Accounting CH. 1 quiz

Management discussion and analysis (MD&A)

A section of the annual report that presents management's views on the company's ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations.

In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results? a. Notes to the financial statements b. Management discussion and analysis section c. Balance sheet d. Auditor's report

d

dividends

distributions of cash from a corporation to its stock holders

assets

future economic benefits

Investing Activities

involves acquiring the resources necessary to run the business

sole proprietorship

ownership is limited to one person

liabilities

Creditor claims against total assets of the business

internal users

Officers and others who manage the business

annual report

a report prepared by management that presents financial information

corporation

a separate legal entity under state laws

The heading on the statement of cash flows identifies all of the following except a. the preparer of the statement. b. the company c. the time period covered by the statement. d. the type of statement.

a

Claims of owners are called a. dividends. b. stockholders' equity. c. liabilities. d. income payable

b

Notes to the financial statements a. are optional. b. help clarify information presented in the financial statements. c. are generally brief and few in number. d. need not be read in detail if an unqualified opinion accompanies the financial statements

b

Retained earnings at the end of the period is equal to a. retained earnings at the beginning of the period plus net income minus liabilities. b. retained earnings at the beginning of the period plus net income minus dividends. c. net income. d. assets plus liabilities.

b

Stockholders' equity is comprised of a. common stock and dividends. b. common stock and retained earnings. c. dividends and retained earnings. d. net income and retained earnings

b

Which financial statement is prepared first? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flows

b

Which of the following statements is true? a. Amounts received from issuing stock are revenues. b. Amounts paid out as dividends are not expenses. c. Amounts paid out as dividends are reported on the income statement. d. Amounts received from issued stock are reported on the income statement

b

In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement? a. I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. b. You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? c. Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. d. Dividends are deducted from retained earnings on the balance sheet.

c

Payments to stockholders are called a. expenses. b. liabilities. c. dividends. d. distributions.

c

The balance sheet a. summarizes the changes in retained earnings for a specific period of time. b. reports the changes in assets, liabilities, and stockholders' equity over a period of time. c. reports the assets, liabilities, and stockholders' equity at a specific date. d. presents the revenues and expenses for a specific period of time.

c

Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed? a. Auditor's report b. Management discussion and analysis section c. Notes to the financial statements d. President's state of the company report

c

Which of the following is not a liability? a. Unearned Service Revenue b. Accounts Payable c. Accounts Receivable d. Interest Payable

c

expenses

consumed assets or services

If the retained earnings account increases from the beginning of the year to the end of the year, then a. net income is less than dividends. b. a net loss is less than dividends. c. additional investments are less than net losses. d. net income is greater than dividends.

d