Accounting Unit 1
Which of the following statements are true about the balance sheet
-It is sometimes called the statement of financial position. -It reports the economic resources and claims on those resources. -It reports the assets, liabilities and stockholders' equity at a point in time.
The statement of retained earnings reports the amount
-of earnings distributed to the company's owners during the accounting period -of earnings kept by the company
Businesses earn profits by ______
-providing service or selling goods at more than the cost to provide the service or deliver the goods -having revenues greater than expenses
The heading of an income statement should include ______
-the accounting period covered by the statement -the title "Income Statement" -the name of the business
True or False. The accounting equation is Assets = Liabilities + Stockholders' Equity.
True (stockholders equity is the same as owners equity)
Creditors want to see that a company that owes them money has
assets that are greater than its liabilities
A classified balance sheet shows subtotals for current ___ and ____
assets, liabilities
What are the primary ways in which a business may be organzied
corporation, partnership, sole proprietorship
A company purchased supplies and promised to pay $200 for them next month. The increase in Accounts Payable would be recorded with a ______.
credit
A company made a $1,000 payment on its $100,000, 20-year mortgage. The decrease in liabilities would be recorded with a Blank______ to Notes Payable. Multiple choice question.
debit
A company paid $500 for supplies that it purchased last month. The decrease in liabilities would be recorded with a ___ to accounts payable
debit
Assets have a normal_____ balance
debit
A net loss will ______
decrease retained earnings
Retained earnings are ______.
decreased by dividends increased by net income
The underlying rules of accounting in the US are called _____ principles
generally accepted accounting
The underlying rules of accounting in the US are called
generally accepted accounting principles (GAAP)
The duality of effects refers to the fact that each transaction ______
has at least two effects on the basic accounting equation
All transactions ______.
have at least two effects on the accounting equation affect assets, liabilities, and/or stockholders' equity
Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholders' equity are called ____ events
internal
The main reason companies exist is to maximize their
owners wealth, profit
The statement of retained earnings reports the ______
profits that have accumulated in the company over time
Select all of the line-items found on a statement of retained earnings for the month ended September 30
Add: Net Income Retained Earnings, September 30 Subtract: Dividends Retained Earnings, September 1
True or False. When a company issues common stock, it gives cash to its owners in exchange for stock.
False
What is the order of an Income statement
- Name of Company -Income Statement - For the year of ended...
Place the single-step income statement items in the proper order from top to bottom.
1) Revenues 2) Expenses 3) Net Income
Which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100?
A stockholders' equity account decreases by $100 An asset increases by $100
Which of the following is the basic accounting equation?
Assets = Liabilities + Stockholders' Equity (owners equity)
Which transactions are recorded in the accounting system?
Both external exchanges and internal events
Which group is responsible for creating the US GAAP?
Financial Accounting Standards Board (FASB)
Which of the following are assets?
Land Cash Equipment
Which line items appear on the statement of retained earnings?
Net Income Dividends ending balance of Retained Earnings beginning balance of retained earnings
What is the effect on total stockholders' equity when a company purchases a cash register for a cash payment of $1,200?
No effect
A single-step income statement includes which of the following?
Revenues Net Income Expenses
Company X issued $10,000 of common stock to its owners for cash. It recorded the transaction by increasing assets and increasing liabilities. Which of the following statements are correct?
Stockholders' equity will be too low. Liabilities will be too high.
A transaction may be recorded with an increase in an asset and a decrease in a(n) ______.
another asset
The purpose of the balance sheet is to report the amount of ______
assets, liabilities, and stockholders' equity at a specific point in time
What does a business typically receive when it issues stock to owners?
cash
The issuance of common stock is recorded with a debit to ______ and a credit to ______
cash, common stock
The 4 financial statements consist of the _____ statement, the statement of _____ earnings, the _____ sheet, and the statement of _____ flows
income, retained, balance, cash
A debit to Cash and a credit to Common Stock is recorded when a company:
incorporates and its owners contribute cash.
What is the effect on total assets when a company purchases land for a cash payment of $10,000?
no effect
The statement of retained earnings is
one of the 4 financial statements
The Mortgage Payable account is increased with an entry on the ____ side of the T-account.
right (credit)
A corporation earns profits for its stockholders by
selling goods at more than their cost providing services at more than cost
A classified balance sheet ______.
shows subtotals for current assets and current liabilities
a ______ _____ income statement reports a single measure of income. It reports the difference between total revenues and total expenses
single step
A company purchased a new cash register in exchange for a cash payment of $1,200. The company recorded only an increase of $1,200 in the Equipment account. No entry was made to the Cash account. As a result, ______.
the accounting equation is not in balance total assets are too high
An income statement is referred to as a single-step income statement because
the format separates total revenues from expenses and reports a single measure of income
Business activities that affect the basic accounting equation and are recorded in the accounting system are called
transactions