MGMT 20000 Chapter 1 Review

Companies communicate information about their business activities primarily through A. their tax return. B. public relations announcements. C. financial statements.

C. financial statements.

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

income statement

Identify the three most common forms of business organization. A. Sole proprietorship B. Corporation C. Unlimited stock entity D. Enterprise entity E. Partnership

A. Sole proprietorship B. Corporation E. Partnership

Which of the following items are found on a balance sheet? (Select all that apply.) A. Stockholders' equity B. Assets C. Dividends D. Liabilities E. Revenue

A. Stockholders' equity B. Assets D. Liabilities

The four financial statements published to provide information to external users include which of the following? A. Statement of Business Activities B. Income Statement C. Statement of Cash Flows D. Balance Sheet E. Statement of Stockholders' Equity F. Statement of Assets

B. Income Statement C. Statement of Cash Flows D. Balance Sheet E. Statement of Stockholders' Equity

An advantage of the corporate form of organization is that a corporation A. is not regulated. B. provides limited liability to stockholders. C. does not have to pay its creditors. D. is not taxed.

B. provides limited liability to stockholders.

_____ is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S. (Enter the acronym.)

FASB

_____ _____ represent a company's primary means of communicating information to external users. (Enter one word per blank.)

Financial statements

_____ is the amount recorded as a result of the sale of products or services to customers. (Enter only one word.)

Revenues

When revenues are greater than expenses, a company has net _____, whereas when revenues are less than expenses, a company has a net _____.

income; loss

A balance sheet lists the assets, _____, and stockholders' equity as of a specific date.

liabilities

Careers for accounting professionals typically include a choice between public and _____ accounting.

private

Profits earned by a company that have not been paid to stockholders are called _____ earnings. (Enter only one word.)

retained

Undistributed profits that have accumulated in the company over time are called _____ earnings. (Enter one word per blank.)

retained

Which of the following aspects relate to the information provided in an income statement? A. Ability to earn a profit from its operations during the current period B. Assurance that the company will pay its obligations when they become due C. Assurance that the company will pay dividends to stockholders

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

Which of these would be found on a company's balance sheet? (Select all that apply.) A. Accounts receivable B. Depreciation expense C. Notes payable D. Sales revenue E. Equipment

A. Accounts receivable C. Notes payable E. Equipment

Which of the following financial statements shows a firm's financial position on a particular date? A. Balance sheet B. Statement of cash flows C. Income statement D. Statement of stockholders' equity

A. Balance sheet

Which of the following lends money to a company and expects the company to repay the debt? A. Creditor B. Investor C. Both creditors and investors

A. Creditor

Which of the following items are assets? (Select all that apply.) A. Equipment B. Notes payable C. Supplies D. Dividends

A. Equipment C. Supplies

Which of the following are financial statements? (Select all that apply.) A. Income statement B. Balance sheet C. Statement of stockholders' equity D. Statement of assets E. Statement of corporate responsibility

A. Income statement B. Balance sheet C. Statement of stockholders' equity

Which of the following appear(s) on the balance sheet? A. Utilities payable B. Common stock C. Salaries expense D. Accounts receivable E. Net income

A. Utilities payable B. Common stock D. Accounts receivable

Accounting professionals: A. are in high demand B. are rarely employed outside the accounting field C. have limited opportunities outside accounting

A. are in high demand

Ending retained earnings is calculated as A. beginning retained earnings + net income - dividends B. net income + dividends C. assets + net income - dividends D. beginning retained earnings + net income + dividends

A. beginning retained earnings + net income - dividends

The purpose of a statement of cash flows is to provide information about the A. assets during the period. B. cash receipts and cash disbursements during a period. C. assets, liabilities, and stockholders' equity used during the period. D. income and related expenses during the period.

B. cash receipts and cash disbursements during a period.

The primary functions of accounting are to: A. provide information to taxing authorities. B. communicate information to decision makers. C. increase a company's profitability. D. increase a company's stock market valuation. E. measure a company's activities.

B. communicate information to decision makers. E. measure a company's activities.

Match each statement to the type of information contained in the statement. Balance sheet Income Statement Statement of Cash Flows ______________________________________ Operating, investing, and financing activities Assets, liabilities, and stockholders' equity Revenues and expenses

Balance sheet: Assets, liabilities, and stockholders' equity Income Statement: Revenues and expenses Statement of Cash Flows: Operating, investing, and financing activities

The accounting equation is: Assets = Liabilities + A. Retained Earnings B. Revenues C. Creditors' Interest D. Stockholders' Equity E. Net Income

D. Stockholders' Equity

Resources owned by a company are called A. stockholders' equity. B. revenues. C. liabilities. D. assets.

D. assets.

A code or moral system that provides criteria for evaluating right and wrong is referred to as A. standards. B. a values model. C. a dilemma system. D. ethics.

D. ethics.

_____ is a term that refers to a code or moral system that provides criteria for evaluating right or wrong. (Enter one word per blank)

Ethics

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as _____. (Enter one word per blank)

accounting

The two main functions of _____ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors. (Enter only one word.)

accounting

A business organization that is legally separate from its owners is called a(n) _____. (Enter one word per blank)

corporation

Any amount owed to a creditor is classified in the balance sheet as a/an _____. (Enter one word per blank)

liability

Stockholders' equity is A. the owners' claims to resources of the corporation. B. amounts owed by a corporation. C. the resources owned by a corporation.

A. the owners' claims to resources of the corporation

Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as A. Assets + Revenues. B. Liabilities + Revenues. C. Assets - Liabilities. D. Assets + Liabilities.

Assets - Liabilities

Margot starts a new business and contributes $20,000 in cash; she also borrows $25,000 from her local bank. She utilizes the cash to purchase supplies for $5,000 and a computer system for $10,000. After these transactions, the total claims to the company's total resources are: A. $20,000 B. $45,000 C. $25,000

B. $45,000

True or false: Technical accounting skills represent the only skills required of accounting professionals. A. True B. False

B. False

Amounts owed to creditors are A. Assets B. Revenues C. Liabilities D. Stockholders' Equity E. Expenses

C. Liabilities

The financial statement that is most useful in explaining a company's stock price performance is the A. statement of stockholders' equity. B. balance sheet. C. income statement.

C. income statement

Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is: A. a net loss of $5,000 B. net income of $17,000 C. net income of $5,000 D. a net loss of $17,000

C. net income of $5,000

Match each user of financial information with the type of decision. Creditors Regulators Customers Managers ______________________________________ Decide whether to lend money Decide production and expansion Decide whether to purchase products Decide on social welfare issues

Creditors: Decide whether to lend money Regulators: Decide on social welfare issues Customers: Decide whether to purchase products Managers: Decide production and expansion

Match the external user to its definition. Investor Creditor ______________________________________ Lends money to the company Owns stock in the company

Investor: Owns stock in the company Creditor: Lends money to the company

The financial statement that summarizes revenues and expenses for a period of time is the _____ _____. (One word per blank)

income statement

Which of the following are attributes of FASB? (Select all that apply.) A. Independence B. Private sector organization C. Full-time board members D. Public sector organization E. Part-time board members

A. Independence B. Private sector organization C. Full-time board members

True or false: The accounting equation is: Assets = Liabilities + Stockholders' equity. A. True B. False

A. True

A(n) _____ is a cost of doing business that is necessary to produce _____. A. expense; revenue B. liability; expenses C. dividend; revenue D. revenue; assets

A. expense; revenue

The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the A. income statement B. statement of cash flows C. balance sheet D. statement of stockholders' equity

A. income statement

An income statement reports: (Select all that apply.) A. revenues B. expenses C. amounts contributed by stockholders D. net income or loss E. cash

A. revenues B. expenses D. net income or loss

The purpose of an income statement is to: A. report the cash inflows and cash outflows for the period B. report the risk involved in operating the business for the reporting period C. report assets, liabilities, and stockholders' equity for the period D. summarize the profit-generating activities that occurred during a particular reporting period

D. summarize the profit-generating activities that occurred during a particular reporting period

Management discussion and analysis and note disclosures to the financial statements are included in the _____ _____. (Enter one word per blank.)

annual report

Shareholders' equity arises primarily from amounts invested by shareholders and amounts ______. A. earned by the corporation B. borrowed from investors C. received by customers D. borrowed from banks

A. earned by the corporation

The three classifications on the statement of cash flows are cash flows from (Select all that apply.) A. investing activities. B. operating activities. C. financing activities. D. discontinued activities. E. business activities.

A. investing activities. B. operating activities. C. financing activities.

The statement of cash flows classifies items as A. operating, investing, and financing. B. recurring and nonrecurring. C. operating and nonoperating. D. current and noncurrent.

A. operating, investing, and financing.

Expenses are: A. the costs of doing business that are necessary to produce revenue B. amounts paid to stockholders for their investment C. always less than revenues D. equal to a company's liabilities

A. the costs of doing business that are necessary to produce revenue

The two primary functions of financial accounting are to: A. report income to taxing authorities. B. measure business activities. C. provide information for internal users. D. communicate measurements to external parties.

B. measure business activities D. communicate measurements to external parties

Which items are found on an income statement? A. Equipment B. Dividends paid C. Expenses D. Revenues

C. Expenses D. Revenues

Match each user of financial information with the type of decision. Suppliers Competitors Investors Creditors ______________________________________ Determine the ability to pay for goods Decide market share and profitability Decide whether to lend money Decide whether to purchase stock

Suppliers: Determine the ability to pay for goods Competitors: Determine market share and profitability Investors: Decide whether to purchase stock Creditors: Decide whether to lend money

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as _____ _____. (Enter one word per blank.)

retained earnings

The two sources of stockholders' equity are amounts _____. A. paid in from shareholders B. borrowed from banks C. earned by the corporation D. borrowed from related companies

A. paid in from shareholders C. earned by the corporation

The three most common forms of business organization are sole proprietorship, _____, and _____. (Enter one word per blank)

partnerships; corporations

Revenues are: A. the amount of cash a company has left after it has paid its obligations B. amounts owed to creditors C. sales of goods or services to customers D. amounts that owners have contributed directly to the business E. cash payments that a business has made directly to its owners

C. sales of goods or services to customers