Accounting chap 1 Smartbook

Jacob's Chocolates had beginning retained earnings of $4,000; net income of $10,000; and dividends of $300, calculate the ending balance in the retained earnings account.

$13,700

Sheldon Company had beginning retained earnings of $1,000, net income of $5,000, and dividends of $250. The ending balance in the retained earnings account is

$5,750

Describe the order in which a company prepares financial statements.

- income statement -statement of retained earnings -balance sheet - statement of cash flows

Given the following list of accounts, identify which are classified as liabilities.

-Accounts Payable -Wages Payable -Taxes Payable -Notes Payable

The expanded accounting equation is defined as: ____= Liabilities + Common Stock + ____ - ____ - Dividends. Do not include the word "account" or "accounts" in your answer.

-Assets -Revenues -Expense

Identify the main sections on a statement of cash flows.

-Cash flows from operating activities -Cash flows from financing activities -Cash flows from investing activities

Which of the following statements represent(s) how expenses affect equity?

-Higher expenses result in lower total equity. -If expenses increase, then total equity decreases.

Dividends cause a(n) (increase/decrease) ____ in equity and are recorded directly in the (retained earnings/dividends/equity) ____ account.

-decrease -dividends

Stock issuances

Dividends cause equity to decrease.

The ____ recognition principle states that revenue is recognized when goods or services are provided to customers and at an amount expected to be received.

revenue

The principle which says that revenue is recognized when goods or services are provided to customers at an amount expected to be received from the customer is known as the

revenue recognition principle

Generally accepted accounting principles (GAAP) wants information to have:

-faithful representation -relevance

Given the statements below, choose the most accurate definition of dividends.

Outflows of cash or other assets paid to the owners of a corporation

Identify which of the following lists of accounts would belong on the statement of retained earnings.

Retained earnings and Dividends

Given the following lists of accounts, choose the one that contains only liabilities.

Taxes Payable, Accounts Payable, Wages Payable

By definition, owner investments increase equity and are called stock issuances.

True

Given the following lists of accounts, choose the one that contains only assets.

Cash, Building, Supplies, Accounts Receivable

An employee that is having trouble paying his personal bills might exhibit the following fraud factor:

Pressure

Recall how to calculate net income using the following information: Total Assets = Liabilities + Common Stock - Dividends +Revenues - Expenses $50,000 = $10,000 +$10,000 - $2,000 + $35,000 - $3,000

Revenues - Expenses = Net Income

Given the statements below, choose the most accurate definition of owner investments.

Stock issuances

The correct definition of an income statement includes which of the following?

The statement reports a business's revenues and expenses over a period of time.

Which of the following statements best represents the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

Which of the following statements best represents the reason for the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

Dividends are resources paid to the owners of a corporation.

True

The FASB conceptual framework consists of all of the following except:

concepts

The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time.

dividends

Final totals in a financial statement are ____ underlined.

double

The principle which states that a company should record expenses it incurred in the same period as the revenue it generated is known as the

expense recognition principle

The details behind the financial statement are often disclosed in the

footnotes to the statements

Given the following list of accounts, identify which are classified as assets.

-Land -Accounts Receivable -Supplies -Equipment -Cash

All of the following are part of the FASB conceptual framework:

-Qualitative characteristics -Recognition and measurement -Objectives -Elements

An income statement reports a company's net income or net loss during a period. Which of the following accounts would appear on an income statement?

-Rent Expense -Wages Expense -Service Revenue -Rent Revenue

Given the accounts below, choose all that affect equity.

-Revenues -Dividends -Common Stock -Expenses

According to the fraud triangle, the three factors that must exist for a person to commit fraud include __, __, and __.

-rationalization -pressure -opportunity

The four major types of transactions that affect equity in a business are ____ accounts, ____ accounts, dividends and common stock. Note: enter one word for each blank.

-revenue -expense

The four general accounting principles include:

-revenue recognition -full disclosure -Measurement -expense recognition

Net income is calculated using the following formula: ____ (expenses/revenues/assets) minus ____ (expenses/revenues/assets) = Net income. Use one word for each blank.

-revenues -expenses

In every financial statement, there exists single and double underlines. Choose the statement below that describes what these are for and when to use them.

A single-ruled line denotes an addition or subtraction and double underlines indicate the final totals.

Each of the financial statements on the left are described on the right. Identify the description that goes with each financial statement.

Balance Sheet- Reports the balance of assets, liabilities and equity at a point in time Income Statement- Reports the revenues and expenses incurred by a business for a period of time Statement of Retained Earnings- Reports the changes in equity during a period of time Statement of Cash Flows-Identifies the cash inflows and outflows over a period of time

Which of the following show a correct date line for a Balance Sheet:

December 31, 20xx

From the following statements, select the one that describes the effect of dividends on equity.

Dividends cause equity to decrease.

Which of the following statements describes the effect of expenses on equity?

Expenses cause equity to decrease.

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice.

The __ is the first financial statement to be prepared.

income statement

Given the list of accounts below, identify which of them would appear on a balance sheet.

-Equipment -Accounts Payable -Cash -Retained earnings, 12/31 -Supplies

Which of the following statements explain(s) how the accounting equation applies to businesses?

-The equation applies to all transactions. -The equation states that Assets = Liabilities + Equity. -The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. -The relation of assets, liabilities and equity is reflected in the equation.

The correct definition of a balance sheet includes which of the following statements?

-The statement reports assets, liabilities and equity at a point in time. -The statement reports the financial position of a company at a point in time. -The statement reports the equality of the accounting equation at any point in time.

Dividends cause a(n) (increase/decrease) ____ in equity and are recorded directly in (common stock/dividends/equity) ____.

-decreases -dividend

The definition of revenues is: Revenues ____ (increase/decrease) ____ (liabilities/equity) and are earned from the sale of products and services.

-increase -equity

The three sections of the statement of cash flows includes all of the following:

-operating -financing -investing

Define what the income statement reports by completing the following sentence: The income statement describes a company's ____ (assets/revenues) and ____ (expenses/liabilities) along with the resulting net income or loss over a period of time due to earnings related activities.

-revenues -expenses

Identify the expanded accounting equation from the options below.

Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses

Which list of accounts below, identifies only accounts that would appear on a balance sheet.

Common Stock, Equipment, Accounts Payable

Which of the following statements is correct regarding common stock?

Common stock causes equity to increase.

Which of the following statements is correct regarding revenues?

Revenues cause equity to increase.

The principle that states that a company should report the details behind the financial statements which would impact users' decisions is called the

full disclosure principle

The revenue recognition principle states that revenue is recognized when:

goods or services are provided to customers

Owner investments cause a(n) (increase/decrease) ____ in equity.

increase

Buying and selling of long-term assets such as land and equipment would be included in the (operating/investing/financing) ____ activities section of the statement of cash flows.

investing

Another name for the expense recognition principle is:

matching principle

The _____ principle states that accounting information is based on actual cost.

measurement

The principle which states that accounting information is based on actual cost is called the

measurement principle

Which of the following statements are true regarding the effect of revenues on the equity of a business?

-Revenues cause equity to increase. -Revenues that increase equity have many forms, such as consulting services and commissions from services.

The definition of revenues includes which of the following statements?

-Revenues increase equity. -Revenues are the sales of products or services to customers by a business.

The heading of every financial statement contains several line items. Identify the correct items from the list below.

-The date or time period the financial statement covers -The company name. -The title of the statement