Downhill World ...
Image via Wikipedia

Lindsey Vonn


  1. Yasmin

    I find the question makes the lesson better to understand. It is a revision.

  2. Being familiar with the lingo of accounting is a stepping stone to understanding the more intricate concepts of this theorem.

    Having all these completely new ideas crammed into my head all at once may seem overwhelming, but the basic concepts are explained here in a manner that is organized and much easier to digest.

    - Gar Choy -

  3. This is very helpful. Thank you.


  4. Thanks Prof. now I'll know a little more of what we discussing in class.

    Thanks again,
    Silena Bru.

  5. Thanks Professor Guerrero... these questions give us, students, a better understanding of the first chapter.

    Betty Aracena AMM 101

  6. We are extremely, lucky to be in a class where there is continuous reinforcement of the material because the teaching is done by asking not by telling. The professor is knowledgeable and articulate, yet simplistic in his delivery.

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  8. wow, this is great .. very convenient .. summarizes the chapter in a way i understand

    Arianna Loffredo

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  10. Jevon Lowenfield

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  11. joffreisy.v
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  12. I find this questions a short summery of the chapter which are easy to learn

  13. I think the idea of questions and answers is essential to the understanding of the material. Not only does this encourage me to memorize the information, but also provides accurate information i could always relay on. Thank You, Professor Guerrero.

  14. This Q&A sheet is very helpful and its an easier way to study and learn the more important things about accounting.