Accounting Unit 1 CHAPTER 1
Companies communicate information about their business activities primarily through
financial statements.
When revenues are greater than expenses, a company has
net income
Which of the following are attributes of FASB?
Full-time board members Independence Private sector organization
The two sources of stockholders' equity are amounts
1. earned by the corporation 2. paid in from shareholders
In our society, the two main functions of accounting are to
1. measure business activities. 2. communicate information to investors and creditors
Financial accounting should provide information that:
1.Is useful to investors and creditors in making decisions. 2.Helps to predict cash flows. 3.Tells about economic resources, claims to resources, and changes in
Accounting is
A system of maintaining records of a company's operations and communicating information to decision makers. " the language of business "
Which of the following appear(s) on the balance sheet?
Accounts receivable Common stock Utilities payable
The accounting equation is:
Assets = Liabilities + Stockholders' Equity
Which relationship is reflected in the balance sheet? a. Revenues − Expenses = Net income b. Assets = Liabilities + Stockholders' Equity c. Assets − Liabilities = Net Income d. Assets = Revenues + Dividends
Assets = Liabilities + Stockholders' Equity
The financial statement that displays a firm's financial position on a particular date is the
Balance Sheet
The four primary financial statements published to provide information to external users include which of the following?
Balance Sheet Statement of Cash Flows Statement of Stockholders' Equity Income Statement
Which of the following are financial statements?
Balance sheet, Income statement, Statement of stockholders' equity
Predictive value
Consistently increasing income helps forecast the company's ability to generate future cash.
Which of these would be found on a company's balance sheet?
Equipment Notes payable Accounts receivable
is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.
Ethics
is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the
FASB or F.A.S.B.
The private sector organization that is currently responsible for setting accounting standards in the United States is the Multiple choice question.
Financial Accounting Standards Board.
represent a company's primary means of communicating information to external users.
Financial Statements
Which financial statement reports revenues and expenses?
Income statement
The cash collected from a customer would be recorded as which type of activity in the statement of cash flows? a. Operating Activity b. Business Activity c. Investing Activity d. Financing Activity
Operating Activity
In financial accounting which of the following are the three types of business activities of a company?
Operating activities, Investing activities,Financing activities
Confirmatory Value
Positive income is consistent with effectiveness of management.
According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?
Predictive value Confirmatory value
Which of the following accounts would appear in a company's income statement? a. Accounts Payable b. Cash c. Dividends d. Rent Expense
Rent Expense
Which of the following represents the net income earned by a corporation and not yet paid to shareholders?
Retained earnings
Which financial stamens are dividends recorded
Statement of cash flows
Which of the following knowledge and skills should an accounting professional possess?
Technical accounting knowledge Ability to work in teams Leadership skills Presentation skills
Importance of Auditors
Trained individuals hired by a company as an independent party to express a professional opinion of the extent to which financial statements are prepared in compliance with G A A P and are free of material misstatement.
sole proprietorship
a business owned by one person.
If revenues are less than expenses, a company has
a net loss.
People make decisions
about companies
Liabilities
amounts owed to creditors
Management discussion and analysis and note disclosures to the financial statements are included in the
annua report
Dividends
are cash payments to stockholders.
Revenues
are the amounts recognized when the company sells products or provides services to customers.
Expenses
are the costs of providing products and services and other business activities during the current period
The two main functions of accounting
are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.
Basic fundamental accounting equation
asset= liabilities + stockholders equity
The amounts recorded when the company sells products or provides services to customers are referred to as: a. Liabilities b. Revenues c. Assets d. Expenses
b. Revenues
Ending retained earnings is calculated as
beginning retained earnings + net income - dividends
The purpose of a statement of cash flows is to provide information about the
cash receipts and cash disbursements during a period.
The primary functions of accounting are to:
communicate information to decision makers. measure a company's activities.
Auditors are independent parties that help: a. To establish accounting rules in the U.S. b. To ensure management has appropriately prepared the company's financial statements c. Investors and creditors in their decisions by adding credibility to the financial statements d. Both b. and c. are correct
d. Both b. and c. are correct
employee
decide employee oppuntuities
competitors
decide market share and profitability
local communities
decide on environmental issues
Regulators
decide on social welfare
tax authorities
decide on tax policies
Managers
decide production and expansion
Suppliers
decide the customer's ability to pay for supplies
Investors
decide whether to invest in stock
Creditors
decide whether to lend money
Customers
decide whether to purchase products
Stockholders' equity arises primarily from amounts invested by shareholders and amounts
earned by the corporation
Stockholders' equity arises primarily from amounts invested by shareholders and amounts Blank______.
earned by the corporation
Dividends are not
expenses
An income statement reports
expenses, net income or loss revenues
To be useful for decision making, information should possess the fundamental qualities of relevance and
faithful representation.
G A A P
generally accepted accounting principles
Information that best explains companies' stock price performance is reported in the
income statement
The financial statement that summarizes revenues and expenses for a period of time is the
income statement
When a company earns net income, its retained earnings:
increase
partnership
is a business owned by two or more persons.
Net income
is the difference between revenues and expenses. Other common names for net income include earnings or profit.
when revenues are less than expenses, a company has a
net loss
Note disclosures
offer additional information either to explain the information presented in the financial statements or to provide information not included in the financial statements.
The three classifications on the statement of cash flows are cash flows from (Select all that apply.)
operating activities. financing activities. investing activities.
The three classifications on the statement of cash flows are cash flows from
operating activities. investing activities. financing activities.
The statement of cash flows classifies items as
operating, investing, financing
Stockholders' equity
owners' claims to resources.
limited liability
personal assets are not at risk if you sued
Careers for accounting professionals typically include a choice between
public and private , accounting
The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of
relevance and faithful representation
Undistributed profits that have accumulated in the company over time are called
retained earnings
The management discussion and analysis
section typically includes management's views on significant events, trends, and uncertainties pertaining to the company's operations and resources.
The financial statement that provides information about cash receipts and cash disbursements for the period is the
statement of cash flows.
If revenues > expenses
then net income.
If revenues < expenses,
then net loss.
Assets
total resources of the company