T ACCT 210 - CH. 1 FLASH CARDS

The correct definition of a balance sheet includes which of the following statements?

*The statement reports assets, liabilities, and equity at a point in time *The statement reports the equality of the accounting equation at any point in time *The statement reports the financial position of a company at a point in time

Describe the order in which a company prepares financial statements

1) Income Statement 2) Statement of owner's equity 3) Balance sheet 4) Statement of cash flows

What is the accounting equation?

Assets = Liabilities + Equity

The accounting assumption related to separating business transactions from the owner's transactions is called the:

Business entity

Users of accounting information can be divided into two main groups. These groups include:

Internal and External

An employee that has unpaid bills might exhibit the following fraud factor:

Pressure

A (proprietorship/partnership/corporation) is a business entity by one person

Proprietorship

Which list contains ONLY liabilities?

Taxes Payable, Accounts Payable, Wages Payable

What correctly represents the accounting equation?

What a business owns will always equal what it owes to creditors and owners

Describe the effect of withdrawals on owner's equity

Withdrawals cause owner's equity to decrease

What is a liability?

A liability is an amount owed to a creditor

In every financial statement, there exists single and double underlines. What are these and when do you use them?

A single-ruled line denotes an addition or subtraction and double underlines indicate the final totals

Select the statement that best defines "return" when used in business and accounting

Return is the income received from an investment

Complete the following statement regarding risk analysis: Higher risk implies higher, but riskier, expected (outcomes/returns/investment)

Returns

What organization has the legal authority to create Generally Accepted Accounting Principles (GAAP)?

SEC

What is the correct definition of an asset?

Something of value that a business owns or has title to

What is the rule of entering transactions into the accounting equation?

The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity

What is the MOST accurate definition of owner investments?

Cash or assets an owner puts into the business

A (proprietorship/partnership/corporation) is a separate entity separate withe the same rights as a person

Corporation

Jackson's Catering Services sold cookies to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:

Increasing Cash; Increasing Revenues

The statement of owner's equity explains changes in equity from net income (or loss) and from any owner _____ and _____ over a period of time.

Investments, withdrawals

How would you characterize a company's Accounts Receivable account?

It is an asset account

The area of accounting that serves the decision-making needs of internal users is referred to as (managerial/financial/research) accounting

Managerial

How is net income calculated?

Net Income = Revenues - Expenses

Identify which accounts would belong on the statement of owner's equity

Owner's Capital and Owner's Withdrawal

A (proprietorship/partnership/corporation) is a business owned by two or more people

Partnership

Compare and contrast Private Accounting and Public Accounting,

Public Accounting *Offers tax advice and auditing services Private Accounting *Employees work for businesses Both *Accounting specialists in this area of accounting are highly regarded

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice

Given that Jacob's Chocolates had owner investments of $4,000; net income during the period of $10,000; and owner withdrawals of $300, calculate the ending balance in the Owner's Capital account

$13,700 Owner investments ($4,000) + Net Income ($10,000) = 14,000 $14,000 - Owner withdrawals ($300) = $13,700

An internal user of accounting information is:

*A human resource manager *A user who is directly involved in managing and operating an organization *A marketing manager

When supplies are purchased on credit, it means that:

*A liability has been incurred *The business will pay for the supplies at a later time *The Accounts Payable account will be increased

Identify which statement(s) is (are) correct as to why accounting is important

*Accounting information summarizes or conveys information about an organization's business activities *Manager, creditors, investors and owners need reliable financial information in order to make decisions *Accounting information identifies, records, and communicates information about a business

What are some examples of accounts that would appear on a balance sheet?

*Cash *Accounts Payable *Supplies *Equipment *I.M. Greasy, Capital

Which accounts are qualified as assets?

*Cash *Supplies *Building *Land *Accounts Receivable

The heading of every financial statement contains several line items. Identify those items

*Company name *Statement title *Date or time period

What describes the effect of expenses on equity?

*Expenses cause the owner's equity to decrease

A customer of Landen Consulting Company makes a $400 payment of cash on a bill for services provided last month. Record this transaction into the accounting equation of Landen Consulting by:

*Increasing Cash, $400 (the customer is paying Landen Consulting) *Decreasing Accounts Receivable, $400

Which statement(s) define(s) why accounting information is useful?

*It is helpful in comparing the performance of one company against a competitor *It is essential to help make business decisions *It records, summarizes, and reports business transactions

Identify the broad opportunity areas of accounting

*Managerial *Financial *Taxation

The Dodd-Frank Act was passed to:

*Protect consumers *Put an end to "too big to fail" notion *Promote accountability and transparency

Which statement(s) define an asset?

*Resources with future benefit *Resources controlled by the business *A resource owned

What is true regarding the effect of revenues on the equity of a business?

*Revenues cause owner's equity to increase *Revenues that increase equity have many forms, such as consulting services and rental revenue

Johna's Plant Nursery pays the salaries of its two employees. How will this transaction affect the accounting equation?

*Salaries expense will be increased *Equity will be decreased

Identify the roles of the International Accounting Standards Board (IASB) and International Financial Reporting Standards (IFRS)

*The IASB issues IFRS that identify preferred accounting practices *The IASB issues IFRS to increase comparability of accounting reports between companies in different countries *The IASB consists of individuals from many countries

When a business provides a service to a customer "on credit," it means that:

*The business will receive payment for its services at a later time *An asset has been created or increased *Accounts Receivable will be increased

Which of the following statements explain(s) how the accounting equation applies to businesses?

*The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners *The relation of assets, liabilities and equity is reflected in the equation *The equation applies to all business transactions *The equation states that Assets = Liabilities + Equity

Which of the following statements explain(s) how the accounting equation applies to businesses?

*The relation of assets, liabilities, and equity is reflected in the equation *The equation applies to all business transactions *The equation states that Assets = Liabilities + Equity *The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners

An owner withdraws $60 cash for personal use. You would record this transaction in the accounting equation by decreasing the (cash/accounts payable/accounts receivable) account and (increasing/decreasing) the Withdrawals account

1) Cash 2 Increasing

Jackson's Programming paid its June rent of $500 cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence: Jackson would decrease (expenses/cash/revenues) and increase (expenses/equity/revenues) in the accounting equation

1) Cash 2) Expenses

FILL IN THE BLANK: Owner withdrawals cause a(n) (increase/decrease) in owner's equity and are recorded directly in owner's (capital/withdrawal/equity)

1) Decrease 2) Withdrawal

Owner withdrawals cause a(n) (increase/decrease) in owner's equity and are recorded directly in owner's (capital/withdrawal/equity)

1) Decrease 2) Withdrawal

When using the accounting equation, recording the purchase of equipment for cash would include an increase to the (Cash/Equipment/Supplies) account and a decrease to the (Cash/Equipment/Supplies) account.

1) Equipment 2) Cash

The four major types of transactions that affect equity are _______, _______, owner's withdrawals, and owner's investments.

1) Expenses 2) Revenues

Owner investments cause a(n) (increase/decrease) in equity and are entered directly in Owner's (Capital/Withdrawals/Revenue)

1) Increase 2) Capital

The correct definition of revenues is: Revenues (increase/decrease) (liabilities/equity) and are earned from the sale of products and services

1) Increase 2) Equity

Bob's Bakery is making a partial payment of $70 for baking supplies it purchased in a previous month. Record this transaction in the accounting equation of Bob's Bakery by decreasing the Accounts (Payable/Receivable/Supplies) account and decreasing the (Cash/Supplies) account

1) Payable 2) Cash

ABC Co. performs $200 of services for a customer, but does not get paid right away. Demonstrate how ABC Co. would record this transaction in the accounting equation by completing the following sentence. ABC Co. would increase the Accounts (Payable/Receivable) account and increase the (Cash/Revenue) account in the accounting equation.

1) Receivable 2) Revenue

Define what the income statement reports by completing the following sentence: The income statement describes a company's (assets/revenues) and (expenses/liabilities) along with the resulting net income or loss over a period of time due to earnings related activities

1) Revenues 2) Expenses

What is the expanded accounting equation?

Assets = Liabilities + Owner's Capital - Owner Withdrawals + Revenues - Expenses

What is the most accurate definition of owner withdrawals

Assets an owner takes from the business for personal use

Sally Smith purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by:

Decrease Cash; Increase Supplies

Define the following: Expenses, Revenues, Withdrawals, and Investments?

EXPENSES: Decrease in equity and are the cost of assets or services used to earn revenue REVENUES: Increase equity and are the assets earned from a company's earning activities WITHDRAWALS: Decrease equity and are the assets removed from the company for personal use INVESTMENTS: Increase equity and are assets an owner puts into the business

Define Financing activities, Operating activities, Investing activities

FINANCING ACTIVITIES *Provide money needed to pay for resources such as land and buildings INVESTING ACTIVITIES *The acquiring and disposing of assets that an organization uses in its business OPERATING ACTIVITIES *The every day activities that occur in running a business, selling a product or providing a service

Define Income Statements, Balance Sheets, Statements of Owner's Equity, and Statements of cash flows

INCOME STATEMENT *Describes a company's revenues and expenses along with the resulting net income or loss over a period of time *Total revenues - Total expenses = Net income (or loss) STATEMENT OF OWNER'S EQUITY *Explains changes in equity from net income (or loss) and from any owner investments and withdrawals over a period of time * Beginning Capital + Owner Investments + Net Income - Withdrawals = Ending Capital BALANCE SHEET *Describes a company's financial position (types and amounts of assets, liabilities, and equity) at a point in time STATEMENT OF CASH FLOWS *Identifies cash inflows (receipts) and cash outflows (payments) over a period of time

Sally Smith decided to start a sea shell business. Her initial investment in the business consisted of $10,000 in cash. Record this transaction in the accounting equation of the new business by:

Increasing Cash; increasing S. Smith, Capital

On 8/1, supplies costing $5000 were purchased on credit. Record this transaction in the accounting equation by:

Increasing Supplies and increasing Accounts Payable

Buying and selling of long-term assets such as land and equipment would be included in the (operating/investing/financing) activities section of the Statement of Cash Flows

Investing