ACCT 2331 Chapter One
The three most common forms of business organization are
sole proprietorship Corporation Partnership
The three classifications on the statement of cash flows are cash flows from...
- Operating Activities - Investing Activities - Financing Activities
What items are found on an Income statement?
- Revenue - Expenses --- Rent, supplies, salaries, utilities, interest - Net income
In our society, the two main functions of accounting are to...
- To measure business activities of a company - To communicate those measurements to external parties for decision-making purposes (Investors/Creditors)
What appears on a balance sheet?
- Assets: Cash, marketable securities, prepaid expenses, accounts receivable, inventory, and fixed assets, equipment - Liabilities: Accounts payable, accrued liabilities, customer prepayments, taxes payable, short-term debt, and long-term debt, notes payable - Shareholders' equity: Stock, additional paid-in capital, retained earnings, and treasury stock
Faithful representation requires information to have which of the following three characteristics?
- Complete - Neutral - Free from error
Which of the following are attributes of FASB?
- Full-time board members - Independent - Private sector organization
Two other types of information in addition to the financial statements that must be reported in the annual reports include...
- Notes Disclosure - Management discussion and analysis
Trial Balance
A list of all accounts and their balances at a particular date showing that debits equal credits
The system that maintains records of a company's operations and then communicates that information to decision makers is
Accounting
Which of the following items are found on a balance sheet?
Assets Liabilities Stockholders' equity
The financial statement that displays a firm's financial position on a particular date...
Balance sheet
The four financial statements published to provide information to external users include which of the following?
Balance sheet Income Statement Statement of Cash Flows Statement of Stockholder's Equity
The two components of stockholders' equity
Common stock and retained earnings
Predictive value
Consistently increasing income helps forecast the company's ability to generate future cash
The form of business organization where an entity is legally separate from its owners and issues shares of stock is a
Corporations
The two sources of stockholders' equity are amounts
Earned by the corporation Paid in from shareholders
The private sector organization that is currently responsible for setting accounting standards in the United States is the...
Financial Accounting Standards Board
Companies communicate information about their business activities primarily through
Financial statements
Which financial statement reports revenues and expenses?
Income statement
When a company earns net income, its retained earnings...
Increase
Shareholders' equity arises primarily from amounts...
Invested by shareholders Earned by the corporation
Assets = ______ + Stockholders' Equity.
Liabilities
Identify the three most common forms of business organization.
Partnership Corporation Sole proprietorship
Confirmatory Value
Positive income is consistent with effectiveness of management
Predictive value and confirmatory value are components of which fundamental qualitative characteristic?
Relevance
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.
Which of the following represents the net income earned by a corporation and not yet paid to shareholders?
Retained earnings
The financial statement that provides information about cash receipts and cash disbursements for the period is the...
Statement of cash flows
Which of the following are financial statements?
Statement of stockholders' equity Balance sheet Income statement
Neutrality
The characteristic that a new accounting standard should not favor one group of companies over others or achieve a particular social outcome
Materiality
The impact of financial accounting information on investors' and creditors' decisions
Financial information that is immaterial in amount or nature need not be reported under GAAP
True
Ethics
a term that refers to a code or moral system that provides criteria for evaluating right or wrong
Management discussion and analysis and note disclosures to the financial statements are included in the...
annual report
Ending retained earnings is calculated as
beginning retained earnings + net income - dividends
Information that best explains companies' stock price performance is reported on the...
income statement
An income statement reports
net income or loss expenses revenues
An advantage of the corporate form of organization is that a corporation
provides limited liability to stockholders.
Financial Statements
represent a company's primary means of communicating information to external users
Income Statement
to report the profit-generating activities of the firm during a period of time.