Chapter 1 Accounting Study Set

An income statement reports

- Revenue - Net income or loss - Expenses

Which of the following aspects relate to the information provided in an income statement?

Ability to earn a profit from its operations during the current period

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as

Accounting

Management discussion and analysis and note disclosures to the financial statements are included in the

Annual report (10-K)

The accounting equation is:

Assets = Liabilities + Stockholders Equity

Stockholders' equity arises primarily from amounts invested by shareholders and amounts

Earned by the corporation

The two sources of stockholders' equity are amounts

Earned by the corporation - Paid in from shareholders

A code or moral system that provides criteria for evaluating right and wrong is referred to as

Ethics

Which items are found on an income statement?

Expenses - Revenues

_______________ requires that information is complete, neutral, and free from material error.

Faithful representation

The financial statement that is the most useful in explaining a company's stock price performance is the

Income statement

The financial statement that summarizes the profit generating activities of a company during a particular period of time is the

Income statement

Which financial statement reports revenues and expenses?

Income statement

Which of the following are financial statements

Income statement - Statement of stockholders' equity - Balance sheet

The statement of cash flows classifies items as

Operating, investing, and financing

The three most common forms of business organizations are

Partnership - Sole proprietorship - Corporation

Predictive value and confirmatory value are components of which fundamental qualitative characteristic?

Relevance

Which of the following items are found on a balance sheet?

Stockholders' equity - Assets - Liabilities

The purpose of an income statement is to

Summarize the profit-generating activities that occurred during a particular reporting period

Retained earnings represents

The total net income earned over the life of the company that has not been distributed as dividends.

Ethics

a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

The accounting equation is:

assets = liabilities + stockholders' equity

A balance sheet lists the ___________ as of a specific date

assets, liabilities, and stockholders' equity

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

balance sheet

The financial statement that provides information about cash receipts and cash disbursements for the period is the statement of

cash flows.

The primary functions of accounting are

communivate information to decision makers and measure a companys activities

the form of business organization where an entity is legally seperate from its owners and issues shares of stock is a

corporation

companies communicate information about their business activities primarily through

financial statements

Information that best explains companies' stock price performance is reported on the

income statement

Salaries already paid to employees for the month is a expense account that appears on the

income statement

The purpose of a ___________ is to report the profit-generating activities of the firm during a period of time.

income statement

the four financial statements published to provide information to external users include which of the following

income statement, statement of cashflows, statement of stockholders equity, balance sheet

The two main functions of accounting are to

measure business activities and to communicate those measurements to investors and creditors.

The characteristics that a new accounting standard should not favor one group of companies over others or achieve a particular social outcome is an example of

neutrality

identify the three most common forms of business organizations

prtnerships sole proprietorships and corporations

To be useful for decision making, information should possess the fundamental qualities of

relevance and faithful representation

A net loss decreases

retained earning

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as

retained earnings

Which of the following financial statements shows a firm's financial position on a particular date?

Balance sheet

The purpose of a statement of cash flows is to provide information about the

Cash receipts and cash disbursements during a period

Which of the following appear on the balance sheet?

Common stock - Utilities payable - Accounts receivable

The primary functions of accounting are to

Communicate information to decision makers - Measure a company's activities

Faithful representation required information to have which of the following three characteristics?

Completeness - Neutrality - Free from material error

Confirmatory value and predictive value

Confirmatory value = positive income is consistent with effectiveness of management - Predictive value = consistently increasing income helps forecast the company's ability to generate future cash.

The private sector organization that is currently responsible for setting accounting standards in the United States is the

Financial accounting standards board (FASB)

_________ represent a company primary means of communicating information to external users

Financial statements

Which of the following are attributes of FASB?

Full time board members - Private sector organization - Independence

Financial information that may impact investors and creditors decision is referred to as materiality and must be reported under

GAAP

When a company earns net income, its retained earnings:

Increase

The three classifications on the statement of cash flows are cash flows from

Investing activities - Operating activities - Financing activities

The impact of financial accounting information on investors and creditors decisions is closely related to the concept of

Materiality

In our society, the two main functions of accounting are to

Measure business activities - Communicate information to investors and creditors

Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?

Neutrality

A business organization that is legally separate from its owners is called a

Corporation

In addition to the financial statements, which of the following must be included in the annual reports?

Notes disclosures - Management discussion and analysis

Which of these would be found on a company's balance sheet?

Notes payable - Accounts receivable - Equipment

The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of

Relevance and faithful representation