BA 211 Ch 1 smartbook

Which items are found on an income statement?

Revenues Expenses

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

Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as

Assets - Liabilities.

The four financial statements published to provide information to external users include which of the following?

Balance Sheet Statement of Cash Flows Statement of Stockholders' Equity Income Statement

If investors or lenders were interested in the amount of debt a company currently has, which financial statement would they need?

Balance sheet

Which of the following are financial statements? (Select all that apply.)

Balance sheet Statement of stockholders' equity Income statement

Which of the following appear on the statement of stockholders' equity? (Select all that apply.)

Dividends Net income Beginning balance of retained earnings

Which of these would be found on a company's balance sheet? (Select all that apply.)

Equipment Notes payable Accounts receivable

Which of the following items are assets? (Select all that apply.)

Equipment Supplies

True or false: The fundamental activities of a business are selling activities and marketing activities.

False

Which financial statement reports revenues and expenses?

Income statement

Norton Corp. has revenues of $5,000 and expenses of $2,000. What is the total effect on retained earnings?

Increases $3,000

- activities involve the buying and selling of land, buildings, and equipment used in the business. (Enter one word per blank)

Investing

Darnell, Inc.'s balance sheet indicated that the cash account increased by $5,400 during the past year. The company generated a positive cash flow from operating activities of $14,000 and a negative cash flow from investing activities of $6,100. What was the cash flow effect of the company's financing activities?

Negative cash flow of $2,500 Reason: $14,000 - $6,100 + x = $5,400 The sum of the operating, investing, plus financing activities equals the change in cash.

Which of these appears on both the income statement and the statement of stockholders' equity?

Net income

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

Operating activities Financing activities Investing activities

Identify the three most common forms of business organization.

Partnership Sole proprietorship Corporation

Which of the following is an investing activity?

Paying cash to buy equipment

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?

Sale of land

True or false: The accounting equation is: Assets = Liabilities + Stockholders' equity.

True

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as -. (Enter one word per blank)

accounting

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

cash receipts and cash disbursements during a period.

The primary functions of accounting are to:

communicate information to decision makers. measure a company's activities.

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

expense; income statement

A(n) ______ is a cost of doing business that is necessary to produce ___.

expense; revenue

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

income statement.

In our society, the two main functions of accounting are to

measure business activities. communicate information to investors and creditors.

Revenues minus expenses equals

net income.

When expenses are greater than revenues, it is referred to as

net loss.

Profits earned by a company that have not been paid to stockholders are called - earnings. (Enter only one word.)

retained

Undistributed profits that have accumulated in the company over time are called - earnings. (Enter only one word.)

retained

Revenues are:

sales of goods or services to customers

Expenses are:

the costs of doing business that are necessary to produce revenue

Robert Lending Company is considering granting a large loan to Flora Inc. Robert's policy is to lend money only to companies with a relatively small amount of currently outstanding debt. Prior to making a decision, Robert Lending Company should examine which of Flora's financial statement?

Balance sheet

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

Which of the following items are reported on the balance sheet as liabilities? (Select all that apply.)

Notes payable Wages and salaries payable

- activities involve purchasing goods from suppliers, designing and manufacturing products, and selling products to customers. (Enter only one word.)

Operating

Which financial statement shows the changes in common stock and retained earnings?

Statement of stockholders' equity

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

True

A(n) - is a resource, such as cash, land, or buildings, that is owned by a company.

asset

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

income statement

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

income statement

The financial statement that summarizes revenues and expenses for a period of time is the --. (One word per blank)

income statement

Revenues will ______ retained earnings, and expenses will ______ retained earnings.

increase; decrease

The objective of financial accounting is to:

provide useful information for external decision makers

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows.

Which of the following items is a financing activity on the statement of cash flows?

Issue stock

Which of the following are operating activities?

Providing services to customers Paying salaries to employees Paying advertising expenses

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

Retained earnings

- is the amount recorded as a result of the sale of products or services to customers. (Enter only one word.)

Revenue

A company owns an economic resource that will provide it with future benefits. This economic resource is

an asset.

The financial statement that displays a firm's financial position on a particular date is the --. (Enter one word per blank)

balance sheet

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

creditors claims plus owners'

A net loss ______ retained earnings.

decreases

The three classifications on the statement of cash flows are cash flows from (Select all that apply.)

financing activities. investing activities. operating activities.

Borrowing from a bank is a(n)

financing activity.

Selling stock to an investor is a(n)

financing activity.

The income statement is considered most useful for predicting

future profitability.

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

income statement.

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

income statement.

A company reports a net loss if its revenues are - than its expenses. (Enter only one word.)

less

The Hill Company's statement of cash flows contained the following: net cash provided by operating activities of $42,500; net cash used by investing activities of $29,300; and net cash provided by financing activities of $15,000. Hill Company's cash increased by

$28,200 Reason: $42,500 (inflow) - 29,000 (outflow) + 15,000 (inflow) = $28,200 increase in cash

Financial accounting should provide information that: (Select all that apply.)

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

Which of the following items are classified as financing activities on the statement of cash flows? (Select all that apply.)

issue stock pay dividend

The statement of cash flows classifies items as

operating, investing, and financing.

The two sources of stockholders' equity are amounts ______.

paid in from shareholders earned by the corporation

Stockholders' equity is

the owners' claims to resources of the corporation.

Amounts owed to creditors are

liabilities.

Any amount owed to a creditor is classified in the balance sheet as a/an -. (Enter one word per blank)

liability

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

stockholders' equity.

The purpose of an income statement is to:

summarize the profit-generating activities that occurred during a particular reporting period