ACCT 2081 Chapter 1 Recharge

The measurement rules applied in computing numbers on the financial statements are referred to as _____.

GAAP

Liberty, Inc., a US company, sold merchandise to Belle, a French company, for 10,000 euros. In Liberty's US financial statements, this sale should be reported in ______.

US dollars

When a company sells goods to customers on credit, _____.

accounts receivable will be reported on the balance sheet

On the balance sheet, accounts receivable represents _____.

amounts not yet collected from customers

Careful consideration is taken when making changes in GAAP _____.

and is actively debated before the changes are required; because they may affect selling prices of public companies' stock

The purpose of a balance sheet is to report the _____ accounts.

asset; liability; stockholders' equity

Balance sheets report amounts _____.

at a specific point in time

The four financial statements include the: _____ sheet, _____ statement, statement of _____ equity, and statement of _____ flows.

balance; income; stockholders'; cash

Profit is _____.

called net income; a measure of performance

The main goal of the accounting system is to _____.

capture information about a business so that it can be reported to decision makers

CPA stands for _____.

certified public accountant

Mauricio invested $30,000 in Pizza Aroma in exchange for its stock. Pizza Aroma now has _____ under stockholders' equity.

common stock

The sum of which two elements equals stockholders' equity?

common stock and retained earnings

Identify the uses of generally accepted accounting principles (GAAP).

companies use GAAP when preparing financial statements; auditors need to be sure the financial statements are prepared in accordance with GAAP

If a company were to go out of business, who has first claim to the company's assets?

creditors

External decision makers use _____ financial accounting reports.

financial

Which financial statement is a company's primary measure of profit?

income statement

Which of the following statements are true?

retained earnings increase when a company earns and keeps profit; common stock increases when the company gets cash in exchange for stock

Which of the following are part of "stockholders' equity"?

retained earnings; common stock

Net income equals _____.

revenues minus expenses; cash and promises received from delivery of goods and services minus resources used to earn revenues

Net income on the income statement equals the _____ during the accounting period.

revenues minus expenses; net amount earned, which does not equal the cash received and paid to operate the business

Identify the 4 significant items in the headings of balance sheets.

specific date; title of the statement; unit of measure; name of entity

Which of the following are financial statements?

statement of stockholders' equity; balance sheet; income statement; statement of cash flows

Which of the following are users of financial statements?

supply chain managers; investors; stockholders; creditors

CPAs in public accounting preform the following services:

tax planning; assurance services; not-for-profit assurance services

The statement of cash flows is needed in addition to the income statement because the statement of cash flows reports _____.

the cash received and paid, which differs from the revenues earned and the expenses incurred on the income statement

The heading of a calendar year-end balance sheet would include which of the following?

the name of the business; the title "Balance Sheet"; At December 31

The income statement reports _____.

the profitability of the company for the accounting period; how well the company performed during the accounting period; the revenues minus the expenses for the accounting period

The income statement reports:

the profitability of the company for the accounting period; how well the company performed during the accounting period; the revenues minus the expenses for the accounting period

An asset is initially recorded at _____.

the total cost incurred to acquire it

True or False: The income statement is useful for determining the amount of economic resources held by the company.

what is left over from total revenue after all of the appropriate costs have been subtracted.

Companies typically prepare _____ financial statements each accounting period.

4

Axis Company just bought a piece of land for $25,000. The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of _____.

$25,000

Ace Electronics bought equipment for $4,000. Normally the equipment would have cost $4,500, but the supplier gave Ace a special discount. Ace's balance sheet should report equipment of _____.

$4,000

Companied typically prepare _____ financial statements each accounting period.

4

Accountants may be licensed and certified as _____.

CIA, CMA, CPA

Accounts may be licensed and certified as _____.

Certified Public Accountants (CPA); Certified Management Accountant (CMA); Certified Internal Auditor (CIA)

Which of the following is true?

Land purchased 20 years ago is reported on the balance sheet at the original price paid for it.

The abbreviation SEC stands for the _____.

Securities and Exchange Commission

Managers are _____ decision makers who need information to manage the operating, financing, and investing activities for the business. Stockholder and creditors are _____ decision makers.

internal; external

Ace Electronics prepared a detailed report that outlines its future plans for making and marketing a new products. This report must be a _____.

managerial accounting report

Ace Electronics prepared a detailed report that outlines its future plans for making and marking a new product. This report must be a _____.

managerial accounting report

Managerial accounting reports are used by the company's _____.

managers

Which of the following are not found in the heading of the balance sheet?

name of the owner; period covered

Net income is _____.

net earnings; revenues minus expenses

The two sources of stockholders' equity are amounts _____.

paid in from shareholders; earned and retained by the corporation

The requirements in most states to become a Certified Public Accountant include _____.

passing the CPA exam

An accountant who is employed by an accounting firm such as PricewaterhouseCoopers or Ernst & Young has a career in ______.

public accounting