Chapter 1 - Introduction to Accounting and Business

Which of the following statements provides a summary of cash receipts and cash payments for a specific period of time, such as a month or a year?

Statement of cash flows

Assets of a company may include

cash, inventory, buildings, and equipment.

All business transactions can be stated in terms of

changes in the elements of the accounting equation

The statement that reports net income or loss for a certain period in time is the

income statement

Included in the statement of owner's equity are

net income (loss) and withdrawals.

Cool Taste Company purchased $1,500 of supplies with cash. What effect does this transaction have on the accounting equation?

no affect on the accounting equation

Assets and liabilities of a company are $150,000 and $30,000, respectively. Determine owner's equity using the accounting equation.

$120,000

On August 1, Harvey Company offered to pay $13,000 for equipment that was advertised as being sold for $19,000 by Carrone Company. The equipment had a retail value of $23,000 on that day. On August 10, Carrone Company offered to sell the equipment for $14,700, and Harvey Company agreed to buy at that price. At what value will Harvey Company record the equipment on the books?

$14,700

Given the following information, determine net income. The capital balance on January 1, 2016 equals $25,000; investments and withdrawals during 2016 total $53,000 and $28,350, respectively; the capital balance at December 31, 2016 equals $64,850.

$15,200

Clayton Company purchased a new coffee maker in the amount of $3,500. Clayton paid $1,000 down and will pay the remainder in 60 days. What effect does this transaction have on the accounting equation?

$2,500 net increase in assets and $2,500 increase in liabilities

Given the following information, determine the amount of Cash on the balance sheet (assume there are only three assets). Liabilities equal $3,050; Owner's equity equals $25,000; Supplies equal $1,500; and Land equals $22,500.

$4,050

Cool Taste Company recorded $5,000 in sales on account for the week. What effect does this transaction have on the accounting equation?

$5,000 increase in assets and $5,000 increase in owner's equity.

Which of the following users is not considered an external user of accounting information?

A Manager

Which of the following does not represent the accounting equation?

Assets + Owners's Equity = Liabilities

The statement that provides the financial position of a company as of a specific date is the

Balance Sheet

Which of the following forms of business entities generates 90% of business revenues in the U.S.?

Corporations

The principles and concepts that the management of a company uses to record and report its financial information are called

GAAP

Which of the following statements about GAAP is not true?

GAAP allows a company's management to record and report data as it sees fit.

sell products purchased from other businesses to make their objective of maximizing their profits

Merchandising businesses

Emily owns three businesses: a dry cleaner, a market, and a candy store. The dry cleaner has revenue of $5,000; the market has revenue of $10,000; and the candy store has revenue of $7,000. Under the business entity concept, Emily should record

None of these choices are correct.

Which of the following is not accurate when it pertains to managerial accounting?

Provides economic data reports on the operations and condition of the business that are useful for banks and other creditors in deciding whether to lend money to the business

Which of the following users is not considered an internal user of accounting information?

a supplier

The area of accounting concerned with providing internal users with information is called

managerial accounting.

Assets are

resources owned by the business

Money earned by a business for selling goods or services to its customers represents

revenues.

Paying an amount on an account reduces

the amount owed on a liability.

Which of the following best represents the accounting equation?

Assets = Liabilities + Owner's Equity

Which financial statement reports financial data based on the matching concept?

Income statement

Which of the following concepts requires that economic data be recorded in dollars in the U.S.?

Unit of measure concept

The paying of an expense reduces

owner's equity