Account Ch 1

Bonds payable

Long-term liabilities that the firm must pay back.

Revenues exceed expenses

Net income will result during a time period when:

What makes up liabilities on a balance sheet?

Notes Payable Accounts Payable Unearned service revenue Salaries and Wages payable Interest payable

Investing Activities

Occur after the company has raised cashed through financing activities. Involves the purchase of the resources a company needs in order to operate. Ex - purchasing computers, delivery trucks, buying stock

Stockholders' equity represents claims of owners

Stockholders' equity represents:

Common Stock

Term used to describe the total amount paid in by stockholders for the shares they purchase.

he element of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is the auditor's opinion

The element of a corporation's annual report that describes the corporation's accounting methods is/are the:

Stockholders' Equity

The owners' claim to assets.

The investing activities section of the statement of cash flows provides information about property, plant, and equipment accounts,

What section of a statement of cash flows indicates the cash spent on new equipment during the past accounting period?

The balance sheet is a formal presentation of the accounting equation, such that Assets = Liabilities + Stockholders' Equity

Which financial statement reports assets, liabilities, and stockholders' equity?

Reduced legal liability for investors

Which is an advantage of corporations relative to partnerships and sole proprietorships?

Tax rates on corporations increased. SOX had nothing to do with taxes

Which of the following did not result from the Sarbanes-Oxley Act?

Issuing shares of stock sellings goods on account - operating activity buying delivery equipment - investing activity buying inventory - operating activity advertising - operating activity

Which of the following is an example of a financing activity?

The balance sheet presents information as of a specific point in time.

Which statement presents information as of a specific point in time?

Note payable

a written promise to pay a creditor a certain amount in the future

Annual Report

a yearly statement of the financial condition, progress, and expectations of an organization

External Users

investors, creditors, taxing authorities, customers, labor unions, regulatory agencies

Why are investors interested in net income

it provides useful information for predicting future net income. Investors buy and sell stocks based on their beliefs about a company's future performance.

Internal Users

managers who plan, organize, and run a business

Assets

resources owned by a business

Auditor's Report

A report prepared by an independent outside auditor stating the auditor's opinion as to the fairness of the presentation of the financial position and results of operations and their conformance with generally accepted accounting principles.

Liabilities

Amounts owed to creditors

DO NOT APPEAR ON INCOME STAEMENT

Amounts received from issuing stock are not revenues, and amounts paid out as dividends are not expenses. For example, Sierra corporation does not treat as revenue the 10,000 cash received from issuing new stock, nor does it regard as a business expense the 500 of dividends paid

retained earnings

An amount earned by a corporation and not yet distributed to stockholders.

Using the accounting equation, liabilities can be computed by subtracting stockholders' equity from assets, or $3,500 − $1,500 = $2,000

As of December 31, 2022, Rockford Corporation has assets of $3,500 and stockholders' equity of $1,500. What are the liabilities for Rockford as of December 31, 2022?

Basic Accounting Equation

Assets = Liabilities + Stockholders' Equity

Financing Activities

Borrowing money (debt financing) and issuing (selling) shares of stock in exchange for cash (equity financing)

Regulatory authorities are considered external users

3. Which statement about users of accounting information is correct?

Corporation

A business owned by stockholders who share in its profits but are not personally responsible for its debts

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

Statement of Cash Flows

A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

Balance sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

What make up assets on balance sheet?

Cash Accounts Receivable Supplies Prepaid insurance Equipment

Operating Activities

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.

What makes up stockholders equity on the balance sheet?

Common Stock Retained Earnings