accounting exam 1
Clem Corporation issues 1,000 shares of common stock for $25,000. Clem purchased equipment for $10,000 by borrowing from the bank. Clem's total assets are
$35,000, Cash $25,000 + Equipment $10,000 = $35,000 total assets.
Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?
$93,000
Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?
$18,000
Green Company has net credit sales of $100,000, an asset turnover ratio of 4, and a receivables turnover ratio of 9. What is the average collection period?
365/receivables turnover = 40.6 days
Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?
A company pays a 6-month insurance premium at the beginning of October. A company pays for 4 months of advertising in the Wall Street Journal on November 1.
Which of these would be found on a company's balance sheet?
Accounts receivable Equipment Notes payable
Which of the following steps are necessary to reconcile the bank balance and the cash account balance
Adjust the company's cash balance for items not in company records Adjust bank's cash balance for items not in bank statement Record items that reconcile the company's cash balance
How do adjusting entries for accrued expenses affect liabilities and expenses?
Adjusting entries for accrued expenses can increase liabilities and increase expenses.
Which of the following statements describes the effect that adjusting entries may have on liabilities?
Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.
In a bank reconciliation, which of the following will require a journal entry by the company?
Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books
If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?
Another asset is increased A liability is decreased
Raven receives a 3-year note receivable from a customer for goods sold. How should Raven report this note receivable in its financial statements?
As a noncurrent asset
Where is inventory reported in the financial statements?
Balance sheet as a current asset
Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit ______ and credit ______.
Cash; Accounts Receivable
When adjusting the company's cash account balance in a bank reconciliation, which item must be added to the cash account balance?
Collections of funds by the bank
The framework for designing an internal control system is provided by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission.
Which of the following appear(s) on the balance sheet?
Common stock Accounts receivable Utilities payable
Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries?
Credit to Accounts Receivable Debit to Allowance for Uncollectible Accounts
Which of the following items are included in cash?
Currency and coins Balance in checking accounts Checks from customers
Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?
Debit Inventory
Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?
Depositing checks into the bank and recording receipts in the accounting records Opening the mail and deposit of checks in the bank
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest cost of goods sold?
FIFO
Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?
FIFO
The private sector organization that is currently responsible for setting accounting standards in the United States is the
Financial Accounting Standards Board.
Which of the following accounts are typically reported in the balance sheet of a manufacturing company?
Finished goods Raw materials Work in process
The allowance method is required by __
GAAP
If a company uses the periodic inventory system, how many entries are made when a sale occurs?
In a periodic system, the cost of goods sold entry is made at the end of the period.
Where is a note receivable reported in the balance sheet?
In either current or noncurrent assets, as appropriate.
Which of the following are financial statements?
Income statement Balance sheet Statement of stockholders' equity
Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?
Interest on the note payable is classified as an expense since it is a cost of borrowing.
Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.
Inventory Cost of Goods Sold
The definition of inventory includes which of the following items?
Items held for resale Items currently in production for future sale Materials used currently in the production of goods to be sold
Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income?
LIFO
The cumulative difference between reporting inventory at LIFO rather than FIFO is commonly referred to as the
LIFO reserve
Who has final responsibility for internal controls?
Management
How do temporary accounts differ from permanent accounts?
Only temporary accounts are cleared out at the end of the accounting period.
Which of the following are detective controls?
Performance reviews Audits Reconciliations
On November 1, 2022, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1 (assume rent is the same amount each month). Movers' year-end financial statements as of December 31, 2022 will show:
Rent expense of $2,000 Prepaid rent of $22,000
Which of the following transactions would normally be recorded as an asset when cash is paid?
Rent paid in advance
Which of the following are stockholder equity accounts?
Retained earnings Common stock
Which of the following is a discount in the amount to be paid if the customer pays within a specified time period?
Sales discount
The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the
Sarbanes-Oxley Act.
When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance?
Service charges Charges for NSF checks
On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:
Service revenue for $1,800
Which of the following methods are not used for inventory costing?
Simple-average NIFO
Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in millions were $105, $115, $110 during the same period. From the perspective of operating cash flows, which company would likely be perceived as riskier?
Smith
The four primary financial statements published to provide information to external users include which of the following?
Statement of Cash Flows Statement of Stockholders' Equity Balance Sheet Income Statement
Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings?
Statement of stockholders' equity
The ending balance in cash is reported in which financial statement(s)?
The balance sheet and statement of cash flows
Who is responsible for providing an opinion on management's assessment of internal control?
The company's auditors
Which of the following statements regarding the statement of cash flows are correct?
The final financial statement that is typically prepared Reports cash disbursements Reports cash receipts
In a perpetual inventory system, when a company sells inventory on account, how many entries are required?
Two entries are required: One entry is required for the sales transaction; a second entry is required to record the cost of goods sold and decrease inventory.
Which of the following methods are available for costing inventory?
Weighted-average FIFO Specific identification LIFO
Which of the following accounts would be found in the balance sheet of a manufacturing company?
Work in process
The account "Allowance for Uncollectible Accounts" is classified as
a contra asset to accounts receivable
In an adjusting entry for expenses incurred but not yet paid ______.
a liability is increasing since cash will be paid in the future due to the expense incurred
A trade discount is
a reduction from list price.
Mueller Inc. utilizes a periodic inventory system. When Mueller incurs shipping costs for purchased goods, the account debited should be
a separate freight-in account.
A(n) __ is the legal right to receive cash from a credit sale and represents an asset of the company.
account receivable
The allowance for uncollectible accounts is a contra account to
accounts receivable.
The amount of cash owed to a company by its customers from the sale of goods or services is referred to as
accounts receivable.
In a perpetual inventory system, freight costs on purchases are
added to the inventory account.
A partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer's expectations is referred to as a sales ___
allowance
To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to
allowance for uncollectible accounts.
A company that expects that some of its customers will not pay the agreed upon sales price must utilize the
allowance method
Revenue in the income statement for the year ended December 31, 2021 equals the:
amount earned by selling goods or services to customers during 2021.
In recording an accrual adjusting entry to account for revenues earned but not yet collected, ___
an asset is increased since cash will be collected at a later date
In a periodic inventory system, purchase returns
are recorded in a separate contra purchases account.
A prepayment such as "Prepaid Insurance" is originally recorded as a(n) ___ when an insurance policy is purchased and will later be expensed in the period used.
asset
Accounts receivable should be classified as a(n)
asset.
Using the perpetual inventory system, what is the effect of a sale of inventory on assets?
assets decrease by the cost of the inventory assets increase by the sales price of the inventory
With the allowance method, bad debt expense is recorded
at the end of the period when bad debts are estimated.
The lower of cost and net realizable value method was developed to
avoid reporting inventory at an amount that exceeds the benefits it provides.
Prepaid rent appears in the ______.
balance sheet because it is an asset
Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to
be more accurate.
A check that is NSF (nonsufficient funds) is a check that
cannot be paid because the account does not contain enough funds.
Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called
checks outstanding.
A journal provides a
chronological record of all transactions affecting a firm.
The entries that transfer the balances of all temporary accounts to retained earnings are referred to as
closing entries
The Sarbanes-Oxley Act applies to
companies that are required to file with the SEC.
Andy records an adjusting entry for deferred revenue. Andy should:
credit a revenue account debit a liability account
When a business provides services to a customer, and the customer promises to pay later, this is referred to as
credit sales
Sales to customers in which the customers pay within 30 to 60 days are referred to as
credit sales. sales on account.
When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following?
credit to Revenue debit to Deferred Revenue
The journal entry to record bad debt expense includes
credit to allowance for uncollectible accounts debit to bad debt expense
The bank will show a customer's deposit on bank statements as a Blank______.
credit, because a deposit is a liability from the bank's point of view
Because cash is assumed to be available for spending, it is typically reported on the balance sheet as a(n) ___
current asset
On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes:
debit to Insurance Expense credit to Prepaid Insurance
Lindell sells $100 of goods to a customer. The customer pays with a personal check. Recording this transaction will include a
debit to cash
Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):
decrease in Accounts Receivable
Prepaid expenses should be ______ by the cost of the asset used during the accounting period.
decreased
Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period.
decreased; increased
A sales allowance _____ the amount owed by the customer for merchandise that is _____ by the customer.
decreases; retained
___ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.
deferred
Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are
deposits outstanding.
The process of allocating the cost of an asset to expense over the useful life of the asset is called
depreciation
The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for
designing an internal control system.
In a perpetual inventory system, purchase discounts and purchase returns
directly reduce the Inventory account balance.
The amount of cash in the balance sheet reflects the
ending cash on the balance sheet date.
Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record ______ bad debt expense ______.
estimated; at the end of the year
If an adjusting entry's credit is to a liability account, then the debit must be to ______.
expense
The formula for calculating interest on a note is
face value x annual rate x fraction of the annual period.
The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources is called occupational __
fraud
A trade discount is a reduction from the list price, which is used to:
give quantity discounts to customers disguise real prices from competitors change prices without publishing a new catalog
A classified balance sheet ______.
groups asset and liabilities into current and long-term categories
An adjusting entry is necessary to record interest expense at year-end because the interest:
has already been incurred
When the allowance method is used, the write-off of an uncollectible account
has no effect on net income
Which of the following are common controls over cash receipts?
having two different employees take custody of the checks and make the deposit opening mail daily and making a detailed list of checks received
Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are
included in Gerald's inventory.
A multiple-step income statement reports multiple levels of
income
The direct write-off method is required for
income tax purposes.
Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to:
increase an asset and increase revenue decrease an asset and increase an expense
The adjusting entry for prepaid rent requires a(n) ____ to rent expense and a ___ to prepaid rent
increase, decrease debit, credit
Purchasing inventory on account:
increases assets increases liabilities
The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as ___ expense
interest
___ is defined as the "cost of borrowing money."
interest
Items held for sale in the normal course of business are referred to as
inventory
Companies are free to choose FIFO, LIFO, or weighted-average cost to report inventory and cost of goods sold. The reported amounts for ending inventory and cost of goods sold will not be the same across inventory reporting methods because:
inventory costs generally change over time.
Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for
inventory. cost of goods sold.
Deferred revenue is a(n) Blank______.
liability
The adjusting entry for a deferred revenue includes a debit to a(n) ___ account and a credit to a(n) ___ account
liability, revenue
Companies that produce the inventory they sell are referred to as
manufacturers
The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement.
multiple-step
The statement of stockholders' equity includes these amounts:
net income ending balance retained earnings dividends for the period
Receivables not expected to be collected should
not be counted in assets of the company.
A formal credit arrangement between a creditor and debtor is called a(n)
note receivable.
When a sale occurs under the periodic inventory system, we record:
only the sale, but not the related cost of goods sold
The information reported in the statement of cash flows is organized by these activities:
operating investing financing
The statement of cash flows classifies items as
operating, investing, and financing.
Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.
owed
Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are:
paid by the supplier.
Freight-in costs are debited to Inventory in this inventory system:
perpetual only
If an adjusting entry's debit is to an expense account, then the credit must be to which of the following?
prepaid expense liability
Separation of duties and E-commerce controls are examples of ______ controls.
preventive
Two types of control activities are
preventive and detective controls.
Two important ratios that help in understanding a company's effectiveness in managing receivables are the:
receivables turnover ratio average collection period
In a periodic inventory system, freight-in costs are
recognized in a temporary freight-in account.
Two entries are required when a previously written off account is collected. These two entries include:
record the collection on the account receivable reinstate the account receivable
At year-end, companies that utilize accrual-based accounting systems complete the measurement process through
recording of adjusting entries
The purposes of the period-end adjustment in the periodic inventory system include:
reflect the proper ending balance in the inventory account recognize cost of goods sold relating to sales during the period close the temporary accounts relating to inventory purchases, discounts, and returns and allowances
Internal control consists of plans to
safeguard company assets. provide accurate and reliable accounting information.
A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as a(n) ___ discount.
sales
When a customer returns a product for a refund, in which account is the entry recorded?
sales return
When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n) __
sales returns
Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's:
statement of cash flows balance sheet
Closing entries move the balances from the _____ accounts into the Retained Earnings account.
temporary
The type of information included in an account includes
the account title. columns for debits and credits.
The post-closing trial balance helps to verify that:
the accounts are ready for next period's transactions we prepared and posted closing entries correctly
After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:
the amount of the sales or services still owed to the customer.
Accounts receivable are typically classified as current assets because
they will be converted to cash within 1 year.
A bank reconciliation compares the company's cash records with the bank statement and discovers differences in those amounts due to
timing differences and errors.
A non-sufficient funds check requiring an adjustment to the cash balance was written:
to the company preparing the bank reconciliation
What is the effect of recording a sale of inventory under the perpetual inventory system on the financial statements?
total assets increase stockholders' equity increases net income increases
A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a(n) __ ___
trial balance
The direct write-off method is used when
uncollectible accounts are not anticipated or are immaterial.
After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies:
used during the accounting period
FOB shipping point means title to the goods passes:
when they are shipped.
FOB destination means title to the goods passes
when they arrive at the destination.
Long issued 5,000 shares of stock for $10,000. Long used $2,000 of the proceeds to purchase supplies, and borrowed $8,000 cash from the bank. Long's total assets are
$18,000, The issuance of stock will cause assets to increase by $10,000. The purchase of supplies for cash will have no affect on total assets (cash decreases and supplies increases). Borrowing from bank will increase cash (an asset) by $8,000. Therefore, total assets equals $18,000.
When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?
Accounts receivable
The accounting equation is:
Assets = Liabilities + Stockholders' Equity
Which of the following appear on the statement of stockholders' equity?
Dividends Net income Beginning balance of retained earnings
Identify the three components of retained earnings.
Expenses Dividends Revenues
Which items are found on an income statement?
Expenses Revenues
Which of the following would be referred to as "accruals?"
Expenses incurred, not yet paid Goods and services provided, not yet collected
In financial accounting which of the following are the three types of business activities of a company?
Financing activities Investing activities Operating activities
Which of the following are attributes of FASB?
Full-time board members Private sector organization Independence
LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?
Increase assets and increase retained earnings
Which of the following represents a common advantage of a computerized accounting system?
Journal entries are instantly posted to the ledger
Which of the following pre-payments requires an adjusting entry at the end of the year?
On November 1, the company pays rent for the next six months.
Which of the following are components of calculating net income?
Revenues Expenses
What are the three components of retained earnings?
Revenues, expenses, and dividends
Which of the following items are found on a balance sheet?
Stockholders' equity Assets Liabilities
Which of the following knowledge and skills should an accounting professional possess?
Technical accounting knowledge Ability to work in teams Leadership skills Presentation skills
The heading of an income statement should include which of the following?
The title of the financial statement The accounting period covered by the statement The name of the business
If revenues are less than expenses, a company has
a net loss
Which of the following aspects relate to the information provided in an income statement?
ability to earn a profit
A(n) ______ is maintained for each financial statement item, whereas a(n) _____ contains all of the accounts of the company.
account; general ledger
The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as
accounting
The two main functions of ___ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.
accounting
____ occur when the cash flow occurs after either the expense is incurred or the revenue is earned.
accurals
Management discussion and analysis and note disclosures to the financial statements are included in the ___
annual report
Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period.
asset
Prepaid insurance is a(n) ______.
asset in the balance sheet
The financial statement that displays a firm's financial position on a particular date is the __ __
balance sheet
Which of the following financial statements shows a company's financial position on a particular date?
balance sheet
Reporting revenues only when cash is received and expenses only when cash is paid is called the ___ basis of accounting
cash
The purpose of a statement of cash flows is to provide information about the
cash receipts and cash disbursements during a period.
Tabor Company issues $20,000 of common stock to investors. Recording this transaction will include a credit to
common stock
Expenses will cause retained earnings to
decrease
A net loss ______ retained earnings.
decreases
Stockholders' equity arises primarily from amounts invested by shareholders and amounts
earned by the corporation
The two sources of stockholders' equity are amounts
earned by the corporation paid in from shareholders
Adjusting entries are made at the ___ of the accounting period, while daily transactions are made throughout the accounting period.
end
Which type of account is increased with a debit?
expense
Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.
expense; income statement
Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred.
expenses
Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n)____ in the period the benefit expires
expenses
Credits increase revenues, whereas debits increase
expenses and dividends.
Under cash-basis accounting,
expenses are recorded when cash is paid. revenues are recorded when cash is received.
True or false: The fundamental activities of a business are selling activities and marketing activities.
false
True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.
false
Companies communicate information about their business activities primarily through
financial statements
Statements represent a company's primary means of communicating information to external users
financing, finance
Which of the following contains a list of transactions affecting each account and the account's balance?
general ledger
Where is the time period covered by the income statement found?
in the heading
Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses:
in the same period as related revenue.
Information that best explains companies' stock price performance is reported in the
income statement
The financial statement that is most useful in explaining a company's stock price performance is the
income statement
The purpose of a(n)____ ____ is to report the profit-generating activities of a company over an interval of time
income statement
Which financial statement reports revenues and expenses?
income statement
The financial statement that reports the company's revenues and expenses over an interval of time is the
income statement.
When a company earns net income, its retained earnings:
increase
Net income Blank______ retained earnings.
increases
The two roles of financial accounting are to:
measure business activities of the company. communicate information to external parties for decision making purposes.
In our society, the two main functions of accounting are to
measure business activities. communicate information to investors and creditors.
Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is:
net income of $5,000
In addition to the financial statements, which of the following must be included in the annual reports?
notes disclosures. management discussion and analysis.
The process of transferring information from the journal to the ledger is referred to as
posting
Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as ______.
prepaid expenses; assets
The purpose of a general ledger is to
provide in a single location the list of transactions affecting each account and the account's balance.
Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company
provided goods or services to a customer.
The purpose of a journal is to
record a chronological listing of every transaction for a company.
The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as __ __
retained earnings
Consistent with the ___ recognition principle, companies record revenue at the time goods are provided to customers.
revenue
Sampson Corporation issues common stock for $25,000 cash and uses some of the proceeds to purchase equipment for $10,000 cash. Sampson also purchases $4,000 of supplies on account. After recording these transactions total assets are
$29,000, Issuing common stock increases assets by $25,000 (cash) and increases equity (common stock). Purchasing equipment for cash decreases one asset and increases another asset, so there is no change in assets. Purchasing supplies on account increases assets and increases accounts payable. $25,000 + $0 + $4,000 = $29,000 total assets.
The primary functions of accounting are to:
communicate information to decision makers. measure a company's activities.
In a double-entry accounting system ___ represents the left side of the account
debit
An general ledger account should have an account title, account number, a place for the date of the transaction, and two columns for
debits and credits
Dividends paid to stockholders will cause retained earnings to
decrease
The types of accounts which affect retained earnings are
expenses. dividends. revenues.
True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.
false
True or false: A ledger provides a chronological record of all transactions affecting the firm.
false
True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.
false
What effect does revenue have on retained earnings?
increases
A transaction is initially recorded in the journal, and then subsequently posted to the general
ledger
Which of the following includes the list of transactions affecting each individual account and the account's balance?
ledger
A balance sheet lists the assets, ___, and stockholders' equity as of a specific date.
liabilities
The financial statement that provides information about cash receipts and cash disbursements for the period is the
statement of cash flows
The purpose of an income statement is to:
summarize the profit-generating activities that occurred during a particular reporting period
Accounts receivable are assets which represent
the amounts owed by customers.
Retained earnings represents
the total net income earned over the life of the company that has not been distributed as dividends.
True or false: An external transaction is a transaction the firm conducts with a separate economic entity.
true
There is a cause-and-effect relationship between revenues and expenses that dictates:
when costs are recognized as expenses in the income statement.