Financial Accounting Exam #1
Land owned by a company
Assets
a term that refers to a code or moral system that provides criteria for evaluating right or wrong
Ethics
When should supplies be recorded as an expense?
In the period the supplies are used, regardless of when they were purchased
Chronological record of all transactions
Journal
Format used to record transactions of a company
Journal entry
list of permanent accounts and their balances
Permanent accounts
Adjusting entries are needed...
before financial statement preparation and to update accounts to their prior balances.
A classified balance sheet ______.
groups asset and liabilities into current and long-term categories
assets, liabilities, stockholders equity
Adjusted Trial Balance
Receive cash in the current period that will be recorded as a revenue in a future period
Deferred Revenue
Which of the following are attributes of FASB?
Full-time board members Independence Private sector organization
Information that does not bias the decision maker
Neutrality
The purpose of a general ledger is to
provide in a single location the list of transactions affecting each account and the account's balance.
An advantage of the corporate form of organization is that a corporation
provides limited liability to stockholders.
At year-end, companies that utilize accrual-based accounting systems complete the measurement process through
recording of adjusting entries
After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents
the amount of the sales or services still owed to the customer.
The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as
Accounting
Reporting revenues only when cash is received and expenses only when cash is paid is called the ________ basis of accounting
CASH
right side of an account
Credit
An adjusting entry for accrued expenses involves
Credit to liability, debit to expense
left side of an account
Debit
Which type of account is increased with a debit?
Expense
Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?
Interest on the note payable is classified as an expense since it is a cost of borrowing.
A debit is on the _____ side of an account
Left
Workers salaries for the current period.
Liabilities
List of permanent and temporary account and their balances
Post-closing trial balance
Cash flows...
Report cash receipts Reports cash disbursements Are the financial statement that is typically prepared last
Simplified form of a general ledger account
T-account
revenues, expenses, dividends
Temporary accounts
Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period.
decreased; increased
An adjusting entry is necessary to record interest expense at year-end because the interest
has already been incurred
A primary purpose of adjusting entries is to record events that
have occurred but that have not yet been recorded.
Information that best explains companies' stock price performance is reported on the
income statement
Revenues and expenses are reported in the:
income statement
The financial statement that is most useful in explaining a company's stock price performance is the
income statement
A chronological record of all economic events affecting a firm are recorded in a
journal
The adjusting entry for a deferred revenue includes a debit to a(n)_______ account and a credit to a(n)________ account.
liability; revenue
The statement of stockholders' equity includes these amounts:
net income dividends for the period ending balance retained earnings
list of all accounts and their balances showing that debits equal credits
trial balance
Full set of procedures used to accomplish the measurement/communication process of financial accounting
Accounting cycle
A summary of the effects of all transactions relate to a particular item over a period of time
Accounts
Record an expense in the current period that will be paid in cash in a future period
Accrued expenses
Record a revenue in the current period that will be collected in cash in a future period
Accrued revenue
How do adjusting entries for accrued expenses affect liabilities and expenses?
Adjusting entries for accrued expenses can increase liabilities and increase expenses.
Transfer of temporary balances to retained earnings
Closing entries
All information to necessary to describe an item as reported
Completeness
Information provides feedback on past activities
Confirmatory value
Andy records an adjusting entry for deferred revenue. Andy should:
Debit a liability account Credit a revenue account
Payments made to stockholders
Dividends
Adjusting entries are made at the ______ of the accounting period, while daily transactions are made throughout the accounting period.
End/Closing
Amounts owed to the bank
Expenses
A(n)________ transaction involves an exchange between the company and a separate economic entity.
External
Activities of the company conducted with separate economic entities.
External transactions
Which of the following statements is true?
Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.
Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.
OWED
The information reported in the statement of cash flows is organized by these activities:
Operating Investing Financing
Information is useful in helping to forecast future outcomes
Predictive Value
Pay cash (or have an obligation to pay cash) in the current period that will be recorded as an expense in a future period
Prepaid expenses
Which of the following are attributes of FASB?
Private sector organization Full time board members Independence
Cleaning services provided to customers
Revenues
Common stock issued to investors
Stockholders' Equity
Information is presented in time to make useful decisions
Timeliness
Measurements that independent parties would agree upon
Verifiability
Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as ________ basis accounting.
accrual
Deferred Revenue
arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.
prepaid insurance is an
asset in the balance sheet
Prepaid rent appears in the ______.
balance sheet because it is an asset
A list of all account names used to record transactions of a company
chart of accounts
The entries that transfer the balances of all temporary accounts to retained earnings are referred to as
closing entries
The primary functions of accounting are to:
communicate information to decision makers. measure a company's activities.
Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred.
expenses
events that affect the financial position of the company but do not include an exchange with a separate economic entity
internal transactions
Depreciation is
is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used.
If an adjusting entry's debit is to an expense account, then the credit must be to...
pre paid expense and liability
Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.
prepaid expenses; assets
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