ACTG 121

at December 31, Aloe, Inc.'s assets equal $8000 and stockholder's equity equals $5000. Liabilities must equal ________

$3000

expense recognition (matching) principle

requires that expenses be recognized in the same period as the related revenues

profits are earned by a company that have not been paid to stockholders at the end of accounting period are called __________ earnings

retained

which of the following is found on both the statement of retained earnings and the balance sheet

retained earnings

net income equals ___________

revenue minus expenses

revenues should be recognized when they are earned, not necessarily when cash is received

revenue recognition principle

earned by selling goods or services to customers

revenues

the financial reports of a business are assumed to include the results of only that business's activities

separate entity

the financial reports of a business include only the results of that business's activities

separate entity assumption

corporation

separate entity in both legal and accounting

a ledger is used to

show increase and decrease in individual accounts as well as ending balance

reports the accumulation of profits kept by the business during the current accounting period with that of prior periods

state of retained earnings

reports the operating, investing and financing activities effect on cash

statement of cash flows

which of the following financial statements cover a period of time rather than report amounts at a specific point in time

statement of cash flows income statement

the total amounts invested and reinvested in the business by its owners

stockholders equity

expenses are

the costs of doing business that are necessary to earn revenue

business activities that affect the basic accounting equation and are recorded in the accounting system are called ________________

transactions

deposits in __________ are added to the _____________ (bank/book) side of the bank reconciliation

transit, bank

measurement of information about a business in the monetary unity

unite of measure

a ________ system is a process for approving and documenting all purchases and payments made on account

voucher

Liberty, Inc., a US company, sold merchandise to Belle, a French company, for 10,000 euros. In Liberty's US financial statements, this sale should be reported in ______________.

US dollars

a transaction that involves an exchange of assets, liabilities and/or stockholder's equity between the company and someone else is called an __________ exchange

external

reporting revenues when cash is received and expenses only when cash is paid

cash basis of accounting

which of these would be reported in the financing activities section of the statement of cash flows? cash paid to reduce the principal borrowed from banks cash paid to buy computers cash dividends paid to stockholders cash paid to buy land cash borrowed from the bank

cash borrowed from the bank cash dividends paid to stockholders cash paid to reduce the principal borrowed from banks

which of the following would be included in the operating activity section of the statement of cash flows? -cash paid to purchase land -cash paid to employees -cash received from customers -cash paid to suppliers -cash paid to purchase a new office building

cash paid to employees cash received from customers

financial information that depicts the economic substance of business activities

faithful representation

The management of Acme, Inc. prepared a statement for Acme's external users that listed the company's assets, and stockholders' equity as for the last day of the year. This statement must be a(n) __________________.

financial statement

transactions with lenders (borrowing and repaying cash) and stockholders (selling company stock and paying dividends)

financing activities

FIFO

first in, first out method of inventory valuation first goods purchased are first goods sold

GAAP

generally accepted accounting principles

the underlying rules of accounting in the US are called ________________, _________________, _______________,

generally accepted accounting principles

an ______ system controls the amount paid to other by limiting the total amount of money available for making payments

imprest

fraud triangle

incentive, opportunity, rationalize

reports the financial performance of the business during the current accounting period

income statement

wages expenses appears on the

income statement

a financial statement heading states that it was prepared: "for the year ended December 31, 2015." What types of financial statements could this be? -income statement -statement of retained earnings -balance sheet -statement of cash flows

income statement statement of retained earnings statement of cash flows

retained earnings are _______________ 1. increased by net income 2. increased by dividends 3. equal to the company's cash balance 4. cash available to be paid to stockholders 5. decreased by dividends

increased by net income decreased by dividends

cash flows from __________ activities on the statement of cash flows reports the cash activity from the buying and selling of productive resources such as land, buildings, and equipment

investing

buying and selling productive resources with long lives

investing activities

operating activities

involve selling of goods and services to customers

the document that lists all the daily journal entries, but does not provide account balances is the

journal

which of the following are assets? supplies expense inventory equipment supplies wages payable land

land inventory equipment supplies

LIFO

last in, first out method of inventory valuation last goods purchased are first goods sold

the effect of journal entries on each account is summarized in the

ledger

the amounts owed by the business

liabilities

wages payable is a(n)

liability on the balance sheet

a chart of accounts is a ___________

list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named

financial statements ___________________ -may be prepared more than once a year -must have a calendar year end of December 31 -are prepared just once a year -may have a fiscal year end other than December 31

may be prepared more than once a year may have a fiscal year end other than dec 31

liabilities are _______________

measurable amounts that the company owes to creditors

the heading of an income statement should include:

name of business accounting period covered by the statement the title "income statement"

partnership

needs partnership agreement, two or more owners. better than sole proprietorship because more resources to pull from.

which line items appear on the statement of retained earnings?

net income, dividends, ending balance of retained earnings

are dividends on the income statement

no

is a trial balance the same as a balance sheet?

no

is common stock a liability account?

no, it is an equity account

dividends are ______________ amounts owed to creditors not an expense incurred to earn revenue company profits that are paid to stockholders a corporations asset required amounts owed to stockholders

not an expense incurred to earn revenue company profits that are paid to stockholders dividends are determined at the discretion of the company stockholders

sole proprietorship

one person, no legal maneuvers necessary , only business license. all gains or losses are taxable income, owner is personally liable for all debts

what is the order in which these appear on the statement of cash flows? cash flows from financing activities cash flows from operating activities cash flows from investing activities

operating investing financing

activities directly related to running the business to earn profit

operating activities

an incorporated business owned by two or more persons

partnership

which of the following issue stock to represent ownership?

private and public corporations

a company that sells shares of its stock privately and is not required to release its financial statements to the public

private company

a company that has it stock bought and sold by investors on established stock exchanges

public company

a feature of financial information that allows it to influence a decision

relevance

which of the following characteristics are needed in order for information to be useful? faithful representation relevance competitiveness internally reported

relevance faithful representation

when a check is presented to a bank for payment and the amount is deducted from the payer's account and the check is said to have __________ the bank

cleared

list the steps in the accounting cycle in chronological order

1. record journal entry 2. summarize in the ledger (T accounts) 3. prepare an unadjusted trail balance 4. adjust account 5. prepare financial statement 6. close books

the heading of a balance sheet might include....

1. the title "Balance Sheet" 2. At December 31, 2015 3. The name of the business

a current ratio that equals 2.0 suggest that a

company has the ability to pay its current liabilities and its current assets are larger than its current liabilities

an incorporated business that issues shares of stock as evidence of ownership

corporation

the ________ principle requires that assets and liabilities be recored at the amounts that were measurable at the time transactions occurred

cost

units of cost expense

(cost of good - sale price) x time used / life of good =

dividends 1) type 2) statement

1) Dividend 2) Statement of Retained Earnings

common stock 1) type 2) statement

1) Stockholders' Equity 2) Balance sheet

cash 1) type 2) statement

1) asset 2) balance sheet

equipment 1)type 2) statement

1) assets 2) balance sheet

long-term debt 1)type 2) statement

1) liability 2) balance sheet

accounts payable 1) type 2) statement

1) liability 2) balance sheet

sales revenue 1) type 2) statement

1) revenue 2) income statement

retained earnings, beginning of year 1) type 2) statement

1) stockholders' equity 2)statement of retained earnings

place the balance sheet line items in the proper order from top to bottom 1. Supplies 2. Common Stock 3. Equipment 4. Retained earnings 5. Accounts payable 6. Cash

1. Cash 2. Supplies 3. Equipment 4. Accounts payable 5. Common stock 6. Retained earnings

Ace Electronics had the following increases in the cash accounting during the month: $20,000 from owners for stocks $5000 from sales to customers $15000 borrowed from river bank Ace's revenue for the month was ___________________.

5000

excluded or included in inventory of the Knot, Inc. goods are being held by The Knot on consignment from Emerald Bridal

Excluded

goods in transit to Winston Wedding Consultants, sold by The Knot FOB shipping point

Excluded

financial accounting standards board

FASB

Goods in transit to The Knot, purchased by The Knot FOB shipping point

Included

securities and exchange commission

SEC

SOX

Sarbanes-Oxley Act, protects investors from fraud

a system that collects and processes financial information about an organization and reports that information to decision makers

accounting

_______ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together

accounts

individual expenses are accumulated in separate ________

accounts

reporting revenues when they are earned and expenses when they are incurred is called _________ basis accounting

accrual

deposits in transit are ______ on a bank reconciliation

added

in a bank reconciliation, interest revenue earned on the bank account balance is ______

added to the book balance

which of the following are possible effects on the accounting equation when recording a transaction that increases an asset by $100 stockholders equity account decreases by 100 stockholders equity account increases by 100 liability account decreases by 100 liability account increases by 100 an asset decreases by 100

an asset decreases by 100 stockholders equity account increase by 100 liability account increases by 100

a transaction may be recorded with an increase in an asset and a decrease in an

another asset

a decrease in liabilities also means a decrease in

assets

the resources owned by a business

assets

what is on a balance sheet?

assets, liabilities, stockholder's equity, retained earnings

reports the financial position of the business at a point in time

balance sheet

the prior period's ending balances become the next period's _____________ balances

beginning

NSF checks are the same as

bounced checks, not sufficient funds checks

adjusting entry to record depreciation on equipment

credit to accumulated depreciation debit to depreciation expense

entry to record income tax accrued, but unpaid at the end of the accounting period

credit to income tax payable debit to income tax expense

two sources of financing for a new business are

creditors stockholders

debits must always equal the

credits

currents assets divided by current liabilities is the ____________ ratio

current

list these in the proper order current assets stockholder's equity non-current assets non-current liabilities stockholder's equity

current assets non-current assets current liabilities non-current liabilities stockholder's equity

entry to record cash from customers in advance

debit cash credit unearned revenue

record prepaid rent expiration

debit rent expense

a net loss will

decrease retained earnings

the adjusting entry to record the supplies used during the period

decrease to supplies and increase to supplies expense

adjusting entry to record the amounts earned during the accounting period

decrease to unearned revenue account

outstanding checks written by the company should be a(n) _____ on the company's bank reconciliation

deduction

bank reconciliations are needed to reconcile for ____________

deposits in transit, outstanding checks

a _____ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employee's bank accounts

direct

profits earned by a company that are paid to stockholders are called _____________

dividends

control principles

document procedures, establish responsibility, independently verify, restrict access

following strong ___________ financial accounting practice is a key factor in business success and should result in good judgment in applying accounting principles for financial reporting purposes.

ethical

the costs of business necessary to earn revenues

expenses