ACCT 201_Smartbook 1

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

IASB

Which of the following aspects relate to the information provided in an income statement?

Ability to earn a profit from its operations during the current period

Which of the following are attributes of FASB?

Independence Private sector organization Full-time board members

The organization that develops global accounting standards is the

International Accounting Standards Board.

Sandra Inc. purchases new waste paper baskets for its offices and reports the related cost as an expense. This practice is

acceptable because the related amount is immaterial.

retained earnings

all net income - all dividends

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

balance sheet

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

income statement

whats the purpose of an income statement ?

report the profit-generating activities of the firm during a period of time.

Retained earnings represents

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

refers to information being available to users early enough to allow them to use it in the decision process.

timely

If the SEC does not agree with a standard issued by the private sector, it can

force a change in the standard

whereas when revenues are less than expenses, a company has a net

loss

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

true

Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?

$20,000 + $5,000 + $10,000 - $4,000 = $31,000.

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

33,000

Milton Corp. has beginning retained earnings of $800. During the year Milton had $2,000 of revenues and $900 in expenses. Milton paid a dividend of $100. What is retained earnings at year-end?

Beginning balance $800 + $2,000 revenues - $900 expenses - $100 dividend = $1,800 retained earnings at year-end.

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

Collection on account receivable

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

Common stock Accounts receivable Utilities payable

predictive value

Consistently increasing income helps forecast the company's ability to generate future cash. Consistently increasing income helps forecast the company's ability to generate future cash.

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

Corporate management

is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.

FASB

The income statement is considered most useful for predicting

Future profitability

Generally accepted accounting principles are abbreviated as

GAAP

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.

Which of the following is an important purpose of GAAP?

It facilitates comparison of financial information among companies.

In financial accounting which of the following are the three types of business activities of a company?

Operating, Investing, and Financing Activities

is the amount recorded as a result of the sale of products or services to customers.

Revenue

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

The heading of an income statement should include which of the following?

The name of the business The title of the financial statement The accounting period covered by the statement

The heading on the Statement of Stockholders' Equity includes which one of the following?

The period of time covered

True or false: The fact that all companies use the same accounting rules allows financial statement users to make meaningful comparisons among companies.

True

What is contained in the FASB conceptual framework?

Underlying concepts of accounting

Accounting professionals:

are in high demand

An_ is a resource such as cash,land, or buildings, that is owned by a company

assets

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

balance sheet

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.

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

common stock

An enhancing qualitative characteristic of accounting information that refers to the financial statement users' ability to utilize accounting information to differentiate between companies that are reporting similar events is

comparability.

The qualitative characteristic of using the same accounting method each period over time refers to the concept of

consistency

indicates that financial accounting information is provided only when the benefits of doing so exceed the costs.

cost constraint

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

creditors claims plus owners'

The main priority in the hierarchy of qualitative characteristics of financial reporting information is

decision usefulness.

net loss _____ retained earnings

decreases

The purpose of the International Accounting Standards Board is to

develop global accounting standards converge national standards with IFRS

The purpose of the International Accounting Standards Board is to:

develop global accounting standards converge national standards with IFRS

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

earned by the corporation

The purpose of a conceptual framework in accounting is to

establish objectives and fundamental concepts on which to base rules.

is a term that refers to a code or moral system that provides criteria for evaluating right or wrong

ethics

For information to be cost effective, the perceived benefit of increased decision usefulness must

exceed the anticipated costs of providing that information.

When revenues are greater than expenses, a company has net

income

Information that best explains companies' stock price performance is reported on the

income statement

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

management

If revenues are less than expenses, a company has

net loss

Confirmatory Value

positive income is consistent with effectiveness of management

The objective of financial accounting is to:

provide useful information for external decision makers

For a corporation, the owners' claims to the resources of a company are called

stockholders equity

Dividends paid to shareholders is on which financial statement?

Statement of Shareholders' Equity

Which of the following knowledge and skills should an accounting professional possess?

Technical accounting knowledge Presentation skills Leadership skills Ability to work in teams

Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.

expense; income statement

True or false: Dividends paid to shareholders are recorded on the income statement as an expense.

false

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

false

The 1933 Securities Act and the 1934 Securities Exchange Act were designed to restore investors' confidence in

financial accounting

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

income statement

The financial statement that summarizes revenues and expenses for a period of time is the

income statement

The 1933 and 1934 SEC Acts were designed to restore

investor confidence in financial accounting.

Financial accounting should provide information that

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

liabilities

represent amounts owed to creditors

assets

resources of a company

Which of the following is the accounting equation?

Assets = Liabilities + stockholders/Owner's Equity

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

annual report

The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the

income statement.

In addition to the financial statements, which of the following must be included in the annual reports?

notes disclosures. management discussion and analysis.

Stockholders' equity is

owners' claims to resources of the corporation

many liablities are refered to as _ to indicate that amounts must be paid

payables

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

payment of salaries

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

purchase of land

The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of

relevance and faithful representation.

Stockholders' Equity

represents the owners' claims against the assets of a corporation after all liabilities have been deducted

Which of the following represents the net income earned by a corporation and not yet paid to shareholders?

retained earnings

Which of the following items are found on a balance sheet?

Liabilities Stockholders' equity Assets

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

Net income Beginning balance of retained earnings Dividends

Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?

Neutrality

Predictive value and confirmatory value are components of which fundamental qualitative characteristic?

Relevance

The FASB's objectives for financial accounting include which of the following?

Report on economic resources Help predict cash flows Provide useful information to investors and creditors