Accounting

Recognizing revenue when it is earned and not when cash is received and expenses when the related goods or services are used rather than when paid for is called:

Accrual accounting

Which equation correctly states a basic accounting relationship?

Assets = Liabilities + Shareholders' equity

during the current year, liabilities of Logan travel degreased by $60,000 and owners equity increased by $85,000.

Assets increased during the year by $25,000.

If a company has a profit:

Assets will be equal to liabilities plus owners' equity.

Which financial statement is divided into three components: assets, liabilities, and shareholders' equity?

Balance sheet

You have been asked to analyze the financial statements of the Cara Corp. with regards to liquidity and financial flexibility. Which financial statement would you find most useful?

Balance sheet

Owner's equity in a business may increase by:

Earnings from profitable operation of the business.

Which of the following is generally not considered an external user of accounting information?

Factory managers

Which of the following does not describe accounting?

Is an end rather than a means to an end.

Financial accounting information is characterized by all of the following except:

It is factual, so it does not require judgment to prepare.

Common business activities include:

Obtaining a bank loan, Issuing shares of stock, Purchasing merchandise for resale, Designing and printing marketing brochures, Administering the corporation

At the end of its first year, Ben Company reported total assets of $690,000 and total liabilities of $240,000. The company earned $150,000 during the first year and distributed $30,000 in dividends. What was Ben Company's contributed capital?

$330,000

At the end of the current year, the owners' equity in Flynn Bakery is $246,000. During the year the assets of the business had increased by $120,000, and the liabilities had increased by $72,000. Owners' equity at the beginning of the year must have been:

198,000

At year end, Julianna Corporation reported total assets of $30 million, total shareholders' equity of $10 million, and total contributed capital of $7 million. Total liabilities equal

20 million

If total assets equal $150,000 and total liabilities equal $120,000, the total owners' equity must equal:

30,000

The matching principle is best demonstrated by:

Allocating the cost of an asset to expense over the periods during which benefits are derived from ownership of the asset.

The nature of an asset is best described as:

An economic resource owned by a business and expected to benefit future operations.

A revenue transaction results in all of the following except:

An increase in liabilities.

The principle of adequate disclosure means that a company should disclose:

Any financial facts that a reasonable informed person would consider necessary for the proper interpretation of the financial statements.

Which of the following is not a user of internal accounting information?

Creditor

Purposes of an accounting system include all of the following except:

Dictate the specific types of business transactions that the enterprise may engage in.

The accounting standards and concepts used in the preparation of financial statements are called:

Generally accepted accounting principles (GAAP).

29.Establishing international accounting standards is the responsibility of

IASB

Which of the following statements regarding liquidity and profitability is not true?

If a business is unable to pay its debts as they come due, it is operating unprofitably.

From an accounting viewpoint, when is a business considered an entity separate from its owner(s)?

In each of the above situations, the business is an accounting entity separate from the activities of the owner(s).

Which financial statement is divided into three sections: revenues, expenses, and net income (loss)?

Income statement

Which of the following is not one of the primary financial statements?

Tax return

A balance sheet is designed to show:

The assets, liabilities, and owners' equity in the business at the particular date.

16. Which financial statement is at a specific date?

The balance sheet.

Retained earnings appears on:

The balance sheet.

The stockholders' equity of a firm can be defined as

a residual interest

liabilities measure

creditors' claims on the assets of a firm

The shareholders' equity section of the balance sheet for a corporation generally does not include

dividends paid

Assets measure

economic resources

In a statement of cash flows, proceeds from the issuance of common stock should be classified as cash inflows for

financing activities

The major categories of activities included in this list are

financing activities and operating activities

Recognition of revenue usually occurs when

he revenue is earned, such as at the time of the sale or delivery of the goods

On the balance sheet, Land currently used in the business is normally measured at

historical acquisition cost

All of the following are characteristics of management accounting, except:

information must be developed in conformity with generally accepted accounting principles or with income tax regulations.

The primary purpose for external financial statements is to provide

information that is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise

Long-Term Debt are

obligations arising from borrowings having due dates, or maturities, more than one year after the balance sheet date b. bonds, mortgages, and some obligations under long-term leases

When analyzing a balance sheet

one looks for a reasonable match between the nature and mix of assets and mix of liabilities plus shareholders' equity b. the proportion of short-term versus long-term financing should match the proportion of current assets versus noncurrent assets c. the mix of long-term debt versus shareholders' equity should reflect the degree of operating risk

Four activities are common to all entities. These are setting goals and strategies, financing activities, investing activities, and

operating activities

All of the following are classified as current liabilities except

prepaid insurance

Property, Plant, and Equipment refers to

tangible, long-lived assets used in a firm's operations over a period of years and generally not aquired for resale

In the statement of financial position, an asset is a resource that has the potential for providing a company with a future economic benefit -

the ability to generate future cash inflows or to reduce future cash outflows

Revenues measure

the inflows of assets from selling goods and providing services to customers b. the reduction of liabilities from selling goods and providing services to customers

In the income statement, revenues are generally classified by the

the nature of the good or service sold

The statement of cash flows provides information about

the relationship between operations and liquidity of a firm

If total assets equal $105,000 and total owners' equity equal $30,000, then total liabilities must equal:

$ 75,000.

Which party provides funds to a firm and in return receives repayment of the funds, usually with interest at a specific date?

A creditor

Which activity is not an operating activity of the firm?

Borrowing funds for payment of production costs

Which financial statement provides the most information about a firm's operating performance during a period?

Income statement

Which financial statement reports operating performance for a specific period of time?

Income statement

Which of the following is generally not considered one of the general purpose financial statements issued by a corporation?

Income statement forecast for the coming year.

The general purpose financial statements prepared annually by a corporation would not include the:

Income tax return

Objectives of financial reporting to external investors and creditors include preparing information about all of the following except:

Information used to determine which products to produce.

The principal difference between management accounting and financial accounting is that financial accounting information is:

Intended primarily for use by decision makers outside the business organization.

Internal users of financial accounting information include all of the following except:

Investors

Which of the following is descriptive of the proper form of a balance sheet?

Liabilities are listed before owners' equity.

Owner's equity in a business may decrease by

Losses from unprofitable operation of the business

Which of the following activities is not a category into which cash flows are classified?

Marketing activities.

19 . Which of the following are considered "external" users of financial statements?

Owners, Creditors and Labor unions

Which activity is not classified as an investing activity?

Payment of cash dividends

Financial statements are prepared:

Primarily for the benefit of persons outside of the business organization.

13. Financial statements are designed primarily to:

Provide people outside the business organization with information about the company's financial position and operating results.

31. Financial statements are designed primarily to:

Provide people outside the business organization with information about the company's financial position and operating results.

The balance sheet item that represents the portion of owners' equity resulting from profitable operation of the business is:

Retained earnings.

Revenues increase owners' equity because:

Revenue is accompanied by either an increase in assets or a reduction in liabilities.

The principle that states revenue should be recognized at the time goods are sold or services rendered is called:

Revenue realization

Provides owners, investors, and other interested parties with all the financial information they need to evaluate the financial strength, profitability, and future prospects of a given business entity.

Shows the assets, liabilities, and owners' equity of a business entity, valued in conformity with generally accepted accounting principles.

30. Which one of the following is not considered one of the three primary financial statements?

Statement of budgeting activities.

Which financial statement is divided into three components: operating, investing, and financing activities?

Statement of cash flows

Which equation is correct?

Stockholders' Equity = Contributed Capital + Retained Earnings + Net Income - Dividends

Capital stock represents:

The amount invested in the business by stockholders when shares of stock were initially issued by a corporation.

The field of accounting may best be described as:

The art of interpreting, measuring, and describing economic activity.

Which financial statement is primarily concerned with reporting the financial position of a business at a particular time

The balance sheet.

The concept of adequate disclosure means that:

The company must inform users of any significant facts necessary for proper interpretation of the financial statements, including events occurring after the financial statement date.

Net income is:

The increase in owners' equity resulting from the profitable operations of the business.

Which of the following is not characteristic of financial accounting?

The information is confidential and is intended for use only by company management.

To understand and use accounting information in making economic decisions, you must understand:

The nature of economic activities that accounting information describes. B) The assumptions and measurement techniques involved in developing accounting 5 information. C) Which information is relevant for a particular type of decision that is being made.

Which of the following statements is true concerning the statement of cash flows?

The net change in cash will equal the net change in all noncash accounts.

Other Long-Term Liabilities are

a. obligations not properly considered as current liabilities or long-term debt b. some deferred income taxes c. some retirement obligations

Usually, Land appears on the balance sheet at

acquisition cost

The value of fixed assets (such as plant, property, and equipment) included in total assets on the statement of financial position is/are the

acquisition cost reduced by accumulated deprection

All of the following are classified as noncurrent assets except

advances from customers

Current liabilities

are obligations that a firm expects to pay or discharge during the normal operating cycle of the firm, usually one year b. includes liabilities to merchandise suppliers, employees, and governmental units c. includes notes and bonds payable to the extent that they will require the use of current assets within the next year

The Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," requires that the statement of cash flows explain the changes in the firm's

cash and cash equivalents during the accounting period

Liabilities are typically classified on U.S. balance sheets as

current liabilities, long-term debt, or other long-term liabilities

In the income statement, a firm incurs a net loss when

expenses exceed revenues during an accounting period

Expenses measure

the outflows of assets from selling goods and providing services to customers b. the increase of liabilities from selling goods and providing services to customers

The balance sheet amount for retained earnings represents

the sum of all prior earnings of a firm in excess of dividends

Assets are classified as current for reporting purposes when

they are reasonably expected to be turned into cash or to be sold or consumed during the normal operating cycle of the business.