Accounting Chapter 1

Retained Earnings Equation

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

Which item is classified as an operating activity on the statement of cash flows?

Collection on account receivable

The foundation upon which financial accounting is built is referred as the FASB

Conceptual Framework

Which of the following appear on the statement of stockholders' equity?

Net income Beginning balance of retained earnings Dividends

Which financial statement shows the changes in common stock and retained earnings?

Statement of stockholders' equity

The financial statement that displays a firm's financial position on a particular date is the

balance sheet

if investors or lenders were interested in the amount of debt a company currently has, which financial statement would they need?

balance sheet

The purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period

Cash Flow formula

change in cash=operating cash flows+Investing cash flows+financing cash flows

The financial statement that is most useful in explaining a company's stock price performance is the

income statement

Which of the following items are classified as financing activities on the statement of cash flows?

issue stock pay dividend

Collections of account receivable are examples of what activities?

operating

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as

retained earnings

Undistributed profits that have accumulated in the company over time are called

retained earnings

Ending retained earnings appears on the:

Balance Sheet and Statement of Stockholders' Equity

Where is the time period covered by the income statement found?

Heading

The two sources of stockholders' equity are amounts

earned by the corporation paid in from shareholders

The income statement is considered most useful for predicting

future profitability

The abbreviation GAAP stands for

generally accepted accounting principles

The 1933 and 1934 SEC Acts were designed to restore

iNVESTOR CONFIDENCE IN FINANCIAL ACCOUNTING

Stockholders' Equity Formula

= Common Stock + Retained Earnings

Which of the following accounts is on the statement of stockholders' equity?

Common stock and retained earnings

In what statements are dividends in?

Dividends to shareholders are a distribution to shareholders and are found on the statement of stockholders' equity.

pay dividend issue stock are what examples of activities? Investing Operating or Financing

Financing

Which of the following are attributes of FASB?

Full-time board members Private sector organization Independence

is the common abbreviation for the Board that currently establishes global accounting and reporting standards.

IASB

The purpose of the International Accounting Standards Board is to develop a single set of global accounting standards, which are referred to as

International Financial Reporting Standards.

In 2002, the FASB and IASB formalized their commitment to the convergence of U.S. GAAP and IFRS. This is commonly referred to as the

The Norwalk Agreement

Which of the following is true regarding disclosure notes?

They explain or elaborate on data presented in the financial statements.

What is the purpose of the auditor?

To add credibility to the financial statements.

A net loss Blank______ retained earnings.

decreases

Revenues will______ retained earnings, and expenses will ______ retained earnings.

increase, decrease

Which of the following accounts are stockholders' equity accounts?

Common stock Retained earnings

Which of the following is an important purpose of GAAP? Multiple choice question.

It facilitates comparison of financial information among companies.

Which item is classified as an operating activity on the statement of cash flows?

Payment of salaries

The involvement of accounting professionals and management in accounting scandals resulted in Congress passing the Sarbanes-Oxley Act. What is the purpose of the Sarbanes-Oxley Act?

Regulate auditors Prevent conflicts of interests Provide penalties for violators Require CEO accountability

Which of the following line items appear on an income statement?

Revenues Supplies expense

The legal authority to set accounting and reporting standards for companies whose securities are publicly traded lies with the

SEC

Which of the following line items appear on an income statement?

Service revenue Salaries expense Supplies expense

Which of the following appear(s) on the balance sheet?

Utilities payable Common stock Accounts receivable Assets Stockholders' equity Liabilities Accounts receivable Equipment Notes payableMany liabilities are referred to as

identify which of the following are included in the heading of the statement of stockholders' equity for Xoff, Inc.

Xoff, Inc. Statement of Stockholders' Equity The period of time covered by the statement

Who serves as an independent intermediary to help ensure that management has appropriately applied GAAP in preparing the financial statements?

auditors

The financial statement that reflects the accounting equation is referred to as the

balance sheet

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

corporate management

The balance sheet shows that a company's resources equal Blank______ claims to those resources.

creditors claims plus owners'

Stockholders' equity arises primarily from amounts invested by shareholders and amounts Blank______.

earned by the corporation

The financial statement that reports the company's revenues and expenses over an interval of time is the

income statement.

The statement used to predict future profitability and a company's future cash-generating ability is the

income statement.

Norton Corp. has revenues of $5,000 and expenses of $2,000. What is the total effect on retained earnings? Multiple choice question.

increases 3000

Accounts that include the term "payable" typically are classified as

liabilities

Who has the responsibility to apply accounting standards when communicating with investors and creditors?

management

in addition to the financial statements, which of the following must be included in the annual reports? Multiple select question.

management discussion and analysis. notes disclosures.

Which of these appears on both the income statement and the statement of stockholders' equity?

net income

The term "cooking the books" typically refers to the practice by some companies to

purposely provide misleading accounting information.

Which of the following is classified as an investing activity on the statement of cash flows? .

sale of land

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows

The accounting equation is: Assets = Liabilities +

stockholders equity

The purpose of an income statement is to:

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

Financial accounting should provide information that:

tells about economic resources, claims to resources, and changes in resources and claims helps to predict cash flows is useful to investors and creditors in making decisions

The amount of cash reported on the balance sheet is ______the ending cash balance reported on the statement of cash flows.

the same as

Retained earnings represents

the total net income earned over the life of the company that has not been distributed as dividends.

True or false: The statement of stockholders' equity indicates the changes in the various equity accounts.

true