Accounting Exam 1
Income Statement
A financial statement showing the revenue and expenses for a fiscal period. (Period of Time)
A report prepared by management that presents financial information
Annual report
Basic Accounting Equation
Assets = Liabilities + Stockholders' Equity
Basic Accounting Equation (Balance Sheet Equation)
Assets = Liabilities + Stockholders' Equity
Accounts Receivable, Cash, Inventory, and Supplies
Current Assets
It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of
Economic entity assumption
What organization issues U.S. accounting standards?
Financial Accounting Standards Board
Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?
Going concern assumption
which of the following organizations issues accounting standards for countries outside of the United States?
IASB
Which of the following is not an accounting assumption?
Integrity
A section of the annual report that presents management's views
Management discussion and analysis
description of favorable and unfavorable trends
Management discussion and analysis
Accumulated Depreciation, Buildings, and Land
PP&E
Balance sheet
Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.
The agency of the United States Government that oversees the U.S. financial markets is the
Security Exchange Commission
on a classified balance sheet, short-term investments are classified as
a current asset
which of the following is not classified properly as a current asset
a receivable from the sale of an asset to be collected in two years
Some examples of liabilities
accounts payable and salaries and wages payable
Generally accepted accounting principles
are accounting rules that are recognized as a general guide for financial reporting.
The periodicity assumption states that the economic life of a business can be divided into
artificial time periods
Land purchased
asset
Future economic benefits
assets
Certified Public Accountant (CPA)
auditors report
unqualified opinion
auditors report
increase in the debt to assets ratio
bad news
Accounts Receivable
balance sheet
Interest Payable
balance sheet
common stock
balance sheet
equipement
balance sheet
the operating cycle of a company is the average time that is required to go from cash to
cash in producing revenues
Issuance of ownership shares
common stock
Creditor claims against the assets of the business.
liabilities
Bonds Payable
liability
amounts owed to suppliers
liability
intangible assets are
listed after property, plant, and equipment
Investment in long-term bonds
long term investments
mortgage payable (due in 3 years)
long-term liabilities
Description of ability to pay near-term obligations
management discussion and analysis
Which accounting assumption or principle requires that only those things that can be expressed in dollar values are included in the accounting records?
monetary unit assumption
Descriptions of significant accounting policies
notes to the financial statements
details concerning liabilities, too voluminous to be included in the statements
notes to the financial statements
Equipment is classified on the balance sheet as
property, plant, and equipment
The two fundamental qualities of useful information are
relevance and faithful representation
amount recorded from selling a product
revenue
More owner control
sole proprietorship
ownerships is limited to one person
sole proprietorship
tax advantages
sole proprietorship and partnership
the claims of owners on the assets of a corporation are known as
stockholders' equity
The historical cost principle requires that when assets are acquired, they are recorded at
the amount paid to acquire them
liabilities generally classified on a balance sheet as
current liabilities and long term liabilities
An intangible asset
derives its value from the rights and privileges it provides the owner.
Distributions of cash from a corporation to its stockholders
dividends
which of the following is not considered an asset?
dividends
a current asset
expected to be converted to cash or used in the business within a relatively short period of time
cost of advertising
expense
Consumed assets or services.
expenses
Activities that involve collecting the necessary funds to start the business
financing
All of the following are qualities of useful information except
flexibility
Increase in current ratio
good news
intangible assets
goodwill, trademarks and patents
Advertising Expense
income statement
Service revenue
income statement
Officers and others who manage the business.
internal users
Involves acquiring the resources necessary to run the business
investing activities
Relevant accounting information
is information that is capable of making a difference in a business decision.
A business organized as a separate legal entity owned by stockholders is a
corporation
A separate legal entity under state laws
corporation
Easier to raise funds
corporation
Easier to transfer ownership
corporation
No personal legal liability
corporation
In a classified balance sheet, assets are usually classified as
current assets, long term investments, property, plant, and equipment, and intangible asset
Accounts Payable, Income Taxes Payable, Unearned Sales Revenue, Notes Payable
current liabilities