Accounting Exam 1
An accounting ______ is an economic occurrence that changes an enterprises assets, liabilities, or stockholder's equity
event
An event that causes one asset account to decrease and another asset to increase is called an asset _________ transaction
exchange
Things present on the income statement
expense, revenue, and net income
Conversion agents are provided with physical resources, labor resources, and ________ resources by the resource owners
financial
________ accounting is meant to meet the needs of external stakeholders, such as investors and creditors
financial
Companies must follow generally accepted accounting principals (GAAP) for _______ accounting reports, but not for _________ accounting reports
financial, managerial
Assets are normally shown on the company's books at the amount of their:
historical cost
Liquidity refers to
how quickly assets are converted to cash
West company has $200 cash, $1200 land, $600 liabilities, and $800 stockholders equity. West has earned profits every year since its inception. Based on this information:
if the liabilities are due immediately, West could be forced into bankruptcy, and West may be forced to sell its land in order to pay its debt
The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the
income statement
The financial statement that shows all the revenues earned and expenses incurred during the accounting period is
income statement
Which statements report what happened over a span of time
income statement, statement of changes in stockholders equity, and statement of cash flows
What effect does earning cash revenue have on financial statements
increase retained earnings, increases cash flow from operating activities, increases net income, increases total stockholder's equity, and increases total assets
What effect does earning cash revenue have on the balance sheet?
increases total assets, increases retained earnings, and increases total stockholders equity
Activities dealing with purchasing and selling long-term assets used in the operations of a business are
investing activities
What are the primary categories reported on the statement of cash flows
investing, operating, and financing
Dividends are paid to _________ while interest is paid to creditors
investors
Which of the following are benefits that motivate investors to provide resources to businesses
investors share in the company's earning, and investors receive and ownership interest in the business
Which of the following may be included in the list of stakeholders who use accounting information
investors, newspaper reporters, the federal government, and creditors
Which of the following activities are considered financing activities
issuing common stock, repaying the principal on a loan, and paying a dividend to stockholders
Intellectual and physical labor are examples of _______ resources
labor
Businesses that sell goods are called
merchandising companies
How does an increase in the fair market value of an asset affect the financial statements
no affect
How does borrowing from creditors affect the income statement
no effect
The accounting term normally used to describe organizations that are NOT motivated by profit are:
not-for-profit, and nonprofit
Activities dealing with purchasing and selling short-term assets are
operating activities
The market for business resources involves three distinct participants; consumers, conversion agents, and resource ________
owners
Which of the following terms that mean the same thing as the term investors
owners and stockholders
The wordings "as of" in the date line of a balance sheet indicates that the information reported on it refers to
the financial condition of the company at a specific point in time
The idea that sacrifices should be paired to benefits is called
the matching concept
When a company pays cash to purchase land, the result is that
total assets are not affected
A __________ is a particular event that involves transferring something of value between two entities
transaction
Acquiring cash from the issuing of common stock will affect the accounting equation in at least _____ places
two
An event that causes assets and liabilities to decrease is an asset ______ transaction
use
Which of the following shows the effects of borrowing from creditors on the financial statements
Increases assets, increases cash flow from financing activities, and increases liabilities
What items are NOT present in the statement of changes in stockholder's equity
Land, revenue, cash, notes payable, expense, liabilities, and assets
Which of the following are NOT presented on the balance sheet
Net cash flow from operating activities, expense, net cash flow from financing activities, net income, revenue, net cash flow from investing activities, and dividends
If expenses exceed revenue, the company reports which of the following on the income statement
Net loss
How does declaring and paying a cash dividend affect the income statement
No effect
Which of the following statements are true
The right side of the accounting equation shows the sources of assets, and the obligations of a business to creditors are shown on the right side of the accounting equation
Which of the following stakeholders would most likely use MANAGERIAL accounting information
a manager of a company
The relationship between a businesses assets and the claims on its assets is frequently expressed in an equality called the _________________ equation.
accounting
The balance sheet reports assets, liabilities, and stockholders' equity as of the end of the:
accounting period
Borrowing money from creditors will cause the
amount of cash and amount of liabilities to increase
Earning cash revenue by providing services to customers will cause the
amount of retained earnings to increase, and amount of cash to increase
Recognizing cash expenses will cause the amount of cash
and the amount of retained earnings to decrease
The resources a business uses to conduct its operations are called:
assets
When a company pays cash to purchase land, the total amount of the:
assets is not affected, and liabilities is not affected
Which of the following includes only items that are reported on the balance sheet
assets, liabilities, common stock, and retained earnings
Ending balances for assets, liabilities, and stockholders equity are reported on the _______ ________
balance sheet
When a business borrows cash from a creditors
both its assets and liabilities increase
Paying a cash dividend will cause the amount of
cash and the amount of retained earnings to decrease
Paying cash expenses will cause the amount of
cash to decrease, and retained earnings to decrease
The amount of cash dividends a company can pay are limited by the amount of the company's
cash, and retained earnings
Which of the following contains language that describes the rights and privileges of ownership in a company
common stock certificate
A general ledger is a:
complete list of a company's accounts
The horizontal statements method is
A teaching tool used to show how transactions affect the income statement, balance sheet, and statement of cash flows
How does incurring cash expenses affect the financial statement
Decreases retained earnings, decreases assets, decreases net income, decreases operating cash flow, and decreases stockholders equity
Profit may also be called which of the following:
Earnings and income
When it is liquidated a business has assets of $500 cash, $800 of liabilities and $400 of common stock and ($700) deficit in retained earnings. Based on this information:
Creditors will receive $500, and owners will receive zero
An event that causes assets and liabilities to increase is an asset ______ transaction
source
How does incurring cash expenses affect the income statement?
decrease net income, and increases expenses
Paying cash to purchase land will cause the cash account on the assets side of the accounting equation to _______ and the land account on the assets side to _____
decrease, increase
How does declaring and paying a cash dividend affect the financial statements
decreases retained earnings, and decreases stockholders equity
Which of the following are asset use transactions
pay expenses, pay dividends, and repay debt
Resource providers use accounting information to identify companies with high earnings potential because those companies are better able to:
pay higher salaries, make interest payments, and share profits
In their most primitive form, _______ resources are natural resources such as oils, minerals, or timber
physical
The normal duties of a private sector accountant include all of the following except
providing legal advice
Temporary account balances are closed to which of the following accounts
retained earnings
Acquiring cash by issuing common stock will have no effect on the amount of
retained earnings, and liabilities
Paying cash expenses will cause the
right side of the accounting equation to decrease, and the left side of the accounting equation to decrease