SECTION II: MATCHING (10 possible points) Please match the numbered terms with their definitions by placing the letter that identifies the best definition in the blank space next to the term. The value of each correct answer is 1 point. ____ 1. Accrual Basis ____ 2. Cost Principle

____ 3. Credit ____ 4. Debit

____ 5. Generally Accepted Accounting Principles (GAAP) ____ 6. General Ledger ____ 7. Journal ____ 8. Liquidity

____ 9. Matching Principle

____ 10. Materiality

A. The various methods, rules, practices, and other procedures that have evolved over time in response to the need to regulate the preparation of financial statements. B. The magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information.

C. A book, file, hard drive, or other devices containing all of a companys accounts.

D. An entry on the left side of an account.

E. An entry on the right side of an account.

F. A chronological record of transactions, also known as the book of original entry.

G. The association of revenue of a period with all of the costs necessary to generate that revenue.

H. Assets are recorded at the cost to acquire them. I. The ability of a company to pay the debts as they come due. J. A system of accounting in which revenues are recognized when earned and expenses are recognized when incurred.

SECTION III. SHORT ANSWER

1. Explain the difference between internal and external users of a corporations financial information. Give two examples of internal users and two of external users.

2. How do financial accounting and management accounting differ?

3. What does relevance mean with regard to the use of accounting information?

4. Briefly explain the purpose of a Trial Balance.

5. Explain briefly the Revenue Recognition Principle. When should a publisher of magazines recognize revenue?