Chapter 1

Economic entity assumption

Harbor's CEO purchased a yacht for personal use and charged it to the company

Income Statement

How did this year's sales figures compare with last year's sales figures

Balance Sheet

How much does the company owe its suppliers in total?

Balance Sheet

How much in borrowings does the company currently owe?

Consistency

The ability to compare and contrast the financial activities of the same company over a period of time

Retained Earnings

Equity generated from profitable operations and retained in the business

Time period assumption

Harbor added four additional weeks to its fiscal year so that it could make its income look stronger. Past years were 52 weeks

Balance Sheet

Financial statement that reports assets, liabilities, and equity

Cost Principle

Inventory with a cost of $186,400 is reported at its market value of $235,600

Matching principle

Matching revenues and expenses

Revenues exceed expenses

Net income is created in a time period when:

Revenue recognition principle

Revenues are recorded when they are earned

Understandability

The ability of accounting information to be comprehensible to those who have a reasonable understanding of business and are willing to study the information with reasonable diligence

Comparability

The ability to compare and contrast the financial activities of different companies

Relevance

The capacity to affect business decisions

Realiability

The dependability of accounting information

The income statement and the balance sheet

The statement of retained earnings links which two financial statements?

Materiality

The threshold over which an item begins to affect decision making

Conservatism

The way in which the accountants deal with uncertanty

Understandability, relevance, consistency

What are the 3 qualitative characteristics of accounting?

Statement of cash flows

What financial statement is the Income Activities on?

Income Statement

What was the company's total interest cost last year?

Going concern

Which assumption states that an economic entity will continue its operations indefinitely?

Income statement

Which financial statement reports revenues and expenses?

Developing economic information

Which of the following is not included in the definition of accounting?

Revenues recognition principle

revenues of 25,000 earned in the prior year were recorded in the current year