accounting test 1: smart book 1
statement of stockholders equity
a financial statement that shows changes in stockholders equity over an interval of time
ethics
a term that refers to a code or moral system that provides criteria for evaluating right or wrong
which of the following aspects relate to the information provided in an income statement?
ability to earn a profit from its operations during the current period
The two main functions of __________ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.
accounting
the system that maintains records of a companies operations and then communicates that informations to decision makers is referred to as
accounting
what's included on the liabilities side of a balance sheet
accounts payable salaries payable utilities payable interest payable notes payable other liabilities
management discussion and analysis and note disclosures to the financial statements are included in the
annual report
what are the three major aspects on a balance sheet
assets liabilities stockholders equity
what's the accounting equation
assets = liabilities + stockholders equity
the financial statement that displays a firms financial position on a particular date is the
balance sheet
which of the following financial statements shows a firm's financial position on a particular date?
balance sheet
what's included on the stock holders equity side of the balance sheet
common stock retained earnings
the hiding of an income statement should include
companies name title of the financial statement time period covered by the financial statement
if the same accounting principles and methods are used for similar events by two different firms, this enhances what accounting qualitative characteristic?
comparability
faithful representation requires that information is
complete neutral free from material error
according to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?
confirmatory and predictive value
the two sources of stockholders equity are amounts
earned by the corporation paid in from shareholders
Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.
expense income statement
FASB
financial accounting standards board that establishes financial accounting and reporting standards in the US
Companies communicate information about their business activities primarily through
financial statements
the three classifications on the statement of cash flows are cash flows from
financing activities investing activities operating activities
the income statement is most useful for predicting
future profitability
GAAP
generally accepted accounting principle that is the accounting standard for the US SEC
materiality
impact fo financial accounting information on investors and creditors decisions
The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the
income statement
the financial statement that is most useful in explaining a companies stock price performance is the
income statement
what financial statement reports revenues and expenses
income statement
The four financial statements published to provide information to external users include which of the following?
income statement balance sheet statement of stockholders equity statement of cash flows
which of the following are attributes of FASB?
independent, private sector full time voting members large support staff
what information will not need to be reported under GAAP
information that will not affect external users' decisions
The impact of financial accounting information on investors' and creditors' decisions is closely related to the concept of:
materiality
if revenues are less than expenses, a company has
net loss
which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?
neutrality
financial statements
periodic reports published by the company for the purpose of providing information to external users
the advantage of the corporate form of organizations is that a corporation
provides limited liability to stockholders
Predictive value and confirmatory value are components of which fundamental qualitative characteristic?
relevance
to be useful for decision making, information should posses the fundamental qualities of _____________ and ______________
relevance faithful representation
which of the following represents the net income earned by a corporation and not yet paid to shareholders?
retained earnings
retained earning equations
retained earnings = net income - dividends
what are the three main headings of an income statement
revenue expenses net income
net income equation
revenues - expenses
what are the three most common forms of business organizations
sole proprietorship corporation partnership
stockholders equity equation
stockholders equity= common stock + retained earnings
predictive value
the companies future cash generating abilities
retained earnings represents
the total net income earned over the life of the company that has not been distributed as dividends
relevance
accounting information should possess confirmatory value and/or predictive value
the purpose of a statement of cash flows is to provide information about the
cash receipts and cash disbursements during a period
confirmatory value
net income
what's included in stockholders equity (in depth)
beginning balance of retained earnings issuance of common stock add: net income for period less: dividends ending balance (net income)
ending retained earnings is calculated by
beginning retained earnings + net income - dividends
what's included on the asset side of a balance sheet
cash accounts receivable supplies equipment other assets
a business organization that is legally separate from its owners is called
corporation
what are the 4 primary financial statements
income statement balance sheet statement of stockholders equity statement of cash flows
does materiality have to be reports under GAAP
yes
