Principles of Accounting: Chapter One

Home

Chapter 1 introduces the study of accounting. Accounting is defined as a set of concepts and techniques that are used to measure and report financial information about an economic entity. Accounting consists of both external reporting issues known as "financial accounting," and internal reporting issues related to "managerial accounting." There are numerous accounting career choices, and these options are discussed in the chapter.

There is a long-standing fundamental accounting equation that is core to the overall reporting model: Assets = Liabilities + Equity. This chapter shows that the equality is preserved as transactions are processed through an accounting system. The system customarily results in the production of certain core financial statements: The Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. Each of these statements, and their interrelationships, are illustrated. This chapter is foundational for beginning to understand how business activity is reflected in key financial reports.

Exercises

To aid in your understanding of this chapter, exercises with solutions are available for free download at Bookboon.com. You will find these exercises very helpful in providing models and guidelines for solving all of the problems at principlesofaccounting.com.

Click here to go to Bookboon.

Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Problems: Chapter One

Obtain the entire Accounting Cycle Problem Workbook via the linked image at left. Our high volume production process makes this an economical option as compared to printing these files on your own printer!



Basic		Problem	Worksheet	Combined	Objective

	B-1.01				Definitions, concepts, and awareness of accounting

	B-1.02				Classification of items as assets, liabilities, revenues, or expenses

	B-1.03				Impact of transactions on fundamental accounting equation

	B-1.04				Basic identification of revenues, expenses, assets, liabilities

	B-1.05				To develop an understanding of the nature of changes in equity

	B-1.06				To drill on the articulation of the core financial statements

	B-1.07				Broad ideas about the role of accounting and its concepts

	B-1.08				Differentiating between "right" and "wrong" accounting

	B-1.09				Interpreting financial statement outcomes to assess profit/loss





Involved		Problem	Worksheet	Combined	Objective

	I-01.01				Accounting, GAAP, careers, and ethics

	I-01.02				Accounting equation and entity types

	I-01.03				Preparing and formatting basic financial statements from selected data

	I-01.04				Moderately complex assessment to determine income for four years

	I-01.05				Analysis of impact of transactions on complete financial statements

	I-01.06				Computing income and extended analysis based on partial data

	I-01.07				Team-based identification of errors and corrections

	I-01.08				Preparing financial statements and cash calculations based on a narrative

	I-01.09				Basic cash flow analysis and statement of cash flows

	I-01.10				Accessing and examining financial statements of a public company

The preceding table includes links to "Basic" and "Involved" problems. Each link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically. If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear. The comments include useful suggestions for improving your spreadsheet skills.

Solutions to these problems may be obtained from your instructor, however you may not post or redistribute, electronically or otherwise, any such solution material. Solution material may be provided to you for your sole use only, at the discretion of your individual instructor. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found under the "Exercises" tab within each chapter. Video solutions to selected problems are available to students enrolling in the online course.