ACC. Chapter 1

Real world financial statements may also report

comprehensive income

A business may borrow assets from

creditors

Companies must follow generally accepted accounting principles (GAAP) for [blank] accounting reports but not for [blank] accounting reports

external/internal

[blank] accounting practice is designed to meet the needs of external stakeholders, such as investors and stakeholders

financial

The measurement rules established by the financial accounting standards board are called

generally accepted accounting principles/ gaap

The statement of changes in stockholders equity shows

how common stock and retained earnings changed over the accounting period

Liquidity refers to

how quickly assets are converted into cash

The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the

income statement

Businesses frequently trade one asset for another asset. The amount of asset decreases and the amount of another asset [blank], while the total amount of asset is not affected.

increase

Earning cash revenue by providing services to customers will cause the amount of cash to [blank] and the amount of retained earnings to [blank]

increase/increase

Dividends are paid to [blank] while interest is paid to [blank]

investors/creditors

Recognizing cash revenue will cause assets on the [blank] side of the accounting equation to [blank] and retained earnings on the [blank] side of the accounting equation to [blank]

left/increase/right/increase

In accounting terms, the obligations a business owes to it creditors are called

liabilities

The quickness in which an asset can be sold for cash is referred to as

liquidity

The term used to describe pairing expenses with revenues earned during the accounting period is the

matching concept

A company that has 2000 revenue and 1900 expenses should report

net income on the income statement

How does an increase in the fair market value of an asset affect the financial statements?

no affect

What shows how issuing stock affects the income statement?

no affect

What affect does purchasing land with cash have on total assets?

no effect on total assets

Liabilities

obligations to pay creditors

The criteria for granting CPA is established at

state level

Accounts that only hold a balance for one accounting period is called

temporary account

The accounting records of woo company show 2400 of retained earnings. based on this information alone

the amount of cash dividends the company is able to pay cannot be determined

One of the biggest limitation of the annual report is that

the info is historical

Assets are normally shown on the company's book at the amount of

their historical cost

dividend

wealth transfers from a business to its owners/investors

For the period ended, indicates that the information reported on the financial statement refers to

what happened over the accounting period

Which financial statement only reports account balances as of a specific point in time?

-balance sheet

What items are presented on the statement of changes on stockholder's equity?

-beginning of common stock -ending of retained earnings -net income -dividends -total stockholders equity

Which items are presented on the statement of cash flows?

-cash payments for dividends -net cash flow from investing activities -net cash flow from financing activities -net cash flow from financing activities -cash receipts for borrowing funds -ending cash balance

Which of the following are widely recognized certifications associated with private accounting practice?

-certified internal auditor -certified management accountant

Acquiring cash by issuing common stock will cause the amount of

-common stock to increase -cash to increase

How does incurring cash expenses affect the income statement?

-decreases net income -increase expenses

How does declaring and paying a cash dividend affect the financial statements?

-decreases retained earnings -decreases stockholder's equity

Profit may also be called

-income -value added -earnings

Which of the following are among the four financial statements that are normally included in public reports?

-income statement -statement of changes in stockholders equity -balance sheet -statement of cash flows

Which of the following show the effects of borrowing from creditors on the financial statement?

-increase cash flow from financing activities -increases assets -increases liabilities

Which shows how issuing stock affect the statement of cash flows?

-increases cash flow from financing activities

What affect does earning cash revenue have on financial statements?

-increases cash flow from operating activities -increases total stockholder's equity -increases retained earnings -increases total assets -increases net income

What effect does borrowing from creditors have on liabilities?

-increases notes payable

What affect does earning cash revenue have on balance sheet?

-increases total assets -increases retained earnings -increases total stockholders equity

What effect does cash revenue have on financial statements?

-increases total stockholders equity -increases retained earnings -increases net income

Which stakeholders may use the accounting equation?

-investors -creditors -the federal gov -newspaper reporters

Which of the following activities are considered financing activities?

-issuing common stock -repaying the principal on a loan -paying a dividend to stockholders

Service companies

-law firm -accounting firm -doctor

In business liquidation

-liabilities are paid in full before funds are distributed to owners -creditors may be unable to collect the full amount of liabilities

The 10k report includes

-management discussions and analysis -financial statements -notes to the financial statements

The accounting term used to describe organizations that are not motivated by profit is

-not for profit entities -nonprofit

Which terms means the same thing as as the term investors?

-owners -stockholders

Which of the following are operating activities?

-paying employees -paying expenses -cash receipts from customers

the normal duties of a private sector account includes

-preparing financial reports -developing budgets -paying bills

Managerial accounting practices

-provide more detail about the daily operation of a business -contains more estimates

Asset use transaction

-repaying debt with cash -paying a cash dividend

The amount of dividends a company can pay are limited by the amount of the company's

-retained earnings -cash

Borrowing money from credits will cause the

-right side of the accounting equation to increase -left side of the accounting equation to increase

What is considered an investing activity?

-selling equipment

Which statement reports happen over a span of time?

-statement of changes in stockholder's equity -income statement -statement of cash flows

These are true

-the right side of the accounting equation shows the sources of assets -the obligations of the business to creditors are shown on the right side of the accounting equation

What items are presented on the income statement?

1) Net income 2) Expense 3) Revenue

Acquiring cash from the issue of stock will affect the accounting equation in at least [blank] places

2

Taylor company has 10000 assets, 2000 liabilities, and 5000 common stock. Based on this information, the company has retained earnings to amount

3000

What are the primary categories reported on the statement of cash flows?

Financing, investing and operating

[blank] accounting practice is designed to meet the needs of internal stakeholders, such as managers and employees

Managerial

Common stock

a certificate(Receipt) that describes the rights and responsibilities of the ownership when a company acquires cash from its investors

The horizontal statement model is

a teaching tool used to show how transactions affect the income statement, balance sheet and statement of cash flows

The income statement reports revenues and expenses over the

accounting period

permanent account

accounts payable

The interrelationships among the various elements of financial statements is known as

articulation

cash and land are

asset accounts

An event that causes assets and liabilities to decrease is an

asset use transaction

Which financial statement is most similar to the accounting equation?

balance sheet

cash inflows and cash outflows are reported on the statement of

cash flows

The process of transferring the balances in temporary accounts to the permanent account retained earnings is called

closing

Which of the following lists includes only items that are reported on the balance sheet?

Assets, liabilities, stockholder's equity, and retained earnings

What is not include in the company's annual report?

customer opinions on quality of goods

Paying cash dividends will cause the left side of the accounting equation to [blank] and right right of the equation to [blank]

decrease/decrease

Paying cash will cause the amount of cash to [blank] and the amount of retained earnings to [blank]

decrease/decrease

Using cash to pay off debt will cause the amount of cash to [blank] and the amount of liabilities to [blank]

decrease/decrease

Revenue

economic benefits caused by operating a business

Expenses

economic sacrifices incurred to generate revenue

An event that causes assets and stockholders equity to increase is an asset [blank] transaction

source

Which of the following is considered a financing activity?

paying a dividend to stockholders

[blank] resources are natural resources

physical

What is considered an investing activity?

purchasing land

Businesses convert [blank] to goods and services that are demanded by consumers

resources