SB Chapter 2

Which of the following concepts/principles relate to the entire model?

1.) Accounting equation 2.) Going concern 3.) Accounting entity

Which of the following concepts/principles relate to bookkeeping procedures and the accounting process?

1.) Accounting period 2.) Accrual 3.) Revenue recognition 4.) Matching

Identify the information that the current generally accepted accounting principles and auditing standards require the financial statements of an entity to show for the reporting period.

1.) Earnings for the period 2.) Investments by and distributions to owners (i.e., stockholders) during the period 3.) Financial position at the end of the period 4.) Cash flows during the period

Which of the following are the required financial statements under generally accepted accounting principles and auditing standards?

1.) Income statement 2.) Balance sheet 3.) Statement of cash flows 4.) Statement of changes in stockholders' equity

Which of the following concepts/principles relate to transactions?

1.) Objectivity 2.) Unit of measurement 3.) Cost principle

Which of the following statements are true regarding the matching concept?

1.) Revenues are recorded in the period in which they are earned. 2.) Expenses are recorded in the period in which they are incurred.

Which of the following items are normally included as key components of a corporation's annual report?

1.) The notes to the financial statements. 2.) A five-year (or longer) summary of key financial data. 3.) The report of the external auditor's examination of the financial statements

Which of the following items are normally included as key components of a corporation's annual report?

1.) The reporting firm's financial statements for the year 2.) Highlights for the year, including net revenues, diluted earnings per share, and return of stockholders' equity 3.) Management's discussion and analysis of the financial statements

The balance sheet equation:

1.) must remain in balance after each transaction is recorded. 2.) can be expressed as A = L + SE 3.) is another term for the accounting equation.

_______ _________refers to the entity for which the financial statements are being prepared.

Accounting entity

Understating assets and/or overstating liabilities when making judgments and estimates is driven by which of the following concepts/principles?

Conservatism

__________ principle in accounting relates to making judgments and estimates that result in lower profits and asset valuation estimates rather than higher profits and asset valuation estimates.

Conservatism

Limiting a firm's ability to switch back and forth between alternative generally accepted accounting methods is driven by which of the following concepts/principles?

Consistency

Most assets are not recorded at their current market values because of the limitations imposed by the _______ principle.

Cost

The ________ principle refers to the fact that transactions are recorded at their ______ cost of the entity as measured in dollars.

Cost / original or historical

Which concept/principle supports the fact that assets such as land, buildings, and equipment are not reported at their fair values?

Cost principle

Providing more (rather than less) detail in the notes to the financial statements is driven by which of the following concepts/principles?

Full disclosure

Which of the following is true regarding the balance sheet components?

Liabilities are the obligations of the organization.

_________ means that absolute exactness is not necessary in the amounts shown in the financial statements.

Materiality

Which concept/principle suggests that a given transaction should be recorded in the same way in all situations?

Objectivity

__________ refers to accountants' desire to have a given transaction recorded in the same way in all situations.

Objectivity

In the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that net income affects the ________ __________ account within stockholders' equity.

Retained Earnings

Which concept/principle supports the notion that for companies reporting their financial statements in United States dollars, no adjustments are made for the effects of inflation?

Unit of measurement

A = L + SE is called the _______ _________.

accounting equation

The period of time selected for reporting financial statements is known as the _______ ________.

accounting period

The four concepts/principles that relate to bookkeeping procedures and the accounting process are:

accounting period, matching, revenue recognition, and accrual

The balance sheet is a listing of the organization's:

assets, liabilities, and stockholders' equity

An entity's financial position at the end of a reporting period is reported on the:

balance sheet

Financial statements that show a column for the current year and the prior year are known as _______ financial statements.

comparative

The four concepts/principles that relate to the financial statements are:

consistency, full disclosure, materiality, and conservatism

The matching concept means that:

expenses incurred to generate revenues must be matched to revenues earned for any given period

The _______ _________ concept requires that the financial statements and notes include all necessary information to prevent a reasonably astute user of the financial statements from being misled.

full disclosure

The _______ _________ concept refers to the presumption that the entity will continue to operate in the future.

going concern

The concept that refers to the presumption that the entity will continue to operate in the future is known as the:

going concern concept

An entity's earnings for a reporting period are reported on the:

income statement

The balance sheet:

is like a snapshot of the organization's financial position, frozen at a specific point in time.

The ________ concept does not mean that revenue and expense for a reporting period are equal.

matching

The idea that tells absolute exactness in the amounts shown in the financial statements is not necessary is portrayed by the concept of _____.

materiality

Most assets are reported on the balance sheet based on their:

original (historical) cost

Accrual accounting results in:

recognition of revenues when they are earned (at the point of sale) and recognition of expenses when they are incurred

The balance sheet is sometimes called the:

statement of financial position

The investments by and distributions to owners during a reporting period are reported on the:

statement of stockholders' equity

In the horizontal model representation of the financial statements, _____.

the arrow pointing from net income to stockholders' equity indicates that net income affects retained earnings

A corporation's annual report contains the reporting firm's financial statements and each of the following key components, except:

the reporting firm's operating budget for the next fiscal year

If the total liabilities is equal to $8,000 and the total stockholders' equity is equal to $4,000, then:

the total assets is equal to $12,000

If the total assets is equal to $10,000, and the total stockholders' equity is equal to $3,000, then:

the total liability is equal to $7,000

If the total assets is equal to $15,000 and the total liabilities is equal to $9,000, then:

the total stockholders' equity is equal to $6,000.

A firm prepares comparative financial statement so that _____.

the users of the data can easily spot changes in the firm's financial position and in its results of operations

Revenue is recognized at the time of sale, which is when:

title passes to the buyer or when the services are performed

In the United States, the dollar is the _______ of __________ for all transactions.

unit measurement