Accounting Ch.1
Which of the following statements is NOT correct about the financial statements?
A balance sheet reports assets, liabilities, revenues, and expenses
Which of the following statements regarding financial reports is not correct?
A statement of stockholders' equity reports revenues, net income, and dividends information
Which of the following items would not appear in an income statement?
Accounts Payable
Materiality is based upon which factor(s)?
Amount and nature of an item
Which of the following best describes revenue?
Amounts earned from providing goods and services to a customer
The accounts that represent the resources of the company are called:
Assets
The accounting equation is defined as:
Assets = Liabilities + Stockholders' Equity
The equation best describing the balance sheet is:
Assets = Liabilities + Stockholders' Equity
The balance sheet depicts which of the following equations?
Assets = liabilities + stockholders' equity
. An alternative form of the accounting equation is:
Assets Liabilities = Stockholders' Equity
Liabilities are shown in which of the following statements?
Balance sheet
The financial statement that represents activity over the entire life of the company is the:
Balance sheet
The financial statement that represents the accounting equation is the:
Balance sheet
Which of the following financial statements reports a company's retained earnings?
Balance sheet
Retained earnings at the end of the year is calculated using:
Beginning retained earnings, net income, and dividends
International Accounting Standards Board (IASB)
Body that is attempting to develop a single set of high-quality, understandable global accounting standards
Which of the following is not a major section in the statement of cash flows?
Cash flows from customers
statement of cash flows
Change in cash as a result of operating, investing, and financing activities
Which of the following accounts appears in the statement of stockholders' equity?
Common Stock, retained earnings
The qualitative characteristic that says accounting information can influence users' decisions by allowing them to assess past performance is:
Confirmatory value
The form of business organization that is legally separate from its owners is a:
Corporation
Which business form has the advantage of limited liability?
Corporation
Constraints on qualitative characteristics of accounting information include:
Cost effectiveness
Liabilities are best defined as
Debts or obligations the company owes resulting from past transactions
The account type that represents payments to stockholders is called:
Dividends
One disadvantage of the corporate form of business is:
Double taxation
The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the:
Economic entity assumption
The costs associated with producing revenues are referred to as:
Expenses
The costs of providing goods and services to customers are referred to as:
Expenses
The independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States is the:
FASB
Independent auditors express an opinion on the:
Fairness of financial statements
Fundamental qualitative characteristics of accounting information are:
Faithful representation and relevance
Today, financial accounting and reporting standards in the United States are established primarily by the:
Financial Accounting Standards Board
Transactions of a company involving external sources of funding are referred to as
Financing activities
The body of rules and procedures that guide the measurement and communication of financial accounting information in the United States is known as:
Generally Accepted Accounting Principles (GAAP)
GAAP is an abbreviation for:
Generally accepted accounting principles
If a company has gone bankrupt, its financial statements likely violate the:
Going concern assumption
The assumption that a business will continue to operate into the future is the
Going concern assumption
Expenses are shown in which of the following statements?
Income statement
Which financial statement is typically prepared first?
Income statement
The financial statement(s) that record activity over an interval of time is (are) the
Income statement and statement of cash flows
Net income (loss) appears in which two financial statements?
Income statement and statement of stockholders' equity
Transactions of a company that include the purchase and sale of long-term productive assets are referred to as
Investing activities
The major underlying assumptions of accounting include all of the following except:
Legal liability
Creditors' claims to a corporation's resources are referred to as:
Liabilities
The accounts that represent resources owed to creditors are called:
Liabilities
Which accounting amount best represents value created for stockholders during the current period?
Net income
Which accounting number has the single greatest impact on stock prices?
Net income
Which financial accounting number impacts stock prices more than any other single piece of information?
Net income
Which of the following items is reported in the statement of stockholders' equity?
Net income
Accounting information that does not provide measurement bias in favor of a particular set of companies has the characteristic of:
Neutrality
The conceptual framework's qualitative characteristic of faithful representation includes:
Neutrality
Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:
Operating activities
Of the following, the most important objective for financial reporting is to provide information useful for:
Predicting cash flows
The conceptual framework's qualitative characteristic of relevance includes:
Predictive value
For accounting information to be relevant, it should possess which of the following characteristics?
Predictive value, confirmatory value, and/or materiality.
The International Accounting Standards Board:
Promotes the use of high-quality, understandable global accounting standards
The equation best describing the income statement is:
Revenues Expenses = Net Income
Net income can best be described as:
Revenues minus expenses
revenues
Sales of products or services
Generally Accepted Accounting Principles (GAAP) are best defined as:
Standards or methods for presenting financial accounting information
Limited liability means
Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket
The owners' interest in a corporation is called
Stockholders' equity
Which of the following best explains the meaning of total stockholders' equity?
The amount of capital invested by stockholders plus profits retained over the life of the company
Liabilities can be best described as:
The amount owed to creditors
If accounting information is considered to have faithful representation, then which of the following is true?
The information represents to users what it claims to represent
Which one of the following statements regarding financial reports is correct?
The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year.
Financial reporting objectives do not include providing information:
To determine market values, assess profit potential, and evaluate management
sole partnership
a business owned and managed by a single individual
partnership
a business owned by two or more people
Statement of Cash Flows
amount of cash received from borrowing money from a local bank
Liabilities
amounts owed
what does a balance sheet show?
assets, liabilities, owner's equity
traditional careers in public accounting include
auditors, tax preparers/planners, business consultants
which financial statement reports a company's assets and liabilities?
balance sheet
Which of the following is a balance sheet item?
cash
Statement of stocholders equity
change in owners claims to resources
Enhancing qualitative characteristics of accounting information include:
comparability and consistency
expenses
costs of selling products or services
dividends
distributions to stockholders
corporation
entity legally separate from it's owners
which of the following describes the cost of selling to customers?
expenses
Which of the following is not a balance sheet item?
expenses, revenues
which body has the primary responsibility for the establishment of generally accepted accounting principles?
financial accounting standards board
securities and exchange comission
group that has been given power by congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded
which financial statement shows a company's revenues and expenses?
income statement
In what are financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity?
income statement, statement of stockholders equity, balance sheet
auditors
independent intermediaries that help to ensure that management approximately applies financial reporting rules in preparing the companys financial statement
Financial Accounting Standards Board (FASB)
independent, private-sector group that is primarily responsible for setting financial reporting stands in the u.s.
which of the following represents an obligation of the company?
liabilities
financial accounting
measuring a company's business activities and communicating those measurements to external parties
Stocholders' equity
owners claims to resources
a component/aspect of relevant accounting information includes:
predictive value
income statement
profitability of the company
balance sheet
resources equal creditors and owners claims to those resources, total amounts owed to workers at the end of the year
assets
resources of a company
income statement
revenue from sales to customers during the year
what does an income statement show?
revenues, expenses
statement of stockholders' equity
the change in retained earnings due to net income and dividends
which of the following best describes an important function of financial accounting?
to support the efficient distribution of society's resources