SB 1 Acctg Intro

The complete collection of a company's accounts is called the _________ ledger.

general

The assumption that a business is able to continue its operations into the foreseeable future is the _____ doctrine.

going concern

The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the ______.

income statement

An asset source transaction causes a(n) ______.

increase in an asset account and an increase in a liability or stockholders' equity account

Earning cash revenue by providing services to customers will cause the amount of cash to ________, and the amount of retained earnings to .

increase;

In a business liquidation, ______.

liabilities are paid in full before funds are distributed to owners creditors may be unable to collect the full amount of the liabilities

In accounting terms, the obligations a business owes to its creditors are called

liabilities or liability

The Statement of Changes in Stockholder's Equity captures information related to the company's ______.

owners

The right side of the accounting equation for a corporation may be viewed as ______.

sources of assets obligations and commitments of the business claims of creditors and owners

Businesses have a(n) ______ function, which means that it has a duty to protect and use its assets for the benefit of the owner.

stewardship

An event that causes assets and liabilities to decrease is an asset _____ transaction.

use

True or false: All companies use the same number of accounts.

False Reason: The number of accounts depends on the specific business involved. For example, one business may own land while another does not. Accordingly, one business would have a land account, while the other would not.

True or false: The sacrifices a company incurred in order to produce benefits during the period are reported on the statement of changes in stockholders' equity.

False Reason: The sacrifices a company incurred during the period are reported as expenses on the income statement.

Which items are presented on the statement of changes in stockholders' equity?

Net income Beginning common stock Ending retained earnings Total stockholders' equity Dividends Note: expense, cash, notes payable, and revenue appear on the income statement

Which items are not presented on the statement of changes in stockholders' equity?

Revenue Cash Expense

Which financial statement(s) reports the effects of transactions on common stock and retained earnings?

Statement of Changes in Stockholders' Equity

Which of the following questions are correct?

The going concern doctrine assumes a business will continue operations into the foreseeable future. Many procedures and practices used by accountants are based on a going concern assumption.

Which of the following statements are true?

The obligations of the business to creditors are shown on the right side of the accounting equation. The right side of the accounting equation shows the sources of assets. note: Paying dividends is an option, not a requirement.

Detailed information about the accounting equation is maintained in records commonly called ____________.

accounts

Businesses commonly acquire assets from ______.

borrowing from creditors earning revenue ( + cash assets) issuing common stock

When a business borrows cash from a creditor, ______.

both assets and liabilities increase Reason: When a customer borrows cash from creditors, it receives cash and incurs an obligation to repay the amount borrowed. As a result, the amount of its assets (cash) and the amount of its liabilities (notes payable) increase.

The amount of cash dividends a company can pay are limited by the amount of the company's ______.

cash retained earnings

Green Company has $10,000 of assets. Fifty percent of the assets were acquired from the issue of common stock and thirty percent were acquired from earnings. Based on this information, the dollar value of liabilities must be ______.

$2,000

Monster Media's (MM) accounting records indicate that the company has $500 of cash; $2,500 of land; $1,600 of common stock; and $1,400 of retained earnings. Based on this information, the maximum cash dividend the company can pay is ______.

$500 Reason: The company has only $500 cash available to pay dividends. There is no cash in retained earnings.

Which of the following statements about assets are true? (Select all that apply.)

- A business may acquire assets from three sources including creditors, investors, and its operations. - Assets are resources used in the process of generating revenue.

The accounting records of Direct Marketing Company (DMC) indicate that the company has $500 of cash; $3,500 of land; $1,000 of liabilities; $600 of common stock; and $2,400 of retained earnings. Based on this information, the percent of assets provided by earnings is ______

60%. Reason: Total assets amount to $4,000 ($500 cash + $3,500 Land). Retained earnings = 60% ($2,400/$4,000) of total assets.

Which of the following is not a business asset? Multiple choice question. Cash in the bank An obligation to repay debt A plot of land Projection equipment

An obligation to repay debt

Which financial statement is most similar to the accounting equation?

Balance Sheet

Which statement reports ending balances for total assets, total liabilities, and total stockholders' equity?

Balance Sheet

When a company pays cash to purchase land, the amount of cash ______.

decreases and the amount of land increases Say it a better way: the amount of cash decreases and the amount of $ that goes into the record/ account for land increases, the amount of land doesn't physically increases

When a company pays cash to purchase land, the TOTAL amount of assets and liabilities ______.

do not change Reason: Cash decreases and land increases by the same amount. Since the decrease and increase offset, the total amount of assets (left side of equation) is not affected.

When it is liquidated, a business has assets of $500 cash, $800 of liabilities and $400 common stock and ($700) deficit in retained earnings. Based on this information, ______.

owners will receive zero creditors will receive $500

The text defines ______ as an increase in assets that results from providing goods and services to customers.

revenue