Accounting

A retail store buys t-shirts for $125 and sells them for $160. The store's cost of goods sold would be:

$125

At the beginning of the period, assets were $450,000 and stockholders' equity was $200,000. During the year, assets increased by $50,000, liabilities decreases by $40,000, and stockholders' equity increased by $90,000. Beginning liabilities must have been:

$250,000

At the beginning of the period, assets were $490,000 and stockholders' equity was $240,000. During the year, assets increased by $60,000, liabilities increased by $40,000, and stockholders' equity increased by $20,000. Beginning liabilities must have been:

$250,000

Stockholders' equity for Commerce-GA Corporation on 01/01/2008 and 12/31/2008 were $60,000 and $75,000, respectively. Assets on 01/01/2008 and 12/31/2008 were $115,000 and $105,000, respectively. Liabilities on 01/01/2008 were $55,000. What is the amount of liabilities on 12/31/2008?

$30,000

A retail store sells t-shirts for $85 and purchases them for $60. The store's cost of goods sold would be:

$60

limited liability company

A business organization in which the business (not the owner) is liable for the company's debts.

corporation

A business owned by stockholders. A corporation is a legal entity, an "artificial person" in the eyes of the law.

proprietorship

A business with a single owner.

current liabilities

A debt due to be paid within 1 year or within the entity's operating cycle if the cycle is longer than a year.

income statement

A financial statement listing an entity's revenues, expenses, and net income or net loss for a specific period. Also called the statement of operations.

account payable

A liability backed by the general reputation and credit standing of the debtor.

note payable

A liability evidenced by a written promise to make a future payment.

long-term debt

A liability that falls due beyond 1 year from the date of the financial statements.

stockholders

A person who owns stock in a corporation. Also called a shareholder.

generally accepted accounting principles (GAAP)

Accounting guidelines, formulated by the Financial Accounting Standards Board, that govern how accounting is practiced.

objectivity activities

Activities that create revenue or expense in the entity's major line of business; a section of the statement of cash flows. Operating activities affect the income statement.

investing activities

Activities that increase or decrease the long-term assets available to the business; a section of the statement of cash flows.

financing activities

Activities that obtain from investor and creditors the cash needed to launch and sustain the business; a section of the statement of cash flows.

current assets

An asset that is expectd to be converted to cash, sold, or consume during the next 12 months, or within the business's normal operating cycle if longer than a year.

partnership

An association of 2 or more persons who co-own a business for profit.

liabilities

An economic obligation (a debt) payable to an individual or an organization outside the business.

assets

An economic resource that is expected to be of benefit in the future.

entity

An organization or a section of an organization that, for accounting purposes, stands apart from other organizations and individuals as a separate economic unit.

net earnings

Another name for net income.

net profit

Another name for net income.

fixed assets

Another name for property, plant, and equipment.

plant assets

Another name for property, plant, and equipment.

shareholder

Another name for stockholder.

statement of financial position

Another name for the balance sheet.

statement of operations

Another name for the income statement

capital

Another name for the owners' equity of a business.

The accounting equation can be stated as

Asses - Liabilites = Stockholders' equity

The accounting equation can be stated as

Assets - liabilities = stockholders' equity

financial statements

Business documents that report financial information about a business entity to decision makers.

For which form of business ownership are the owners of a business legally distinct from the business?

Corporation

The relevant measure of value of the assets of a company that is going out of business is the:

Current market value

expenses

Decrease in retained earnings that results from operations; the cost of doing business; opposite of revenues.

Expenses are:

Decreases in retained earnings resulting from operations

dividends

Distributions (usually cash) by a corporation to its stockholders.

net loss

Excess of total expenses over total revenues.

net income

Excess of total revenues over total expenses. Also called net earnings or net profit.

A balance sheet reports the company's financial position over a period of time.

False

Common stock and net income are the main components of paid-in capital.

False

For business puposes, dividend payments are classified as expenses

False

Net income appears only on the income statement

False

There are two sections to the statement of cash flows-operating activities and investing activities.

False

board of directors

Group elected by the stockholders to set policy for a corporation and to appoint its officers.

A Jacksonville business paid $45,000 cash for equipment used in the business. At the time of purchase, the equipment had a list of price of $65,000. When the balance sheet was prepared, the value of the equipment had increased to $68,000. What is the relevant measure of the value of the equipment?

Historical cost, $45,000

goig-concern concept

Holds that entity will remain in operation for the forseeable future.

Which of the following statements should be prepared before the balance sheet is prepared?

Income statement and statement of retained earnings

revenues

Increase in retained earnings from delivering goods or services to customers or clients.

balance sheet

List of an entity's assets, liabilities, and owners' equity as of a specific date. Also called the statement of financial position.

property, plant, and equiment

Long-lived assets, such as land, buildings, and equipment, used in the operation of the business. Also called plant assets or fixed assets.

cash

Money and any medium of exchange that a bank accepts at face value.

For which form of business ownership(s) are the owners not legally distinct from the business?

Partnership & Proprietorship

Which of the following best describes a liability? Liabilities are:

Payables of the corporation

cost principle

Principle that states that assets and services should be recorded at their actual cost.

Which of the following are characteristics of useful accounting information?

Reliability

statement of cash flows

Reports cash receipts and cash payments classified according to the entity's major activites: operating, investing, and financing.

stock

Shares into which the owners' equity of a corporation is divided.

Retained earnings appears on which of the following financial statements?

Statement of retained earnings and balance sheet, but not the income statement or statement of cash flows

statement of retained earnings

Summary of the changes in the retained earnings of a corporation during a specific period.

reliability principle

The accounting principle that ensures that accounting records and statements are based on the most reliable data available. Also called the objectivity principle.

paid-in capital

The amount of stockholder's equity that stockholders have contributed to the corporation. Also called contributed capital.

retained earnings

The amount of stockholders' equity that the corporation earned through profitable operation and has not given back to stockholders.

fair value

The amount that a business could sell an asset for, or the amount that a business could pay to settle a liability.

management accounting

The branch of accounting that generates information for the internal decision makers of a business, such as top executives.

financial accounting

The branch of accounting that provides information to people outside the firm.

owners' equity

The claim of the owners of a business to the assets of the business. Also called capital, stockholder's equity, or net assets.

accounting

The information system that measures business activities, processes that information into reports and financial statements, and communicates the results to decision makers.

merchandise inventory

The merchandise that a company sells to customers, also called inventory.

common stock

The most basic form of capital stock.

accounting equation

The most basic tool of accounting: Assets = Liabilities + Owner's Equity.

stable-monetary-unit concept

The reason for ignoring the effect of inflation in the accounting records, based on the assumption that the dollar's purchasing power is relatively stable.

stockholders' equity

The stockholders' ownership interest in the assets of a corporation.

Able Co. has $500,000 in assets and $400,000 in liabilities; therefore, the equity is $100,000.

True

Expenses are decreases in retained earnings that result from operations.

True

Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB.

True

Ramos, Inc. has monthly revenues of $30,000 and monthly expenses of $18,000, and the company paid $4,000 in dividends; therefore, net income for the month is $12,000.

True

Since cost is a reliable measure to use in financial accounting, the cost principle states that assets and services should be recorded at their actual cost.

True

Yummy Inc. has beginning retained earnings of $10,000, net income of $50,000, and dividend payments of $5,000; therefore, the ending retained earnings is $55,000.

True

The income statement covers a defined period of time

a defined period of time

What type of account is prepaid insurance?

an asset

The going-concern concept

assumes that the entity will remain in operation for the foreseeable future.

Equipment would appear on the

balance sheet with long term assets

Accounts receivable would appear on the

balance sheet with the current assets

A company purchased office supplies for cash. This transaction increased assets and

decreased assets

A company paid cash for an amount owed to a creditor. This transaction decreased cash and:

decreased liabilities

The stable-monetary-unit concept of accounting:

enables accountants to ignore the effect of inflation in the accounting records.

A companys' gross profit for the period is reported on the

income statement

If liabilities increase $200,000 during a given period and stockholders' equity decreases $65,000 during the same period, assets must:

increase $135,000.

The owner of a business paid cash from his personal checking account to purchase an automobile for his personal use. This transaction:

is not a transaction recognized by the business

Payables are classified as

liabilities

Which of the following must be added to the beginning retained earnings to compute ending retained earnings?

net income

The reliability principle is also called the

objectivity principle

Net income is computed as

revenues - expenses

Which of the following financial statements shows the net increase or decrease in cash during the period?

statement of cash flows

Dividends appear on the

statement of retained earnings

Prepaid expense accounts appear on

the balance sheet

Current assets are assets expected to be converted to cash, sold, or consumed:

within the nex 12 mths