Practice SB CH2 - Exam 1

Accounting or balance sheet equation (must remain imbalance after each transaction is recorded)

A = L + SE is called the

The notes to the financial statements, management's discussion and analysis of the financial statements, the report of the external auditor's examination of the financial statements

A corporation's annual report contains the reporting firm's financial statements and each of the following key components:

The users of the data can easily spot changes in the firm's financial position and its results of operations

A firm prepares comparative financial statement so that

Recognition of revenues when they are earned (at the point of sale) and recognition of expenses when they are incurred

Accrual accounting results in:

Income Statement

An entity's earnings for a reporting period are reported on the:

Accounting Entity

__ refers to the entity for which financial statements are being prepared

Balance Sheet

An entity's financial position at the end of a reporting period is reported on the

Total liabilities is equal to $7000

If the total assets is equal to $10,000 and the total shareholders' equity is equal to $3,000, then:

Retained Earnings

In the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that net income affects the ___ account within stockholders' equity.

Cost

Most assets are not recorded at their current market value because of the limitations imposed by the __ principle

Original (historical) cost

Most assets are reported on the balance sheet based on their

Conservatism

Principle in accounting relates to making judgement and estimates that result in lower profits and asset valuation estimates rather than higher profits and asset valuation estimates Understating assets and/or overstating liabilities when making judgments and estimates is driven by which of the following concepts/principles:

Going concern

The __ concept refers to the presumption that the entity will continue to operate in the future

Full Disclosure

The __ concept requires that the financial statements and notes include all necessary information to prevent a reasonably astute user of the financial statements from being misled

Cost & Original/Historical

The ___ principle refers to the fact that transactions are recorded at their __ cost of entity as measured in dollars

Assets, liabilities, and stockholders' equity

The balance sheet is a listing of the organization's:

Statement of financial position

The balance sheet is sometimes called the:

Accounting period, matching, revenue recognition, and accruaL

The four concepts/principles that relate to bookkeeping procedures and the accounting process are

Consistency, full disclosure, materiality, and conservatism

The four concepts/principles that relate to the financial statements are:

Materiality

The idea that tells absolute exactness in the amounts shown in the financial statements is not necessary is portrayed by the concept of

Expenses incurred to generate revenues must be matched to revenues earned for any period

The matching concept means that

Accounting period

The period of time selected for reporting financial statements is known as the

Accounting equation, accounting entity, and going concern

The three concepts/principles that relate to the entire model (of the flow of data from transactions to financial statements) are:

Unit of measurement, cost principle and objectivity

The three concepts/principles that relate to the transactions are

The total stockholders' equity is equal to $6,000

The total assets is equal to $15,000 and the total liabilities is equal to $9,000 then:

Comparative

Financial statements that show a column for the current year and the prior year are known as ____ financial statements

Financial position at the end of the period, earnings for the period, investments by and distributions to owners (i.e., stockholders) during the period, cash flows during the period

Identify the information that the current generally accepted accounting principles and auditing standards require the financial statements of an entity to show for the reporting period

Objectivity

Which concept/principle suggest that a given transaction should be recorded in the same way in all situations

Cost principle

Which concept/principle supports the fact that assets such as land, buildings, and equipment are not reported at their fair values:

Unit of Measurement

Which concept/principle supports the notion that for companies reporting their financial statements in United States dollars, no adjustments are made for the effects of inflation: In the United States, the dollar is the __ for all transactions

Statement of changes in stockholders' equity, balance sheet, statement of cash flows, income statement

Which of the following are the required financial statements under generally accepted accounting principles and auditing standards:

Accounting entity, going concern, accounting equation

Which of the following concepts/principles relate to the entire model:

Obligations of the organization

Which of the following is true regarding the balance sheet components: liabilities are the

Highlights of the year, including net revenues, diluted earnings per share, and return of stockholders' equity, the reporting firm's financial statements for the year, management's discussion and analysis of the financial statements

Which of the following items are normally included as key components of a corporation's annual report: