Ch. 1 Accounting in Action - Questions
Corporation
A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock.
Proprietorship
A business owned by one person.
income statement
A(n) _____ presents the revenues and expenses and resulting nt income or net loss for a specific period of time.
statement of cash flows
A(n) _____ summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.
retained earnings statement
A(n) _____ summarizes the changes in retained earnings for a specific period of time.
Cost Principle
An accounting principle that states that companies should record assets at their cost.
1500
As of December 31, 2014, Stoneland Company has assets of $3,500 and stockholders' equity of $2,000. What are the liabilities for Stoneland Company as of December 31, 2014?
Economic Entity
Basic Assumption that states that there should be a particular unit of accountability.
Communication
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Analyzing and interpreting information.
Recording
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Classifying economic events
Communication
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Explaining uses, meaning, and limitations of data.
Recording
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Keeping a systematic chronological diary of events.
increased 40,000
During 2014, Gibson Company's assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity therefore: (A: increased or decreased and the amount)
Relevance
Financial info. that is capable of making a difference in decision
Monetary Assumption
Identify which principle or assumption is supporting or has been violated in this situation: Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money.
Cost Principle
Identify which principle or assumption is supporting or has been violated in this situation: Julia Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting reports.
Economic entity assumption
Identify which principle or assumption is supporting or has been violated in this situation: Omar Shariff, president of Omar's Oasis, records his personal living costs as expenses of the Oasis.
300,000
If total assets decreased $80,000 and stockholders' equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?
decreses
Indicate whether each item increases or decreases stockholders' equity: Advertising expense
decreases
Indicate whether each item increases or decreases stockholders' equity: Dividends
Increases
Indicate whether each item increases or decreases stockholders' equity: Retained Earnings
increases
Indicate whether each item increases or decreases stockholders' equity: Service Revenues
increases
Indicate whether each item increases or decreases stockholders' equity: Stockholders invest cash in the business
Asset
Indicate whether the following item is an asset, liability or part of stockholders' equity: Accounts receivable
Stockholders equity
Indicate whether the following item is an asset, liability or part of stockholders' equity: Common Stock
Asset
Indicate whether the following item is an asset, liability or part of stockholders' equity: Equipment
Asset
Indicate whether the following item is an asset, liability or part of stockholders' equity: Prepaid Insurance
Stockholders Equity
Indicate whether the following item is an asset, liability or part of stockholders' equity: Retained Earnings
Liability
Indicate whether the following item is an asset, liability or part of stockholders' equity: Salaries and wages payable
Asset
Indicate whether the following item is an asset, liability or part of stockholders' equity: Supplies
Liability
Indicate whether the following item is an asset, liability or part of stockholders' equity: Unearned Service Revenue
balance sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Supplies
balance sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Total Assets
Revenues exceed expenses
Net income will result during a period when:
Expenses exceed revenues
Net loss will result during a period when:
balance sheet only
On the last day of the period, Jim Otto Company buys a $900 machine on credit. This transaction will affect this report/statement:
Assets
Resources a business owns are:
auditing, taxation, and management consulting
Services provided by a public accountant include
Incorrect
State if the accounting method used is correct or incorrect: Julia Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting reports.
Common Stock
Term used to describe the total amount paid in by stockholders for the shares they purchase.
Expenses
The cost of assets consumed or services used in the process of generating revenues
Assets= Liabilitites + Common Stock + Revenues - Expenses - Dividends
The expanded accounting equation .
Managerial Accounting
The field of accounting that provides internal reports to help users make decisions about their companies.
balance sheet
The financial statement that reports assets, liabilities, and stockholders' equity is the
Revenues
The gross increase in stockholders' equity resulting from business activities entered into for the purpose of earning income.
d
Which of the following statements about users of accounting information is INCORRECT? a. Management is an internal user b. Taxing authorities are external users c. Present creditors are external users d. Regulatory authorities are internal users
Stockholders' equity
the ownership claim of shareholders on total assets
Partnership
A business owned by two or more persons associated as partners.
Dividend
A distribution by a corporation to its stockholders.
balance sheet
A(n) _____ reports the assets, liabilities, and stockholders' equity at a specific date.
600,000
At the beginning of the year, Gonzales Company had total assets of $870,000 and total liabilities of $500,000. Answer the following questions. If total assets increased $150,000 during the year and total liabilities decreased $80,000, what is the amount of stockholders' equity at the end of the year?
900,000
At the beginning of the year, Gonzales Company had total assets of $870,000 and total liabilities of $500,000. Answer the following questions. During the year, total liabilities increased $100,000 and stockholders' equity decreased $70,000. What is the amount of total assets at the end of the year?
Recording
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Measuring events in dollars and cents.
Communicating
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Preparing accounting reports.
Communicating
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Reporting information in a standard format.
Identification
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Selecting economic activities relevant to the company
Recording
Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Summarizing economic events.
Expense
Classify the following item as dividends, revenue, or expense: Advertising expense
Dividends
Classify the following item as dividends, revenue, or expense: Dividends
Expense
Classify the following item as dividends, revenue, or expense: Insurance Expense
Revenue
Classify the following item as dividends, revenue, or expense: Rent revenue
Expense
Classify the following item as dividends, revenue, or expense: Salaries and wages expense
Revenue
Classify the following item as dividends, revenue, or expense: Service revenue
Expense
Classify the following item as dividends, revenue, or expense: Utilities expense
Generally accepted accounting principles
Common standards that indicate how to report economic events. GAAP
Liabilities
Creditor claims on total assets
Liability
Indicate whether the following item is an asset, liability or part of stockholders' equity: Notes payable
Stockholders equity
Indicate whether the following item is an asset, liability or part of stockholders' equity: Owner's investment
Income Statement
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Advertising expense
Balance sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Cash
Balance Sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Common stock
Retained Earnings
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Dividends
Balance sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Equipment
Income Statement
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Net Income/Net loss (as the result)
Retained Earnings
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Net Income/Net loss (not as the result)
Balance Sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Notes payable
Income Statement
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Service revenue
balance sheet
Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Stockholders' Equity
decreases assets and decreases liabilities
Payment of an account payable affects the components of the accounting equation in the following way: (A: decrease or increase and the accounts)
increase assets and increase stockholders equity
Performing services on account will have the following effects on the components of the basic accounting equation:
Correct
State if the accounting method used is correct or incorrect: Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money.
Incorrect
State if the accounting method used is correct or incorrect: Omar Shariff, president of Omar's Oasis, records his personal living costs as expenses of the Oasis.
Cost Principle
States that assets should be recorded at their cost.
Proprietorships, Partnerships, and corporations
The three types of business entities
b
Which of the following events is not recorded in the accounting records? a. Equipment is purchased on account. b. An employee is terminated. c. A cash investment is made into the business. d. The company pays a cash dividend.
Verification
Which of the following is NOT a step in the accounting process? °Identification °Recording °Verification °Communication
c
Which of the following statements is false? a. A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. b. A balance sheet reports the assets, liabilities, and stockholders' equity at a specific date. c. An income statement presents the revenues, expenses, changes in stockholders' equity, and resulting net income or net loss for a specific period of time. d. A retained earnings statement summarizes the changes in retained earnings for a specific period of time.
