Accounting 2 Chapter 1

Cash supplies goes where on financial statement?

statement of cash flows

Statement of Retained Earnings

Reports the accumulation of profits kept by the business during the current accounting period with that of prior periods. Reports the accumulation of profits kept by the business during the current accounting period with that of prior periods.

Balance Sheet

Reports the financial position of the business at a point in time. Reports the financial position of the business at a point in time.

Where do Investing Activities go?

Statement of cash flows

Place the balance sheet line items in the proper order from top to bottom.

1. Cash 2. Supplies 3. Equipment 4. Accounts Payable 5. Common Stock 6. Retained Earnings

Place these items in the order in which they appear on the statement of cash flows.

1. Cash Flows Provided by (used in) Operating Activities 2. Cash Flows Provided by (used in) Investing Activities 3. Cash Flows Provided by (used in) Financing Activities

Place the following in order (top down) of how they would appear in the heading of Deli Llama's annual income statement for the fiscal year ended March 31, 2020.

1. Deli Llama 2. Income statement 3. For the year ended March 31, 2020

Prepare a statement of retained earnings for the month of September from top to bottom.

1. Retained Earnings, September 1 2. Net Income 3. Dividends 4. Retained Earnings, September 30

Place the single-step income statement items in the proper order from top to bottom.

1. Revenues 2. Expenses 3. Net Income

Prepare a single-step income statement in its proper order starting from the top to the bottom.

1. Sales Revenue of $9,000 2. Salaries and Wages Expense of $5,000 3. Utilities Expense of $1,400 4. Advertising Expense of $100 5. Net Income of $2,500

How many financial statements do companies typically prepare each accounting period?

4

Which of the following accounts are liabilities?

Accounts Payable Wages Payable Taxes Payable Note Payable

What is true about a balance sheet?

It is sometimes called the statement of financial position. It reports the assets, liabilities and stockholders' equity at a point in time. It reports the economic resources and claims on those resources.

Income Statement

Reports the financial performance of the business during the current accounting period. Reports the financial performance of the business during the current accounting period.

Statement of Cash Flows

Reports the operating, investing and financing activities effect on cash. Reports the operating, investing and financing activities effect on cash.

Revenues and Expenses

Revenues equal the price times the quantity of goods or services delivered to a customer. Revenues and expenses are reported on the income statement. Expenses are the costs of doing business necessary to earn revenues.

What are the three primary forms of business organization?

Sole proprietorship, partnership, corporation

Which financial statement reports the operating, investing and financing activities affect on cash?

Statement of cash flows

Liberty, Inc., a US company, sold merchandise to Belle, a French company, for 10,000 euros. In Liberty's US financial statements, this sale should be reported in?

US dollars

The underlying rules of accounting in the US are called?

generally, accepted, accounting principles

Expenses appear on the

income statement

Expenses appear on the?

income statement

Retained earnings are?

increased by net income decreased by dividends

Financial Statements

may have a fiscal year end other than December 31 may be prepared more than once a year

Financial statements can be prepared?

on a fiscal year basis on a monthly basis on a quarterly basis

The three types of activities reported on the statement of cash flows are the

operating, investing and financing

The statement of retained earnings reports the

profits that have accumulated in the company over time

Information that always makes a difference in a decision is

relevant

The unit-of-measure assumption states that?

results of business activities should be reported in an appropriate monetary unit

An income statement includes?

revenues expenses net income

A financial statement heading states that it was prepared: "For the Year Ended December 31, 2020." What types of financial statements could this be?

statement of cash flows income statement statement of retained earnings

US GAAP are

the accounting rules developed by the FASB for use in the United States

Accounts Receivable

the amount the company expects to collect for previous credit sales

Income statements are sometimes called?

the statement of operations report revenues minus expenses

The heading of an income statement should include?

the title "Income Statement" the accounting period covered by the statement the name of the business

The primary goal of most companies is?

to make a profit

Financial information is enhanced when it is

understandable comparable timely verifiable

Accounts are?

used to accumulate and report the effects of each different business activity

A company started the month with $1,000 of Retained Earnings. During the month, it had Revenue of $5,000 and Expenses of $4,500. It also distributed a Dividend of $100 to its stockholders. The company's Retained Earnings at the end of the period equals $?

$1,400

At December 31, Equate, Inc.'s assets equal $50,000 and liabilities equal $30,000. Stockholders' equity must equal $?

$20,000

Axis Company just bought a piece of land for $25,000. What a deal! The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of?

$25,000

At December 31, Aloe, Inc.'s assets equal $8,000 and stockholders' equity equals $5,000. Liabilities must equal $ ?

$3,000

Ace Electronics had the following increases in the cash account during the month: $20,000 from owners for stock; $5,000 from sales to customers; and $15,000 borrowed from River Bank. Ace's revenue for the month was?

$5,000

Ace Electronics sold $5,000 of goods to customers of which $3,000 has been collected. Using accrual accounting, Ace Electronics should report revenues of?

$5,000

What is true about income statements?

A dollar sign appears only at the top and bottom of the column of numbers. Each major caption has an underlined subtotal, such as Total Expenses. Net Income has a double underline. Revenues are listed before expenses.

What are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together?

Accounts

What is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit?

Accounts Receivable

Which of the following are found on a balance sheet?

Accounts Receivable Retained Earnings Cash Notes Payable

When a company is owed for sales made to customers on credit, the asset called

Accounts Receivable will be reported on the balance sheet

Total Liabilities

Amount of creditors' claims to the company's resources Amount of creditors' claims to the company's resources

Total Stockholders' Equity

Amount of owners' claims to the company's resources Amount of owners' claims to the company's resources

Total Assets

Amount of the company's resources Amount of the company's resources

Which economic resource provide futures resources?

An Asset

The balance sheet balances when

Assets = Liabilities + Stockholders' Equity

Which of the following is the accounting equation?

Assets = Liabilities + Stockholders' Equity

Supplies go where on financial statement?

Balance Sheet

Which financial statement reports the financial position of the business at a point in time?

Balance sheet

Which of the following are found on a balance sheet?

Common Stock Equipment Supplies Notes Payable

A single-step income statement includes which of the following?

Expenses Net Income Revenues

Which of the following characteristics are needed in order for information to be useful?

Faithful representation Relevance

The order of the heading of an income statement indicates the name of the statement first, the period of time covered, and the name of the company third.

False because the name of the company is first, followed by the statement name, and then the period of time covered by the income statement.

Net income equals the net amount of cash collected during the accounting period. True or False

False because the net income does not equal cash collected because some revenues are collected and some expenses are paid in a later accounting period. Cash can increase from other activities, such as borrowing or owner contributions.

Revenue always equals cash collections during the accounting period.

False, because Revenues are recorded when the goods or services are provided even if the cash is not collected until a later accounting period.

Which group is responsible for creating the US GAAP?

Financial Accounting Standards Board (FASB)

Where does net income go?

Income Statement

Supplies expense goes where on financial statement?

Income statement

Which of the following are financial statements?

Income statement Statement of retained earnings Balance sheet Statement of cash flows

Which of the following are found on a balance sheet?

Stockholders' Equity Assets Liabilities

What are assets?

Supplies Cash Land Equipment

What is the main reason companies exist?

To maximize their profits and owners wealth

Creditors would like a company that owes them money to have a large positive cash flow from operating activities.

True

The unit of measure concept is the idea that a company should report its financial results on its financial statements using

a single monetary unit, such as the US dollar

Individual expenses are accumulated in separate?

accounts

Acme Enterprises, a consulting firm, bought 4 boxes of copy paper from an office supply store for $15 each. The copy paper would be reported as?

an asset, supplies

Creditors want to see that a company that owes them money has

assets that are greater than its liabilities

The purpose of the balance sheet is to report the amount of

assets, liabilities, and stockholders' equity at a specific point in time

A balance sheet shows

assets, liabilities, stockholders equity

Where do assets go?

balance sheet

Which line items appear on the statement of retained earnings?

ending balance of Retained Earnings Dividends Net Income

The order in which assets are reported on the balance sheet is based on when the asset is

expected to be used or turned into cash