Accounting Unit 1 CHAPTER 1

Companies communicate information about their business activities primarily through

financial statements.

When revenues are greater than expenses, a company has

net income

Which of the following are attributes of FASB?

Full-time board members Independence Private sector organization

The two sources of stockholders' equity are amounts

1. earned by the corporation 2. paid in from shareholders

In our society, the two main functions of accounting are to

1. measure business activities. 2. communicate information to investors and creditors

Financial accounting should provide information that:

1.Is useful to investors and creditors in making decisions. 2.Helps to predict cash flows. 3.Tells about economic resources, claims to resources, and changes in

Accounting is

A system of maintaining records of a company's operations and communicating information to decision makers. " the language of business "

Which of the following appear(s) on the balance sheet?

Accounts receivable Common stock Utilities payable

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

Which relationship is reflected in the balance sheet? a. Revenues − Expenses = Net income b. Assets = Liabilities + Stockholders' Equity c. Assets − Liabilities = Net Income d. Assets = Revenues + Dividends

Assets = Liabilities + Stockholders' Equity

The financial statement that displays a firm's financial position on a particular date is the

Balance Sheet

The four primary financial statements published to provide information to external users include which of the following?

Balance Sheet Statement of Cash Flows Statement of Stockholders' Equity Income Statement

Which of the following are financial statements?

Balance sheet, Income statement, Statement of stockholders' equity

Predictive value

Consistently increasing income helps forecast the company's ability to generate future cash.

Which of these would be found on a company's balance sheet?

Equipment Notes payable Accounts receivable

is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

Ethics

is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the

FASB or F.A.S.B.

The private sector organization that is currently responsible for setting accounting standards in the United States is the Multiple choice question.

Financial Accounting Standards Board.

represent a company's primary means of communicating information to external users.

Financial Statements

Which financial statement reports revenues and expenses?

Income statement

The cash collected from a customer would be recorded as which type of activity in the statement of cash flows? a. Operating Activity b. Business Activity c. Investing Activity d. Financing Activity

Operating Activity

In financial accounting which of the following are the three types of business activities of a company?

Operating activities, Investing activities,Financing activities

Confirmatory Value

Positive income is consistent with effectiveness of management.

According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?

Predictive value Confirmatory value

Which of the following accounts would appear in a company's income statement? a. Accounts Payable b. Cash c. Dividends d. Rent Expense

Rent Expense

Which of the following represents the net income earned by a corporation and not yet paid to shareholders?

Retained earnings

Which financial stamens are dividends recorded

Statement of cash flows

Which of the following knowledge and skills should an accounting professional possess?

Technical accounting knowledge Ability to work in teams Leadership skills Presentation skills

Importance of Auditors

Trained individuals hired by a company as an independent party to express a professional opinion of the extent to which financial statements are prepared in compliance with G A A P and are free of material misstatement.

sole proprietorship

a business owned by one person.

If revenues are less than expenses, a company has

a net loss.

People make decisions

about companies

Liabilities

amounts owed to creditors

Management discussion and analysis and note disclosures to the financial statements are included in the

annua report

Dividends

are cash payments to stockholders.

Revenues

are the amounts recognized when the company sells products or provides services to customers.

Expenses

are the costs of providing products and services and other business activities during the current period

The two main functions of accounting

are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.

Basic fundamental accounting equation

asset= liabilities + stockholders equity

The amounts recorded when the company sells products or provides services to customers are referred to as: a. Liabilities b. Revenues c. Assets d. Expenses

b. Revenues

Ending retained earnings is calculated as

beginning retained earnings + net income - dividends

The purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period.

The primary functions of accounting are to:

communicate information to decision makers. measure a company's activities.

Auditors are independent parties that help: a. To establish accounting rules in the U.S. b. To ensure management has appropriately prepared the company's financial statements c. Investors and creditors in their decisions by adding credibility to the financial statements d. Both b. and c. are correct

d. Both b. and c. are correct

employee

decide employee oppuntuities

competitors

decide market share and profitability

local communities

decide on environmental issues

Regulators

decide on social welfare

tax authorities

decide on tax policies

Managers

decide production and expansion

Suppliers

decide the customer's ability to pay for supplies

Investors

decide whether to invest in stock

Creditors

decide whether to lend money

Customers

decide whether to purchase products

Stockholders' equity arises primarily from amounts invested by shareholders and amounts

earned by the corporation

Stockholders' equity arises primarily from amounts invested by shareholders and amounts Blank______.

earned by the corporation

Dividends are not

expenses

An income statement reports

expenses, net income or loss revenues

To be useful for decision making, information should possess the fundamental qualities of relevance and

faithful representation.

G A A P

generally accepted accounting principles

Information that best explains companies' stock price performance is reported in the

income statement

The financial statement that summarizes revenues and expenses for a period of time is the

income statement

When a company earns net income, its retained earnings:

increase

partnership

is a business owned by two or more persons.

Net income

is the difference between revenues and expenses. Other common names for net income include earnings or profit.

when revenues are less than expenses, a company has a

net loss

Note disclosures

offer additional information either to explain the information presented in the financial statements or to provide information not included in the financial statements.

The three classifications on the statement of cash flows are cash flows from (Select all that apply.)

operating activities. financing activities. investing activities.

The three classifications on the statement of cash flows are cash flows from

operating activities. investing activities. financing activities.

The statement of cash flows classifies items as

operating, investing, financing

Stockholders' equity

owners' claims to resources.

limited liability

personal assets are not at risk if you sued

Careers for accounting professionals typically include a choice between

public and private , accounting

The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of

relevance and faithful representation

Undistributed profits that have accumulated in the company over time are called

retained earnings

The management discussion and analysis

section typically includes management's views on significant events, trends, and uncertainties pertaining to the company's operations and resources.

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows.

If revenues > expenses

then net income.

If revenues < expenses,

then net loss.

Assets

total resources of the company