Chapter 1

ethics

is 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 four financial statements published to provide information to external users include which of the following?

Balance Sheet Income Statement Statement of Stockholders' Equity Statement of Cash Flows

Which of the following financial statements shows a firm's financial position on a particular date?

Balance sheet

Which of the following appear(s) on the balance sheet?

Common stock Utilities payable Accounts receivable

Which of the following appear on the statement of stockholders' equity?

Dividends Net income Beginning balance of retained earnings

Which of these would be found on a company's balance sheet?

Equipment Notes payable Accounts receivable

Which items are found on an income statement?

Expenses Revenues

Which of the following are attributes of FASB?

Full-time board members Private sector organization Independence

The accounting equation is: Assets = ______ + Stockholders' Equity

Liabilities

Which of the following items are found on a balance sheet?

Liabilities Stockholders' equity Assets

According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?

Predictive value Confirmatory value

Predictive value and confirmatory value are components of which fundamental qualitative characteristic?

Relevance

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as

Retained Earnings

Which of the following represents the net income earned by a corporation and not yet paid to shareholders?

Retained earnings

When a company earns net income, its retained earnings:

increase

The accounting equation is: Assets = Liabilities +

Stockholders' Equity

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as

accounting

Management discussion and analysis and note disclosures to the financial statements are included in the

annual report

The financial statement that displays a firm's financial position on a particular date is the

balance sheet

The purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period.

In our society, the two main functions of accounting are to

communicate information to investors and creditors. measure business activities.

A potential disadvantage to a corporation is

double taxation

Stockholders' equity arises primarily from amounts invested by shareholders and amounts

earned by the corporation

Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.

expense; income statement

The three classifications on the statement of cash flows are cash flows from

financing activities. investing activities. operating activities.

Information that best explains companies' stock price performance is reported on the

income statement

The financial statement that is most useful in explaining a company's stock price performance is the

income statement.

In addition to the financial statements, which of the following must be included in the annual reports?

management discussion and analysis. notes disclosures.

The impact of financial accounting information on investors' and creditors' decisions is closely related to the concept of:

materiality

In addition to the financial statements, which of the following must be included in the annual reports?

notes disclosures. management discussion and analysis.

The statement of cash flows classifies items as

operating, investing, and financing.

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.

Profits earned by a company that have not been paid to stockholders are called

retained earnings

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows.

The purpose of an income statement is to

summarize the profit-generating activities that occurred during a particular reporting period

FASB

the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.

Retained earnings represents

the total net income earned over the life of the company that has not been distributed as dividends.