Accounting 2301 Quiz #1 (Ch 1-4)

1.11. Assume Global Cleaning Service had net income of $570 for the year. Global Cleaning Service's beginning and ending total assets were $4,520 and $4,180, respectively. Calculate Global Cleaning Service's return on assets for the year.

13.1%

2.10. Nathville Laundry reported assets of $800 and equity of $480. What is Nathville's debt ratio?

40%

Corporation

A business organized under state law that is a separate legal entity.

Sole Proprietorship

A business owned by a single owner

Limited Liability Company (LLC)

A company in which each member is only liable for his or her own actions.

Dividend

A distribution of a corporation's earnings to stockholders.

Stockholder

A person who owns stock in a corporation.

Cost Principle

A principle that states that acquired assets and services should be recorded at their actual cost.

International Financial Report Standards (IFRS)

A set of global accounting guidelines, formulated by the international Accounting Standards Board (IASB)

Accounts Payable

A short-term liability that will be paid in the future.

1.9. Assume that Global Cleaning Service performed cleaning services for a department store on account for $180. How would this transaction affect Global Cleaning Service's accounting equation?

Increase both assets and equity by $180

1.8. Consider the overall effects on Global Cleaning Service from selling and performing services on account for $6,400 and paying expenses totaling $2,500. What is Global Cleaning Service's net income or net loss?

Net income of $3,900

Statement of Cash Flows

Reports on a business's cash receipts and cash payments for a specific period.

Balance Sheet

Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date

Income Statment

Reports the net income or net loss of the business for a specific period.

Sarbanes-Oxley Act (SOX)

Requires management to review internal control and take responsibility for the accuracy and completeness of their financial reports.

Security and Exchange Commission (SEC)

U.S. governmental agency that oversees the U.S. financial markets.

2.2. Which of the following accounts is a liability?

Unearned Revenue

Partnership

a business organization with two or more owners and not organized as a corporation

1.1. Accounting is the information system that

a) measures business activities. b) communicates the results to decision makers. c) processes information into reports. d) All of the above. <--

2.1. The detailed record of the changes in a particular asset, liability, or stockholders' equity is called

an account.

Creditor

any person or business to whom a business owes money

1.10. The balance sheet reports the

financial position on a specific date.

Contributed Capital

owner contributions to a corporation

Faithful Representation

providing info that is complete, neutral, and free from error

Statement of Retained Earnings

reports how the company's retained earnings balance changed from the beginning to the end of the period

Common Stock

represents the basic ownership of a corporation

Financial Accounting

the field of accounting that focuses on providing information for external decision makers

Managerial Accounting

the field of accounting that focuses on providing information for internal decision makers

Accounting

the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

Equity

the owner's claims to the assets of the business

Return on Assets (ROA)

Measures how profitably a company uses its assets. Net income / Average total assets.

Monetary Unit Assumption

The assumption that requires the items on the financial statements to be measured in terms of a monetary unit.

Accounting Equation

The basic tool of accounting, measuring the resources of the business (what the business owns or has control of) and the claims to those resources (what the business owes to creditors and to the owners). Assets = Liability + Equity.

Expenses

The costs of selling goods or services

Revenues

Amounts earned from delivering goods or services to customers.

Transaction

An event that affects the financial position of the business and can be measured with faithful representation.

Audit

An examination of a company's financial statements and records

Economic Entity Assumption

An organization that stands apart as a separate economic unit.

Going Concern Assumption

Assumes that the entity will remain in operation for the foreseeable future.

Financial Accounting Standards Board (FASB)

The private organization that overseas the creation and governance of accounting standards in the United States

International Accounting Standards Board (IASB)

The private organization that oversees the creation and governance of International Financial Reporting Standards (IFRS).

Net Loss

The result of operations that occurs when total expenses are greater than total revenues.

Net income

The result of operations that occurs when total revenues are greater than total expenses.

Amounts Receivable

The right to receive cash in the future from customers for goods sold or for services performed

Certified Management Accountant (CMAs)

Certified professionals who specialize in accounting and financial management knowledge. They typically work for a single company.

1.6. Which of the following requires accounting information to be complete, neutral, and free from material error?

Faithful representation concept

1.3. Generally Accepted Accounting Principles (GAAP) are currently formulated by the

Financial Accounting Standards Board (FASB).

1.7. At the end of a recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3,630 and equity of $2,280. How much were Global Cleaning Service's liabilities?

$1350

Generally Accepted Accounting Principles (GAAP)

Accounting guidelines, currently formulated by the Financial Accounting Standards Board (FASB); the main U.S. accounting rule book.

2.4. Which of the following statements is correct?

Accounts Payable is increased with a credit.

Financial Statements

Business documents that are used to communicate information needed to make business decisions.

2.3. The left side of an account is used to record which of the following?

Debits

Liabilities

Debts that are owed to creditors

Assets

Economic resources that are expected to benefit the business in the future. Something the business owns or has control of.

1.2. Which of the following is not an external user of a business's financial information?

Employees

2.9. Which sequence correctly summarizes the accounting process?

Journalize transactions, post to the accounts, prepare a trial balance

2.8.Pixel Copies recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will the trial balance show for this error?

Liabilities are overstated

Certified Public Accountants (CPAs)

Licensed professional accountants who serve the general public

1.4. Which type of business organization is owned by only one owner?

Sole proprietorship

1.5. Which of the following characteristics best describes a corporation?

Stockholders not personally liable for entity's debts

Retained Earnings

equity earned by profitable operations of a corporation that is not distributed to stockholders