ACCT 509

Accounting is the process of:

identifying, measuring, and communicating information about an organization for the purpose of making decisions and informed judgments.

Revenues, expenses, gains, and loses are reported on the _____ _____

income statement

Assets are _____ future economic benefits obtained or controlled by a particular entity as a result of _____ transactions or events.

probable, past

The consulting practices of several large auditing firms have been split off into separate entities in an effort to help achieve _____ in fact and appearance.

Independence

Income from operations:

Is a subtotal on the income statement that is not affected by the firm's tax rate or by amount of interest expense incurred. Is frequently called operating income Is frequently called earnings from operations

Financial Accounting:

Is not the sole source of information about an entity is a form of historical scorekeeping is measured in dollars may provide information that is helpful in assessing and entity's future prospects

Retained earnings:

Is reduced by any dividends paid to stockholders Is referred to as an accumulated deficit if cumulative losses and dividends exceed cumulative net income Is increased each year by the entity's net income Is the cumulative net income of the entity that has been retained for use in the business

Stockholders' Equity

Is sometimes referred to as net assets Is sometimes referred to as owners' equity Is sometimes referred to as net worth Is the equity in the assets that remain after subtracting the liabilities

Stockholders' Equity:

Is the equity in the assets that remain after subtracting the liabilities Is sometimes referred to as owners' equity Is sometimes referred to as net assets Is sometimes referred to as net worth

The financial position of an entity is reported at a _____ in time.

Point

Financial accounting generally refers to the:

Process that results in the preparation and reporting of financial statements for an entity.

The Financial Accounting Standards Board (FASB) Accounting Standards Codification:

Represents a single source of U.S. generally accepted accounting principles (GAAP) Became effective in July 2009. Superseded the FASB's SFAS series and other divergent sources of U.S. generally accepted accounting principles (GAAP). Made it easier to access and research authoritative accounting standards. Is updated with changes communicated through an Accounting Standards Update (Update or ASU).

Net sales:

Represents the amount of sales of merchandise to customers, less any sales returns.

Which of the following statements is incorrect regarding retained earnings?

Retained earnings is increased each year by the entity's net income and dividends.

A report by management on the effectiveness of the company's internal control over financial reporting is required for all Securities and Exchange Commission regulated companies under:

Section 404 of the Sarbanes-Oxley Act of 2002.

The statutory authority to establish accounting principles for companies whose securities are publicly traded in the United States rests with the:

Securities and Exchange Commission (SEC).

The statutory authority to establish accounting principles for companies whose securities are publicly traded in the United States rests with the _____ and _____ _____.

Securities, Exchange Commission

An unqualified, or, clean, independent auditor's opinion:

States that the named financial statements "present fairly, in all material respects" the financial position of the entity. Describes briefly the work that is involved in performing an audit. States that the named financial statements "present fairly, in all material respects" the entity's results of operations for the period. States that the auditor's work requires the application of generally accepted auditing standards (GAAS). States that it is the independent auditor's responsibility to express an opinion about the financial statements. Explains that the audit was conducted in accordance with the standards of the GAAP. States that the named financial statements "present fairly, in all material respects" the entity's cash flows for the period.

The four concepts/principles that relate to bookkeeping procedures and the accounting process are:

accounting period, matching, revenue recognition, and accrual

Stockholders' equity is the ownership right of the stockholders in the _____ that remain after subtracting the _____ of the corporation.

assets, liabilities

It is important to recognize that financial accounting information is developed at a _____ and that the _____ to the user of the information should exceed the cost of providing it.

cost, benefit

Assume that is the current year a company collected $70 in cash from a customer for services that were performed in a prior period. This transaction would be recorded in the horizontal model with:

+70 Cash and -70 Accounts Receivable in the Assets column

Luca Pacioli was:

A Franciscan monk A mathematics professor The author of "method of Venice" system

Identify the statement that is true about a balance sheet.

A balance sheet is generally prepared as of the end of a fiscal year.

Section 404 of the Sarbanes-Oxley Act of 2002 requires all SEC-regulated companies to include in their annual reports:

A report by management on the effectiveness of the company's internal control over financial reporting.

The process of identifying, measuring, and communicating an organization's economic information for the purpose of making decisions and informed judgments is called _____.

Accounting

Which of the following concepts/principles relate to the entire model?

Accounting equation Going concern Accounting entity

Which of the following statements is not true regarding accounts receivable?

Accounts receivable is recorded for the company's gross profit on credit sales.

Which of the following concepts/principles relate to bookkeeping procedures and the accounting process?

Accrual Matching Accounting period Revenue recognition

The balance sheet:

As of the end of one period is the balance sheet at the beginning of the next period.

The income statement reports all of the following account types except:

Assets

Which of the following statements are true about the assets of a firm?

Assets are probable future economic benefits to the firm The economic benefits associated with assets must be obtained or controlled by the firm Assets represent the amount of resources controlled by the firm Assets result from the past transactions or events of the firm

Which of the following statements are true about the assets of a firm?

Assets represent the amount of resources controlled by the firm Assets result from past transactions or events of the firm Assets are probable future economic benefits to the firm The economic benefits associated with assets must be obtained or controlled by the firm

The Sarabanes-Oxley Act of 2002 (SOX) now prohibits:

Auditing firms from performing a variety of non-auditing services for financial statement audit clients.

Financial accounting information is:

Based primarily on past transactions and events.

Under accrual accounting, year-end adjustments are made:

Because the cash disbursement for expenses may occur before or after the event that causes expense recognition. To ensure that revenues are recognized in the year in which they are earned.

The objectives of financial reporting for government-sponsored entities engaged in activities that are not unique to government should be similar to those of _____ enterprises.

Business

Accounting information is required:

By not-for-profit entities, such as hospitals and voluntary health and welfare organizations. By not-for-profit entities, such as trade associations and country clubs.

Tax practitioners:

Can develop specialization in the taxation of international tax law issues. Can develop specialization in the taxation of trusts and estates.

The Financial Accounting Standards Board (FASB) _____ reorganized divergent sources of U.S. generally accepted accounting principles (GAAP) in a more accessible and researchable format.

Codification

Which of the following statements is true regarding the statement of cash flows?

Depreciation expense is added back to net income in the operating activities section Cash received from the sale of long-term debt is a financing activity, and the activity is a source of cash Cash received from the sale of buildings or equipment is an investing activity, and the activity is a source of cash The increase in accounts payable for the year is a source of cash and is shown as an operating activity Net income from the income statement is the starting point for determining cash provided or used by operating activities Cash paid for the purchase of buildings or equipment is an investing activity, and the activity is a use of cash Cash received from the sale of common stock is a financing activity, and the activity is a source of cash

The statement of changes in stockholder's equity reports:

Dividends for the year Total stockholders' equity at the end of the year Net income for the year The year-end balance of retained earnings Common stock issued during the year

Financial reporting is:

Done for individual firms, or entities.

A primary objective of financial reporting is to provide timely information about a firm's _____ and cash flow.

Earnings

Which of the following types of accounts are reported on the income statement?

Expenses Revenues Gains Losses

Which of the following types of accounts are reported on the income statement?

Expenses Revenues Losses Gains

Financial reporting is primarily aimed at meeting the needs of:

External users of accounting information who do not otherwise have access to the firm's record.

The process that results in the preparation and reporting of financial statements for an entity is referred to as _____ accounting.

Financial

Financial statements present information about the entity's:

Financial Position - At a point in time Results of Operations - For a period of time The cash flow activities of an entity for some period of time.

Financial accounting when compared to managerial and cost accounting.

Has primarily an external orientation and are based primarily on past historical cost data.

Managerial accounting and cost accounting when compared to financial accounting:

Have primarily an internal orientation, and the data are more likely to be used in a future-oriented way.

The goal of the _____ (IASB/IASC/IFRS) is to develop a single set of high-quality, understandable, enforceable, and globally accepted financial reporting standards.

IASB

In 2001, the _____, which operates under the _____ Foundation, was formed in a restructuring effort and has since assumed the responsibilities of the _____, which was disbanded at that time.

IASB, IFRS, IASC

The _____ (IASB/IASC/IFRS) is an accounting standard issued by the _____ (IASB/IASC/IFRS).

IFRS IASB

Accounting is the process of _____, _____, and _____ economic information about an organization for the purpose of making decisions and informed judgements.

Identifying, measuring, and communicating

Which of the following statements are true about liabilities of a firm?

Liabilities are claims against the firm by its creditors Liabilities are present obligations to transfer assets or provide services to other organizations Liabilities are amounts owed to other entities Liabilities are probable future sacrifices of economic benefits Accounts payable is an example of liabilities

Which of the following statements are true about liabilities of a firm?

Liabilities are probable future sacrifices of economic benefits Accounts payable is an example of liabilities

Which of the following items is not considered a key element of ethical behavior for a professional accountant?

Maintaining profitability: to the greatest extent possible, ensure that the client's accounting records show a profit.

Which of the following items are normally included as key components of a corporation's annual report?

Management's discussion and analysis of the financial statements Highlights for the year, including net revenues, diluted earnings per share, and return of stockholders' equity The reporting firm's financial statements for the year The report of the external auditor's examination of the financial statements The notes to the financial statements A five-year (or longer) summary of key financial data

An internal auditor:

May be responsible for analyzing the operating efficiency of one of the company's divisions. In some cases performs functions much like those performed by an independent (external) auditor, but perhaps on a smaller scale.

The first known text to describe a comprehensive double -entry bookkeeping system was called the:

Method of Venice system

Accounting information is required by governmental units at which of the following levels

Municipal State Federal

Which of the following statements are not true about net sales?

Net sales is the difference between gross profit and cost of goods sold Net sales includes only credit sales, not cash sales.

Which of the following concepts/principles relate to transactions?

Objectivity Cost principle Unit of measurement

The two main components reported on the statement of changes in stockholders' equity are:

Paid-in capital and retained earnings

The cash flow activities for an entity are reported for a ______ of time.

Period

The results of operations for an entity are reported for a _____ of time.

Period

Identify the correct statement about the role of an internal auditor

The qualifications of an internal auditor are similar to those of any other professional accountant.

A corporation's annual report contains the reporting firm's financial statements and each of the following key components, except:

The reporting firm's operating budget for the next fiscal year.

One of the objectives of financial reporting is:

To provide timely information about a firm's earnings and cash flow.

True or False: The growing complexity of federal, state, municipal, and foreign income tax laws has led to a demand for professional accountants who are specialists in various aspects of taxation.

True

The three concepts/principles that relate to transactions are:

Unit of measurement, cost principle, and objectivity