Acctg Test 1 Prep Set #1
in order for accounting info to be useful in making informed decisions, it must be: A) internal B) relevant C) reliable D) both relevant & reliable
d
The time period assumption is necessary because: A) inflation exists & causes confusing swings in financial statement amounts over time B) external users of financial statements want accurately reported net income for a specific period of time C) financial statements users expect full disclosure of all events throughout the entire time period translated in dollars D) it's required by federal gov.
B
"economic resources" are known as A) assets B) liabilities C) owners equity D) retained earnings
A
Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the A) financing activities section B) investing activities section C) operating activities section D) supplemental section
A
Info that's material means that an error in recording the dollar amount of a transaction would A) likely affect the judgment of someone relying on the financial statements B) not affect the decisions of financial statement users C) not impact a business decision of a creditor D) result in the overstatement of assets or income
A
One of the qualitative characteristics of accounting info include A) reliability B) cash flow info C) all accounting info D) assets reported on the balance sheet
A
The going concern assumption is concerned with A) the company's ability to continue operations long enough to carry out its existing obligation B) any info that's capable of influencing the decisions of anyone using the financial statements C) measuring ongoing business activities at their exchange price at the time of the initial external transaction D) offsetting management's natural optimism by providing a prudent approach to uncertainty in financial statement items
A
The statement of cash flows has which of the following economic activity categories? A) financing, investing, & operating B) cash, credit, & non cash C) financing, credit, & operating D) financing, management, & operating
A
Which financial statement would you refer to in order to determine how many resources (assets) the company owns? A) balance sheet B) statement of retained earnings C) income statement D) statement of cash flows
A
Which of the following best describes a company's operating activities? A) operating activities are cash flows directly related to earning income B) operating activities are necessary to provide the $ to start a business C) operating activities are needed to provide the valuable assets required to run a business D) operating activities represent the right to receive a benefit in the future
A
Which of the following best describes a distribution of the net income of a corporation to its owners? A) retained earnings B) dividends C) liquidation of assets D) revenue
B
Which of the following is an assumption made in the preparation of the financial statements? A) financial statements are prepared for a specific entity that's distinct from the entity's owners B) the current market value is assumed to be less relevant than the original cost paid C) the preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time D) financial statements are prepared assuming that inflation has a distinct effect on the monetary unit
A
Which one of the following events creates a liability for a business? A) an obligation to pay for goods purchased on credit from a supplier B) inventories purchased for cash C) amounts invested by the owners D) stock sold to the general public
A
Which one of the following financial statements reports an entity's financial position at a specific date? A) balance sheet B) statement of retained earnings C) income statement D) statement of cash flows
A
Which one of the following items appears on a balance sheet? A) retained earnings B) sales revenue C) utilities expense D) dividends
A
Who among the following invest funds into a business & are considered owners? A) stockholders B) creditors C) bankers D) lenders
A
You are a potential creditor and are concerned that a particular company you're ready to give a loan to might have too much debt. Which financial statement would provide you info needed in order to evaluate your concern? A) balance sheet B) income statement C) statement of retained earnings D) statement of cash flows
A
if an investor can use accounting info for 2 different companies to evaluate the types & amounts of expenses, the info is said to have the quality of A) comparability B) consistency C) neutrality D) materiality
A
the principle of conservatism is concerned with A) the avoidance of overstating assets or income in the preparation of financial statements B) the minimization of costs associated with providing financial info C) the company's ability to carry out its existing commitments D) the company's procedures for recording activities at their initial exchange price
A
"revenues" are best described as A) decreases in resources resulting from the purchase of goods for the provision of services B) increases in resources resulting from the sale of goods or the provision of services C) assets used or consumed in the sale of products or services D) an increase in the financing activities section of the statement of cash flows
B
An accountant is uncertain about the best estimate of an amount for a business transaction. If there are 2 possible amounts that could be recorded, the amount least likely to overstate assets & earnings is selected. Which of the following qualities is characterized by this action? A) comparability B) conservatism C) materiality D) neutrality
B
If stockholders want to know how money flowed into & out of the company, what financial statement would they use? A) income statement B) statement of cash flows C) balance sheet D) statement of retained earnings
B
Monaco Lawn Service Company used $250 of fuel to mow customer lawns in June. The fuel was purchased on account & due in July. Fuel Expense should be recorded in: A) july B) june C) august D) april
B
PTG enterprises purchases many small pieces of office furniture, such as trash cans, that cost less than $100 each. PTG accounts for these items as expenses when acquired rather than reporting them as property, plant, & equipment on its balance sheet. The company's accountant states that no accounting principle has been violated. Justification for PTG's policy of expensing these furniture items is based on cost vs. benefit considerations as well as qualitative characteristic of accounting info of: A) conservatism B) materiality C) reliability D) verifiability
B
The resources used to generate revenues during a period are called: A) net income B) expenses C) revenues D) dividends
B
which of the following financial statements shows the end of the year cash balance for a business entity? A) income statement & statement of retained earnings B) balance sheet & statement of cash flows C) statement of retained earnings & statement of cash flows D) balance sheet & statement of retained earnings
B
which of the following qualitative characteristic of useful accounting info implies that only items that meet or exceed certain thresholds will affect decisions? A) conservatism B) materiality C) relevance D) comparability
B
"Matching principle" is best described as: A) the principle that a revenue should be recorded when a resource has been earned B) an increase in resources resulting from the sale of goods or the provision of services C) the principle that expenses should be recorded in the period resources are used to generate revenues D) an increase in financing activities
C
Cash received from customers for mowing their lawns is reported on the statement of cash flows in the A) financing activities B) investing activities C) operating activities D) supplemental
C
How is the balance sheet linked to the other financial statements? A) the amount of retained earnings is reported on the balance sheet B) retained earnings is added to total assets & reported on the balance sheet C) retained earnings from the statement of retained earnings is reported on the balance sheet D) there's no link between the balance sheet & other statements, as each contains different accounts & provides different info
C
Monaco Lawn Service Company creates revenue each time: A) it's scheduled for service B) amount is paid in full C) a lawn is mowed D) money is received in advance
C
Mullins, Inc. manufactures furniture. Mullins has given you its most recent annual report in an effort to obtain a sizable loan. The company is very profitable & appears to have a strong financial position. However, based on a news report you saw on tv, you're aware that mullins is a defendant in a class action lawsuit related to defective products. Serious injuries wet allegedly caused by Mullins' infant high chairs overturning. The tv news report is an example of financial info that's: A) predictable B) conservative C) relevant D) comparable
C
Scott Brothers, Inc. follows the qualitative characteristic of consistency. This means that: A) for expenses, scott uses the same account titles as used by its competitors B) scott has elected certain accounting principles that can never be changed C) scott applies the same accounting methods each period D) scott apple the same accounting principles as its competitors
C
Which financial statement would you analyze to determine its operating performance for the past year? A) balance sheet B) statement of retained earnings C) income statement D) statement of cash flows
C
Which of the following concepts relates to separating the reporting of business & personal economic transactions? A) cost principle B) monetary unit assumption C) economic entity assumption D) objectivity assumption
C
Which of the following is the correct date format for the financial statement heading? A) Balance Sheet for the Year Ended June 30, 2012 B) Statement of Retained Earnings as of December 31, 2012 C) Income Statement for the Year Ending December 31, 2012 D) Statement of Retained Earnings at December 31, 2012
C
Which one of the following is NOT one of the activities on the statement of cash flows? A) operating activities B) investing activities C) business activities D) financing activities
C
cash used to purchase a truck to transport lawn mowers & other tools to customer locations is reported on the statement of cash flows in the A) financing B) investing C) operating D) supplemental
C
expenses can be matched against revenues: A) if the earnings process is not complete B) when cash is collected from the sale of products C) in the same period as the revenue that it helped to generate D) when payment is made for costs related to revenue
C
the income statement shows: A) how much profit the company has earned since it began operations B) net income equal to the amount of cash on the balance sheet C) a summary of the results of operations for a period of time D) the liquidity of the company on an annual basis
C
Liabilities are reported on the: A) income statement B) statement of retained earnings C) statement of cash flows D) balance sheet
D
What does the phrase, "Revenue is recognized when earned" mean? A) revenue is recorded in the accounting records when the goods are received from a supplier, & reported on the income statement when sold to the customer B) revenue is recorded in the accounting records & reported on the income statement when the cash is received from the customer C) revenue is recorded in the accounting records when the goods are sold to a customer, & reported on the income statement when the cash payment is received from the customer D) revenue is recorded in the accounting records & reported on the income statement when goods are sold & delivered to a customer
D
Which of the following best describes the term "expenses"? A) The cost of assets used in the investing activities of a business B) The amount of interest or claim that the owners have in the business C) the future economic resources of a business entity D) a decrease in resources resulting from the sale of goods or provision of services
D
Which of the following best describes the term "retained earnings" of a company? A) the amount of total profits earned by a company since it began operations B) the amount of claim that the owners have on the assets of the company C) the future economic resources of a company D) the accumulated net income of a company that has not been distributed to owners in the form of dividends
D
Which of the following is NOT an asset? A) investments B) cash C) inventory D) equity
D
Which one of the following is NOT one of the 3 business activities as shown in statement of cash flows A) financing B) operating C) investing D) measuring
D
Which statement demonstrates the financial success or failure of the company over that specific period of time? A) statement of changes in stockholders equity B) statement of retained earnings C) balance sheet D) income statement
D
Who among the following generally lends funds to a business entity & expects repayment of the funds? A) a partner B) a stockholder C) an owner D) a creditor
D
which of the following underlying assumptions for the conceptual framework is the reason the dollar is used in the preparation of financial statements? A) economic entity B) continuity C) time period D) monetary unit
D
the type of business activity that relates to obtaining funds from either issuing stock or borrowing money is called
financing
the names of the 4 basic financial statements are:
income statement, balance sheet, statement of retained earnings, statement of cash flows
3 financial statements in which net income can be found are:
income statement, statement of retained earnings, statement of cash flows using the indirect method
the statement of cash flows classifies cash flow into _____ ,_____, _____ activities
operating, investing, financing
net income from the income statement increases
retained earnings
both net income & dividends can be found on the financial statement called the
statement of retained earnings