Accounting Ch.1

Which of the following statements is NOT correct about the financial statements?

A balance sheet reports assets, liabilities, revenues, and expenses

Which of the following statements regarding financial reports is not correct?

A statement of stockholders' equity reports revenues, net income, and dividends information

Which of the following items would not appear in an income statement?

Accounts Payable

Materiality is based upon which factor(s)?

Amount and nature of an item

Which of the following best describes revenue?

Amounts earned from providing goods and services to a customer

The accounts that represent the resources of the company are called:

Assets

The accounting equation is defined as:

Assets = Liabilities + Stockholders' Equity

The equation best describing the balance sheet is:

Assets = Liabilities + Stockholders' Equity

The balance sheet depicts which of the following equations?

Assets = liabilities + stockholders' equity

. An alternative form of the accounting equation is:

Assets Liabilities = Stockholders' Equity

Liabilities are shown in which of the following statements?

Balance sheet

The financial statement that represents activity over the entire life of the company is the:

Balance sheet

The financial statement that represents the accounting equation is the:

Balance sheet

Which of the following financial statements reports a company's retained earnings?

Balance sheet

Retained earnings at the end of the year is calculated using:

Beginning retained earnings, net income, and dividends

International Accounting Standards Board (IASB)

Body that is attempting to develop a single set of high-quality, understandable global accounting standards

Which of the following is not a major section in the statement of cash flows?

Cash flows from customers

statement of cash flows

Change in cash as a result of operating, investing, and financing activities

Which of the following accounts appears in the statement of stockholders' equity?

Common Stock, retained earnings

The qualitative characteristic that says accounting information can influence users' decisions by allowing them to assess past performance is:

Confirmatory value

The form of business organization that is legally separate from its owners is a:

Corporation

Which business form has the advantage of limited liability?

Corporation

Constraints on qualitative characteristics of accounting information include:

Cost effectiveness

Liabilities are best defined as

Debts or obligations the company owes resulting from past transactions

The account type that represents payments to stockholders is called:

Dividends

One disadvantage of the corporate form of business is:

Double taxation

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the:

Economic entity assumption

The costs associated with producing revenues are referred to as:

Expenses

The costs of providing goods and services to customers are referred to as:

Expenses

The independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States is the:

FASB

Independent auditors express an opinion on the:

Fairness of financial statements

Fundamental qualitative characteristics of accounting information are:

Faithful representation and relevance

Today, financial accounting and reporting standards in the United States are established primarily by the:

Financial Accounting Standards Board

Transactions of a company involving external sources of funding are referred to as

Financing activities

The body of rules and procedures that guide the measurement and communication of financial accounting information in the United States is known as:

Generally Accepted Accounting Principles (GAAP)

GAAP is an abbreviation for:

Generally accepted accounting principles

If a company has gone bankrupt, its financial statements likely violate the:

Going concern assumption

The assumption that a business will continue to operate into the future is the

Going concern assumption

Expenses are shown in which of the following statements?

Income statement

Which financial statement is typically prepared first?

Income statement

The financial statement(s) that record activity over an interval of time is (are) the

Income statement and statement of cash flows

Net income (loss) appears in which two financial statements?

Income statement and statement of stockholders' equity

Transactions of a company that include the purchase and sale of long-term productive assets are referred to as

Investing activities

The major underlying assumptions of accounting include all of the following except:

Legal liability

Creditors' claims to a corporation's resources are referred to as:

Liabilities

The accounts that represent resources owed to creditors are called:

Liabilities

Which accounting amount best represents value created for stockholders during the current period?

Net income

Which accounting number has the single greatest impact on stock prices?

Net income

Which financial accounting number impacts stock prices more than any other single piece of information?

Net income

Which of the following items is reported in the statement of stockholders' equity?

Net income

Accounting information that does not provide measurement bias in favor of a particular set of companies has the characteristic of:

Neutrality

The conceptual framework's qualitative characteristic of faithful representation includes:

Neutrality

Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:

Operating activities

Of the following, the most important objective for financial reporting is to provide information useful for:

Predicting cash flows

The conceptual framework's qualitative characteristic of relevance includes:

Predictive value

For accounting information to be relevant, it should possess which of the following characteristics?

Predictive value, confirmatory value, and/or materiality.

The International Accounting Standards Board:

Promotes the use of high-quality, understandable global accounting standards

The equation best describing the income statement is:

Revenues Expenses = Net Income

Net income can best be described as:

Revenues minus expenses

revenues

Sales of products or services

Generally Accepted Accounting Principles (GAAP) are best defined as:

Standards or methods for presenting financial accounting information

Limited liability means

Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket

The owners' interest in a corporation is called

Stockholders' equity

Which of the following best explains the meaning of total stockholders' equity?

The amount of capital invested by stockholders plus profits retained over the life of the company

Liabilities can be best described as:

The amount owed to creditors

If accounting information is considered to have faithful representation, then which of the following is true?

The information represents to users what it claims to represent

Which one of the following statements regarding financial reports is correct?

The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year.

Financial reporting objectives do not include providing information:

To determine market values, assess profit potential, and evaluate management

sole partnership

a business owned and managed by a single individual

partnership

a business owned by two or more people

Statement of Cash Flows

amount of cash received from borrowing money from a local bank

Liabilities

amounts owed

what does a balance sheet show?

assets, liabilities, owner's equity

traditional careers in public accounting include

auditors, tax preparers/planners, business consultants

which financial statement reports a company's assets and liabilities?

balance sheet

Which of the following is a balance sheet item?

cash

Statement of stocholders equity

change in owners claims to resources

Enhancing qualitative characteristics of accounting information include:

comparability and consistency

expenses

costs of selling products or services

dividends

distributions to stockholders

corporation

entity legally separate from it's owners

which of the following describes the cost of selling to customers?

expenses

Which of the following is not a balance sheet item?

expenses, revenues

which body has the primary responsibility for the establishment of generally accepted accounting principles?

financial accounting standards board

securities and exchange comission

group that has been given power by congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded

which financial statement shows a company's revenues and expenses?

income statement

In what are financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity?

income statement, statement of stockholders equity, balance sheet

auditors

independent intermediaries that help to ensure that management approximately applies financial reporting rules in preparing the companys financial statement

Financial Accounting Standards Board (FASB)

independent, private-sector group that is primarily responsible for setting financial reporting stands in the u.s.

which of the following represents an obligation of the company?

liabilities

financial accounting

measuring a company's business activities and communicating those measurements to external parties

Stocholders' equity

owners claims to resources

a component/aspect of relevant accounting information includes:

predictive value

income statement

profitability of the company

balance sheet

resources equal creditors and owners claims to those resources, total amounts owed to workers at the end of the year

assets

resources of a company

income statement

revenue from sales to customers during the year

what does an income statement show?

revenues, expenses

statement of stockholders' equity

the change in retained earnings due to net income and dividends

which of the following best describes an important function of financial accounting?

to support the efficient distribution of society's resources