SB CH 2

The matching concept means that:

expenses incurred to generate revenues must be matched earned for any given period

An entity's earnings for a reporting period are reported on line:

income statement

The entity's earnings for a reporting period are reported on the:

income statement

The investments by and distributions to owners during a reporting period are are reported on the:

statement of stockholders' equity

The four concepts/principles that relate to the financial statement are:

1. consistency 2. full disclosure 3. materiality 4. conservatism

Identify the information that the current generally accepted accounting principles and auditing standards require the financial statements of an entity to show for the reporting period. 1. Earning for the period 2. market value of the entity's net assets 3. Investments by and distributions to owners (ex: stockholders) during the period. 4. budget versus actual comparisons of key balance sheet and income statement accounts 5. cash flows during the period 6. Financial position at the end of the period 7. Number of people employed by the entity

1,3,5,6

Which of the following statements are true regarding the matching concept? 1. Cash inflows and cash outflows are matched to the period in which revenues are earned 2. Revenues and expenses for the period must be equal 3. Revenues are recorded in the period in which they are earned 4. Expenses are recorded in the period in which they are incurred.

3,4

A balance sheet equation: 1. can be expressed as A = L + SE 2. Can be expressed as R - E = NI 3. is another term for the accounting equation 4. must remain in balance after each transaction is recorded 5. can be expressed as A + L = SE

1, 3, 4

Which of the following items are normally included as key components of a corporation's annual report? 1. The report of the external auditor's examination of the financial statements 2. A five-year (or longer) summary of key financial data 3. The notes to the financial statements 4. A corporate structure chart showing line and staff reporting responsibilities of all key personnel employed by the reporting firm. 5. The reporting firm's operating budget for the next fiscal year.

1,2,3

______ ________ refers to entity for which the financial statements are being prepared

Accounting entity

________ __________ refers to the entity for which the financial statements are being prepared

Accounting entity

Which concept/principle supports the fact that assets such as land, building, and equipment are not reported at their fair values?

cost principle

The balance sheet is sometimes called...

statement of financial position

If the total assets is equal to $10,000 and the total stockholders' equity is equal to $3000 then:

the total liability is equal t o$7000

If the total assets is equal to $15,000 and the total liabilities is equal to 9,000, then:

the total stockholders' equity is equal to $6,000

The balance sheet equations: 1. must remain in balance after each transaction is recorded. 2. can be expressed as A+L +SE 3. is another term for the accounting equation 4. can be expressed as R-E=NI 5. can be expressed as A + L = SE

1, 2, 3

Financial statements the show a column for the current year and the prior year are known as ______ financial statements.

comparative

Most assets are not recorded at their current market values because of the limitations imposed by the _____ principle

cost

Which of the following items are normally included as key components of a corporation's annual report? 1. A corporate structure chart showing line and staff reporting responsibilities of all key personnel employed by the reporting firm 2. The report of the external auditor's examination of the financial statements 3. A five-year (or longer) summary of key financial data 4. The notes to the financial statements 5. The reporting firm's operating budget for the next fiscal year

2, 3, 4

Identify the information that the current Generally Accepted Accounting Principles and Auditing Standards require the financial statements of an entity to show for the reporting period: 1. Budgeting vs actual comparisons of key balance sheet and income statement accounts 2. Market value of the entity's net assets 3. Number of people employed by the entity 4. Investments by and distribution to owners (ex: stockholders) during the period 5. Financial Position at the end of the period 6. Cash flows during the period 7. Earnings for the period

4, 5, 6, 7

Companies are not allows to switch back and forth between alternative accounting methods from year to year because of the ________ concept

consistency

The four concept principles that relate to the financial statement are:

consistency, full disclosure, materiality, and conservatism

The matching concept means that:

expenses incurred to generate revenues must be matched to revenues earned for any given period

A corporation's annual report contains the reporting firm's financial statements and each of the following key components, except: 1. The reporting firm's operating budget for the next fiscal year 2. The notes to the financial statements 3. management's discussion and analysis of the financial statements 4. the reporting of the external auditor's examination of the financial statements

1

The matching concept means that: 1. Expenses incurred to generate revenues must be matched to revenues earned for any given period 2. cash receipts and cash payments must be adjusted to match revenues and expenses in the period the cash is received 3. a fair representation of the results of operations will be reported on the balance sheet 4. revenues must be equal to expenses for any given period

1

Which of the following items are normally included as key components of a corporation's annual report? 1. The report of the external auditor's examination of the financial statements 2. a corporate structure chart showing line and staff reporting responsibilities of all key personnel employed by the reporting firm 3. A five-year (or longer) summary of key financial data 4. The notes to the financial statements 5. The reporting firm's operating budget for the next fiscal year

1, 3, 4

Which of the following are the required financial statements under generally accepted accounting principles and auditing standards? 1. Statement of operating earnings 2. income statement 3. statement of net asset value 4. balance sheet 5. statement of cash flows 6. statement of changes in stockholders' equity

2, 4, 5, 6

The __________ concept does not mean that revenue and expense for a reporting period are equal

Matching

What concepts/principles supports the notion that for companies reporting their financial statements in United States dollars, no adjustments are made for the effects of inflation?

Unit of measurement

The period of time selected for reporting financial statements is known as the ________ _________.

accounting period

An entity's financial position at the end of a reporting period is a reported on the:

balance sheet

Most assets are not recorded at their current market value because of the limitations imposed by the ___________ principle.

cost

Most assets are not recorded at their current market values because of the limitation imposed by the _______ principle.

cost

The _______ ________ concept refers to the presumption that the entity will continue to operate in the future.

going concern

The _______ __________ concept refers to the presumption that the entity will continue to operate in the future

going concern concept

The concept that refers to the presumption that the entity will continue to operate in the future is known as the:

going concern concept

The balance sheet:

is like a snapshot of the organization's financial position, frozen at a specific point in time.

Most assets are reported on the balance sheet based on their:

original (historical) cost

In the horizontal model representation of the financial statements the arrow pointing from net income to stockholders' equity indicates that net income affects _____.

retained earnings.

A firm prepares comparative financial statement so that ______.

the users of the data can easily spot changes in the firm's financial position and in its results of operations

A firm prepares comparative financial statements so that ________.

the users of the data can easily spot changes in the firm's financial position and in its results of operations

Identify the information that the current generally accepted accounting principles and auditing standards require the financial statements of an entity to show for the reporting period. 1. Financial position at the end of the period 2. Number of people employed by the entity 3. Market value of the entity's net assets 4. Investments by and distributions to owners (i.e., stockholders) during the period 5. Earnings for the period 6. Budget versus actual comparisons of key balance sheet and income statement accounts 7. Cash flows during the period

1, 4, 5, 7

A corporation's annual report contains the reporting firm's financial statements and each of the following key components, except: 1. management's discussion and analysis of the financial statements 2. the reporting firm's operating budget for the next fiscal year 3. the notes to the financial statements 4. the report of the external auditor's examination of the financial statements

2

In the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that the net income affects the ___________ ____________ account within stockholders' equity

Retained Earnings

The period of time selected for reporting financial statements is known as the ______ _______.

Accounting period

________ __________ refers to the entity for which the financial statements are being prepared

Accounting Entity

A = L + SE is called the __________ _____________.

Accounting Equation

Providing more (rather than less) detail in the notes to the financial statements is driven by which of the following concepts/principles?

Full disclosure