Accounting test 1

Management discussion and analysis and note disclosures to the financial statements are included in the

10K or annual report

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

Statement of Cash Flows

Change in cash as a result of operating, investing, and financing activities

statement of stockholders' equity

Change in owners' claims to resources

The last step for analyzing the effect of transactions is:

Confirm that assets are equal to liabilities plus stockholders' equity

True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

False

Cash Basis Accounting

Reporting income when the cash is received and expenses when the cash is paid.

What is the purpose of the auditor?

To add credibility to the financial statements.

When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?

accounts receivable

_______occur when the cash flow occurs after either the expense is incurred or the revenue is earned.

accruals

Liabilities

amount owed

Adjusting entries ensure that Blank______ balances are reported at amounts representing the economic benefits that remain at the end of the period.

asset

Ending retained earnings is calculated as

beginning retained earnings + net income - dividends

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

cash receipts and cash disbursements during a period.

The type of information included in an account includes

columns for debits and credits. and the account title.

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

corporate management

expenses

costs of selling products or services

Prepaid expenses should be Blank______ by the cost of the asset used during the accounting period.

decreased

Dividends

distributions to stockholders

The two sources of stockholders' equity are amounts

earned by the corporation and paid in from shareholders

Adjusting entries help to ensure that all Blank______ are recorded in the period in which they are incurred.

expenses

_______transaction involves an exchange between the company and a separate economic entity.

external

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

false

Which of the following contains a list of transactions affecting each account and the account's balance?

general ledger

Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses:

in the same period as related revenue.

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

income statement

An increase in revenues increases

net income

Stockholders' Equity

owners' claims to resources

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as

posting

Income Statement

profitability of the company

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

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

purposely provide misleading accounting information.

Accural Basis Accounting

reporting income when it is earned and expenses when they are incurred

balance sheet

resources equal creditors' and owners' claims to those resources

Assets

resources of a company

_________recognition principle, companies record revenue at the time goods are provided to customers.

revenue

Revenues

sales of products or services