SECTION II: MATCHING (10 possible points)
Please match the numbered terms with their definitions by placingthe letter that identifies the best definition in the blank spacenext to the term. The value of each correct answer is 1point.
____ 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 proceduresthat have evolved over time in response to the need
to regulate the preparation offinancial statements.
B. The magnitude of an omission or misstatement in accountinginformation that will affect the judgment of
someone relying on theinformation.
C. A book, file, hard drive, or other devices containing all ofa company’s 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 thebook of original entry.
G. The association of revenue ofa period with all of the costs necessary to generate thatrevenue.
H. Assets are recorded at the cost to acquire them.
I. The ability of a company to pay the debts as they comedue.
J. A system of accounting in which revenues are recognized whenearned and expenses are recognized when
SECTION III. SHORT ANSWER
1. Explain the difference between internal andexternal users of a corporation’s financial information. Give twoexamples of
internal users and two ofexternal users.
2. How do financial accounting andmanagement accounting differ?