Chapter 1

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

retained earnings

Net income increases when

Revenues are greater than expenses The company incurs expenses that are less than the price of goods or services sold to its customers

Which of the following statements are true about the balance sheet?

-it reports the assets, liabilities, and stockholders' equity at a point in time -it is sometimes called the statement of financial position -it reports the economic resources and claims on those resources

A company started the month with $1,000 of Retained Earnings. During the month, it had Revenue of $5,000 and Expenses of $4,500. It also distributed a Dividend of $100 among its stockholders. The company's Retained Earnings at the end of the period equals $ ______

1,400

Over Armour, Inc., made shirts at a cost of $6 Per shirt. It's sold five shirts to its customers for A price of $10 per shirt total revenue equals $_____ and the expense equals $_____

50 , 30

Which of the following are true about an accounting system

Its purpose is to analyze, record, and summarize business activities. It captures information about the business and finalizing activities of a company

_____ Are measurable amounts that the company owes the creditors

Liabilities or liability

_____are measurable amounts that the company owes to creditors.

Liabilities or liability

______ accounting reports include Detailed financial reports about the companies operating performance that are continuously updated and used by internal users(employees) ______Accounting reports are prepared periodically to provide information to external users

Managerial and Financial

Liabilities are

Measurable amounts that the company owes to creditors

Select all of the true statements about net income and net loss

Net income increases retained earnings Net income equals revenues minus expenses Net losses decrease retained earnings When revenues are less than expenses a net loss exist

Which of the following accounts are liabilities? (Check all that apply.)

Note Payable Taxes Payable Wages Payable Accounts Payable

The_____to the financial statements help users understand how financial statement amounts were derived and includes other information that may affect the users' decision

Notes or Footnotes

The_____to the financial statements help users understand how financial statement amounts were derived and includes other information that may affect the users' decisions.

Notes or Footnotes

Mauricio, The Pizza owner of Pizza Aroma, spent $2500 of his own money to take his family to Disney World. Pizza Aroma's financial statements will report.

Nothing about this trip

An amount owed to a supplier for prior purchases on account is an Account ____ which is an ____

Payable liability

An amount owed to a supplier for a prior purchases on account is an account _____ which a _____ Account

Payable, liability

Mauricio, the owner of Pizza Aroma inc, arranged for the business to borrow $25,000 from Riverbank which entity should show the liability on its Balance sheet

Pizza Aroma

Which type of accounting is hired by a business as an employee and provides accounting services for that particular business

Private accountant

Which type of accounting is contracted by a variety of different companies for advice and other services

Public accountant

Accounts______ is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit. (Enter one word per blank.)

Receivable

Which of the following characteristics are needed in order for financial information to be useful

Relevance Faithful representation

Profits owned by a company that have not been paid to stockholders at the end of an accounting. Are called ___ earnings

Retained

Place the single-step income statement items in the proper order from top to bottom.

Revenues Expenses Net Income

Net income equals total ______ minus total _____

Revenues - Expenses

Identify the primary ways in which a business maybe organize

So proprietorship, Partnership and corporation

Through common forms of business organization include

Sole proprietorship, Corporation and partnership

Cash Flows Provided by ______ activities on the statement of cash flows reports the cash activity with stockholders and creditors such as banks.

financing

Paying a cash dividend to stockholders is a(n)

financing activity

How is accounting knowledge beneficial to different business majors? Accounting knowledge helps

in setting prices by brand managers to assess the value of investing options by investment analysts to determine supply chain options to forecast revenue by financial analysts

Notes to the financial statements _____

include other information that may affect users' decisions. help users to understand how the financial statement amounts were derived

Which financial statement reports revenues and expenses?

income statement

When a company earns net income, its retained earnings ____

increase

Retained earnings are

increased by net income decreased by dividends

When a company obtains financing by issuing shares that are traded on a stock exchange it is called _____ offering, or IPO,

initial public

Which of the following are the main groups of external users of financial statements

investors, creditors, government

An initial public offering, IPO, is when a company:

issues shares that are traded on a stock exchange

A company might report negative Cash Flows used by Financing Activities when

it has paid a large cash dividend to its stockholders

Which of these appears on both the income statement and the statement of retained earnings?

net income

Which of the following represents the written promise to repay a bank?

notes payable

If an external user of financial statements wants to know how amounts were derived, it would look at the

notes to the financial statements

Financial statements can be prepared on a monthly basis ______

on a monthly basis on a quarterly basis on a fiscal year basis

Net Income is reported

on both the income statement and statement of retained earnings

The statement of retained earnings is:

one of the 4 financial statements

The______activities section on the statement of cash flows reports the activities directly related to running the business to earn profit.

operating

An asset is an amount ______, while a liability is an amount ______.

owned; owed

Operating activities include the ______

payment of wages

The main reason companies exist is to maximize their

profits and owners wealth

The statement of retained earnings reports the

profits that have accumulated in the company over time

A(n) ___ accountant is contracted to provide advice to a variety of businesses whereas a(n) ___ accountant works as an employee for one business.

public private or you can also put managerial

The unit-of-measure assumption states that

results of business activities should be reported in an appropriate monetary unit

Which of these appears on both the statement of retained earnings and the balance sheet?

retained earnings

Which of the following cause Retained Earnings to increase?

revenues greater than expenses net income selling goods or services at a price higher than the costs incurred to operate business

A financial statement heading states that it was prepared: "For the Year Ended December 31, 2020." What types of financial statements could this be?

statement of cash flows statement of retained earnings income statement

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

statement of retained earnings

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

The heading of an income statement should include

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

The amount of cash reported on the balance sheet is ___ the ending cash balance reported on the statement of cash flows

the same as

The primary goal of most companies is to

to make a profit

Accounts are:

used to accumulate and report the effects of each different business activity

Creditors want to see that a company that owes them money has ______.

assets that are greater than its liabilities

A balance sheet shows

assets, liabilities, and stockholders' equity at a single point in time

A company's profits ____

- equal revenues minus expenses - Are called net income - Belong to the owners

Ace Electronics paid $4,000 of the $5,000 its employees had earned during the period. Ace Electronics should report Wages Expense of $5,000 on the income statement and Wages Payable of ____ on the balance sheet prepared in accordance with generally accepted accounting principles.

$1,000

At December 31, Equate, Inc.'s assets equal $50,000 and liabilities equal $30,000. Stockholders' equity must equal

$20,000

Axis Company just bought a piece of land for $25,000. What a deal! The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of ______.

$25,000

Ace Electronics bought equipment for $4,000. Normally the equipment would have cost $4,500, but the supplier gave Ace a special discount. Ace's balance sheet should report equipment of

$4000

Shirts Inc. made shirts at a cost of seven dollars per shirt and so turn shirts to its customers for $10 each. Shirts should Record a total of ______ As an expense for the cost of the goods sold

70

Which of the are true about the income statement?

A dollar sign appears only at the top and bottom of the column of numbers. Net Income has a double underline. Revenues are listed before expenses. Each major caption has an underlined subtotal, such as Total Expenses.

Alpha sold $2,000 of merchandise to Beta on credit. Beta promised to pay for it next month. Alpha report a $2,000

Account Receivable

Distinguish between receivables and payables by selecting the correct statements.

Accounts Payable is a liability and reports the amount of cash to be paid in the future for purchase made on account. Accounts Receivable is an asset and reports the amount of cash to be received in the future for sales made on account.

Pizza Aroma delivered $500 of pizzas to the local high school, but hasn't received payment yet. Pizza Aroma will report ______.

Accounts Receivable of $500

When a company is owed for sales made to customers on credit, the asset called:

Accounts Receivable will be reported on the balance sheet

Ace electronics received $200 of copy paper from its supplier and promise to pay for it next month. Ace should report

Accounts payable of 200 on its balance sheet

It company profits

Are called net income Equal revenues minus expenses Belong to the company's owners

Which of the following is the basic accounting equation

Assets = Liabilities + stockholders Equity

Which of the following are ways of expressing the basic accounting equation

Assets = liability + stockholders equity Assets - Stockholders equity = liabilities Assets - liabilities = stockholders equity

The main goal of an accounting system is two

Capture information about a business so that it can be reported to decision makers

Which of the following would be included in the operating activity section of the statement

Cash paid to suppliers Cash paid to employees Cash received from customers

A positive cash flow under Cash from Financing Activities is a result of which of the following?

Cash received from owners for company stock Cash received on loan from bank

And owner gives $5000 to his company in exchange for stock this will increase the companies

Cash, Common stock, total stockholders equity

Maricio invested $3000 in Pizza Aroma in exchange for its stock. Aroma now has a balance and it's ____ Account

Common stock

Paid in capital is called ______

Common stock

Which of the following represents the amount of owners claim that the owners contribute directly to the company

Common stock paid in capital

It owner gives $5000 cash to his company in exchange for stock this will increase the companies

Common stock, total stockholders equity and cash

Click and drPlace the following in order (top down) of how they would appear in the heading of Deli Llama's annual income statement for the fiscal year ended March 31. 2020.

Deli Llama, Inc. Income Statement For the year ended March 31, 2020

Which of the Following causes between earnings to decrease

Dividends and Expenses

Revenues are

Earned by selling goods or services to Customers

Which of the following represents owners claims on profits the company and for them business operations

Earned capital Retained earnings

An asset is defined as a

Economic resource expected to benefit the company in the future

Managerial Accounting Reports are used by the companies

Employees

A single-step income statement includes which of the following

Expenses Revenues Net Income

Which of the following characteristics are needed in order for financial information to be useful?

Faithful representation Relevance

True or false: Dividends are expenses that decrease net income

False

True or false: Financial statements must have a year end of December

False

True or false: Net income equals the net amount of cash collected during the accounting period

False

True or false: The order of the heading of an income statement indicates the name of the statement first, the period of time covered, and the name of the company third.

False

True or false: The order of the heading of an income statement indicates the name of the stateme the period of time covered, and the name of the company third.

False

Which group is responsible for creating the US GAAP?

Financial Accounting Standards Board (FASB)

The underlying rules of accounting in the US are called

Generally Accepted Accounting Principles (GAAP)

Businesses earn profit by

Having revenue is greater than expenses Providing services or Selling goods at more than the cost to provide the service or deliver the goods

Which of the following are external users of the company's financial statements

Stockholders, Creditors and securities and exchange commission (SEC)

Which of the following are expenses

Supplies expense And wages expense

The separation entity assumption assumes

The financial reports of the business include only the results of the business activity

The heading of a balance sheet should include which of the following? (Check all that apply.)

The title "Balance Sheet" At December 31, 2020 The name of the business

Which of the following are true of financial statements?

They may have a fiscal year end other than December 31. They may be prepared more than once a year.

True or false: A fiscal year can end on a date other than December 31. A calendar year ends on December 31.

True

True or false: Creditors would like a company that owes them money to have a large positive cash flow from operating activities.

True Cash flow from operating activities can be used to repay loans

The unit of measure concept is the idea that a company should report its financial results on its financial statements using ______.

a single monetary unit, such as the US dollar

______ is referred to as the language of business because it is such a key part of business and its terms are typically used in discussing business ______

accounting

Individual expenses are accumulated in separate _____

accounts

The balance sheet balances when

assets equal liabilities plus stockholders equity

Which financial statement reports the financial position of the business at a point in time?

balance sheet

Cash is reported on which of the following financial statements?

balance sheet and statement of cash flows

Cash Flows from (used in) Investing Activities on the statement of cash flows reports the cash activity from the

buying and selling of equipment

Which of these would be reported as Cash Flows from (used in) Investing Activities?

cash paid to build a new corporate headquarters cash paid to buy equipment

Place the balance sheet line items in the proper order from top to bottom.

cash, supplies, equipment, accounts payable, common stock, retained earnings

Financial information is enhanced when it is

comparable verifiable understandable timely

Net losses cause retained earnings to _______.

decrease

A net loss will

decrease retained earnings

Retained ____ Represents the capital earned by the company

earnings

Which line item appear on the statement retained earnings

ending balance of Retained Earnings Net Income Dividends

Which of the following are assets

equipment, cash, land and Supplies

The order in which liabilities are reported on the balance sheet is based on when the liability is ______.

expected to be paid or settled