ACCT 201 Exam 1

During the year, Pizza Company had $100,000 in revenue, $40,000 in expenses, and paid $3,000 in dividends. Whats the net income?

$60,0000 dividends isn't a part of net income

Who would be interested in financial accounting information?

*any active customer, investor, creditor or regulator

What is the correct order of the items found on the balance sheet

1. Assets 2. Liabilities 3. Stockholder Equity

Who are the two external users of financial accounting information that contribute financial resources to a company?

1. Creditors 2. Investors

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?

1. a liability or stockholder must decrease 2. another asset must increase

What type of information is included in an account?

1. account number 2. columns for increases and decreases 3. the account title

What are the three steps in order for bank reconciliation?

1. adjust banks cash balance 2. adjust the company's cash balance 3. update the company cash account by recording items identified in the previous stop

What is the order of assets as they would appear on a classified balance sheet?

1. current assets 2. long term-investments 3. property, plant and land 4. intangible assets

What are the three steps for analyzing the effect of transactions

1. determine one account in the accounting equation that will increase of decrease 2. determine a second account in the accounting equation that will increase of decrease 3. confirm the assets are equal to liabilities plus stockholder equity

The adjusted trial balance is used to prepare what financial statements?

1. income statement 2. statement of stockholders' equity 3. Balance sheet (used to show that credit and debits equal)

What are the long term assets sub-categories on a classified balance sheet

1. long term investments 2. intangible assets 3. property, plant, and equipment

Internal control consists of plans to what?

1. minimize erros and theft 2. encourage adherence to company policies and procedures 3. safeguard company assets

What are detective controls?

1. reconciliation 2. audits 3. performance reviews

What provisions were included in the Sarbanes-Oxley ACT

1. require auditors to retain work papers 7 years 2. require that audit firms are hired by the audit committee of the board of directors

What is the result of closing entries?

1. retained earnings includes current year income minus dividends 2. balances in temporary accounts are zero

What maintains records of a company's operations and communicates information to decision makers?

Accounting

When a company performs service for customer and the customer agrees to pay for the services at a alter date, the transaction is recorded as what?

Accounts receivable

What type(s) of accounting are permitted under current U.S. GAAP?

Accrual basis-accounting

What is an internal transaction?

An exchange from one department to another within the same company

What tracks Assets, liabilities, and stockholders' equity

Balance sheet

What is the framework for designing an internal control system?

Committee of Sponsoring Organizations (COSO) of the Treadway commission

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate Management

What does an investor do?

Decides wether to purchase stock

What is cash received from customers for services to be performed in the future

Deferred Revenue

What is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.

FASB

Selling stock to an investor is what kind of accounting transaction?

Financial, not investing because I am doing he selling, if i was buying would be investing

What are generally accepted accounting principles abbreviated as?

GAAP

What happens if Indigo Company debits the 10,000 of equipment they bought with notes payable?

Indigo must have purchased equipment and signed a note for the purchase price

Any amount owed to a creditor is classified in the balance sheet as a what? (one word)

Liability

What are external transactions?

Purchasing inventory from suppliers Loans Paying salaries

What does closing entires affecting following the permeant accounts?

Retained earnings

What is the sale of goods of services to customers?

Revenue

What tacks operating, investing, and financing activities?

Statement of Cash Flow

What is a list of all accounts and their balances at a particular date showing that debits equal credits?

Trial Balance

A company reports a net loss when?

When expenses are greater than revenue

What is ethics?

a code of moral system that provides criteria for evaluating right and wrong

What is a chart of account?

a list of all account names and numbers used by a company

The income statement, statement of stockholders equity and balance sheet typical are prepared utilizing information shown in the what?

adjusted trial balance

What is considered "property,plant and equipment" on a classified balance sheet?

anything currently in use (land a factory sits on, tools being used in that factory) not includes would be land held for resale or tools being held for resale

What reports assets, liabilities and stockholder equity

balance sheet

The retaining earning balance shown in an adjusted trial balance is the account's (blank) balance.

beginning

The retaining earnings balance shown in an adjusted trial balance is the accounts (blank) balance

beginning

What is included in the calculator of retained earnings?

beginning retained earning , expenses, revenue and declared dividends

Ending retained earnings is calculated how?

beginning retained earnings + net income - dividends

What is the journal entry that affects a companies cash flow?

cash

What is the most liquid asset?

cash

The purpose of a statement of cash flows is to provide what?

cash receipts and cash disbursements during period

What is a list of all account names used to record transactions of a company referred to as?

chart of accounts

What activities are part of the operating cycle?

collect cash from customers pay cash to suppliers buying goods and services

What is considered intangible assets?

copyrights, trademarks, patents

The adjusted trial balance shows service rev = 20,000, sal exp = 8,000...close retained earnings

credit retained earning for the balance of the revenue (20,000)

Interest payable, salaries payable and accounts payable are common examples of what?

current liabilities

How do you close out an account?

debit a credit and credit a debit

Accounts on the left side of the accounting equation (assets) are increased with a (blank) to the account, whereas accounts on the right side of the accounting equation are increased with a (blank)

debit, credit

What does a t account has space for recording?

debits/ credits or increases/ decreases

what is a managers job?

decide production and expansion

What is an internal control procedure for cash disbursements?

disbursements should be made by check

The (blank) represents the cumulative total of net income less dividends over the life of the company.

ending balance of retained earnings

What represents a company's primary means of communicating information to external users?

financial statements

if the SEC doesn't agree with a standard set by a private sector, it can what?

force a change in the standard

What is a classified balance sheet?

groups asset and liabilities into current and long term categories

What is a bank reconciliation?

helps maintain control of cash accounts ?

What is liquidity?

how quickly an asset can be converted to cash

An advantage of a classified balance sheet is that is is easy to see what?

if current assets are large enough to pay current liabilities

What is the financial statement that displays a firm's financial position on a particular date?

income statement

What is the financial statement that summarizes revenue and expenses for a period of time?

income statement

What is cashed based accounting?

it records revenues when collected and expenses paid, for that reason it is usually not accepted in preparing financial statements because it also violates both the revenue recognition and matching principles

What is included on a company's balance sheet?

notes payable, equipment and interest receivable

What is the use of ones occupation for personal enrichment through the deliberate misuse or misapplication of the employers resources?

occupational fraud

What is stockholders equity?

one of the four required financial statements and measures retained earnings with common stock

What is the process of transferring information from a journal to the general ledger?

posting

Small amounts of cash on hand to pay for minor purchases is referred to as what?

pretty cash

What are the two types of control procedures>

preventative and detective

Long-term productive assets used in the normal course of business are classified as what?

property, plant and equipment (2nd highest classified)

What is the purpose of cash flows

report cash distributions, reports cash receipts

What are undistributed profits that have accumulated in the company over time

retained earnings

What accounts should be classified stockholders equity?

retained earnings common stock

What does an Income statement report?

revenue minus expenses

A critical aspect of a good internal control system is what?

separation of duties

What are examples of preventative controls?

separation of duties and E-commerce controls

What is the financial statement typically prepared last?

statements of cash flow

For a corporation, the owners claims to the resource of a company are called what?

stockholders equity

Temporary Accounts are found in what?

the income statement

What is it called when a company records a transaction before the bank records the same transaction?

timing difference

what is a non-sufficient funds check that requires an adjustment to the cash balance was written by who?

to the company preparing the bank reconciliation ?

What is the purpose of closing entries

to zero out the balance in the debits and credits, transfers net income and dividends into retained earnings

The sum of current and long term assets is referred to as what?

total assets

What should a journal entry contain?

1. accounts and amount debited 2. accounts and amount credited 3. the description of the transaction 4. the date

What are the four financial statements published to provide information to external users?

1. balance sheet 2. statement of cash flow 3. statement of SE 4. Income statement

In what order to assets appear on a classified balance?

1. current assets 2. long term investments 3. property, plant and equipment 4. intangible assets (long term assets most classified)

What effect does a scary expense have on the balance sheet?

1. decrease stockholders' equity 2. decrease assets

What are some common current liabilities

1. deferred revenue 2. accounts payable 3. salaries payable

Rank the steps in ethical decision making in the proper order beginning with the first step

1. evaluate the course of action in terms of their impact on stakeholders 2. specify the alternative course of action 3. identify the ethical issue and stakeholders 4. make a decision

What kind of information should financial accounting provide?

1. helps predict cash flow 2. tells about economic resources, claims to resources and changes in resources and claims 3. useful to investors and creditors in making decisions

What are the primary functions of accounting

1. maintain records of a company's operations 2. communicate information to decision makers

The key roles of accountants are to (blank) to activities of the company and to (blank) those measurements to others

1. measure 2. communicate

What is found on a balance sheet?

1. stockholders equity 2. assets 3. liabilities

what are the 5 steps in order of measuring transactions?

1. use a source doc to identify accounts affected 2. analyze the impact of the transaction on the accounting equation 3. Asse whether the transaction on the accounting equation 4. Record the transaction in a journal 5. Post the transaction to the general ledger

What is the difference between an investor and a creditor

An investor owns a part of the company (stoke) while the creditor lends money to the company

What contains management discussion and analysis and note disclosures to the financial statements included?

Annual report

The accounting equation is:

Assets= Liabilities+stockholder equity *alternative: Assets = Liabilities+common stock+revenue- expenses

What is a distribution of net income to owners called?

Dividend

What type of transactions typically are recognized at the end of the period?

Internal

Paying cash to buy equipment is what kind of accounting activity?

Investing

A (blank) is maintained for each financial stamen item, whereas a (blank) contains all of the accounts of the company

account, general ledger

The fundamental model of business valuation is commonly referred to as what?

accounting equation

The classifications on the statement of cash flows are cash flows from (blank)

all the above, money is involved in operating, investing and operating activities

What is an account?

an element of the accounting equation contained in the general ledger

What transfers the balances of all temporary accounts to retained earnings

closing entries

what are the two main functions of accounting?

communicate information to investors and creditors and also to measure business activities

How are computerized systems different from manual systems?

computers instantly post journal entries to the general ledger, manual must be done by human

What is the form of business organization where an entity is legally separate from its owners and issues shares of stock?

corporation

Stockholders equity normally have (blank) balances?

credit

What are the entries needed for the closing process?

credit dividends declared and debit retained earnings debit each revenue and credit each expense, and record the difference in retained earnings

What does a creditor do?

decided whether to lend money

Current liabilities are (blank)

due within the next year/ used up within the year

Shareholder's (Owners) equity arises primarily from amounts invested by shareholders and amounts (blank).

earned by the corporation

What do accounts represent?

elements of the accounting equation contained in the general ledger

what is found on a companies balance sheet?

equipment interest receivable note payable

What are operating activities? Give examples

everything the company does other than buying assets (equipment, land, etc) or getting creditors/investors. The process that allow a company to run on a day to day basis

A(n) (blank) is a cost of doing business that is necessary to produce (blank)

expense revenue

What are the effects of paying upfront with cash?

increased assets and increased retained earnings (must both remain equal)

Revenue does what to retained earnings?

increases

What is the effect on stockholder equity for services performed on account?

increases

Manager accounting provides information to an organizations (internal/external) users?

internal

Accounting transactions are classified as what?

internal or external transactions

What are the three most common forms of business organization?

sole proprietorship (one boss) partnership (2-few bosses) corporation (large, lots of bosses)

What is a collection of accounts used to keep track of increases and decreases in financial position elements

t account? look up

what are temporary vs. permanent accounts?

temporary: revenues, expenses, dividends permanent: assets, liabilities, equity

What is accounts receivable?

the assets (cash) owed by customers

A journal provides what?

the chronological record of all transactions affecting a firm

Balance sheets include what in the header?

the title "Balance Sheet" the name of the business at Month day, year

When should the adjusted trial balance be prepared in order to prove the (blank) of the debits and credits

the trial balance is prepared before the financial statements to prove that total debits equal total; credits

What is a regulators job?

to decide on social welfare issues

What is the purpose of a general ledger?

to provide in a single location the list of transactions affecting each account and the accounts's balance

The objective of financial accounting is what?

to provide useful information for external decision makers

What is the sum of current and long term assets reported on the balance sheets referred to?

total assets

On a classified balance sheet, what represents the sum off current and long term liabilities

total liabilities