Assignment 1.1 Handout
1. Match the following accounting terms with their correct definition:
TERMS:
1. Accounting Equation
2. Asset
3. Balance Sheet
4. Expense
5. Income Statement
6. Liability
7. Net Income
8. Net Loss
9. Revenue
10. Statement of Cash Flows
11. Statement of Retained Earnings
DEFINITIONS:
A. An economic resource that is expected to be of benefit in the future
B. An economic obligation (a debt) payable to an individual or an organization outside the business
C. Excess of total expenses over total revenues
D. Excess of total revenues over total expenses
E. The basic tool of accounting, stated as Assets = Liabilities + Equity
F. Decrease in equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customers
G. Amounts earned by delivering goods or services to customers
H. Report of cash receipts and cash payments during a period
I. Report of an entity's assets, liabilities, and equity as of a specific date
J. Report of an entity's revenues, expenses and net income/net loss for the period
K. Report that shows the changes in retained earnings for a period of time
2. Terry Maness, Inc., publishes a travel magazine. In need of cash, the business asks Metro Bank for a loan. The bank requires borrowers to submit financial statements. With little knowledge of accounting, Terry Maness, the sole shareholder, does not know how to proceed.
Requirements
R1. Explain how to prepare the balance sheet and the income statement.
R2. Which organization is the self-regulating body of accountants that defines pronouncements that guide how the financials will be prepared?
R3. Indicate why a lender would require this information.
R4. What type of organization is Terry Maness?