Acct. Unit One - UNL

Which of the following accounts should be classified as stockholders' equity?

-common stock -retained earnings

Closing entries move the balances from the ______ accounts into the Retained Earnings account.

temporary

Which of the following appear on the statement of stockholders' equity?

-Dividends -Net income -Beginning balance of retained earnings

Faithful representation requires information to have which of the following three characteristics?

-Free from material error -Neutrality -Completeness

Which of the following are attributes of FASB?

-Full-time board members -Private sector organization -Independence

What are current assets?

Assets that provide benefits within the next year.

Where is the time period covered by the income statement found?

In the Heading

Which of the accounts are decreased on the debit side and increased on the credit side?

Liabilities, stockholders' equity, and revenues

Assets that provide benefits for more than one year are classified as

Long-term

Who has the responsibility to apply accounting standards when communicating with investors and creditors?

Management

Which of the following is an external transaction?

Purchasing supplies from a vendor

Profits earned by a company that have not been paid to stockholders are called _____ earnings

Retained

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

Which of the following questions is most likely to be asked by a creditor?

Will the company be capable of repaying its debt when it is due?

Which of the following questions is most likely to be asked by an investor?

Will the company's stock increase in value?

At the beginning of the accounting period, the balances of temporary accounts

are zero

Munster Inc. debits Deferred Revenue and credits Service Revenue. As a result of this adjusting entry, Munster's:

liabilities will decrease; equity will increase

An asset that can quickly be turned into cash has the characteristic of

liquidity

Long-term assets are expected to provide benefits for

more than one year

The statement of cash flows classifies items as

operating, investing, financing

Which activities are part of the operating cycle?

-Collecting cash from customers -Paying cash to suppliers -Selling goods and services

The private sector organization that is currently responsible for setting accounting standards in the United States is the

Financial Accounting Standards Board

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

Careers for accounting professionals typically include a choice between public and _____ accounting.

Private

A classified balance sheet shows subtotals for current ___ and current ___

assets; liabilities

Deferred revenue appears on the ______.

balance sheet as a liability

Ending retained earnings is calculated as

beginning retained earnings + net income - dividends

An adjusting entry for accrued expenses involves:

credit to a liability; debit to an expense

Assets that will be used up or converted to cash within the next year are ___ assets.

currently

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

recording of adjusting entries

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.

Expenses are best defined as:

Costs of providing products and services.

The post-closing trial balance helps to verify that:

-we prepared and posted closing entries correctly -the accounts are ready for next period's transactions

The sum of current and long-term assets reported on the balance sheet is referred to as ___

Total Assets

Which of the following items are found on a balance sheet?

-Stockholders' equity -Liabilities -Assets -Equipment -Notes payable

Stockholders' equity consists of two main components, common stock and ______.

retained earnings

The statement of stockholders' equity includes these amounts:

-ending balance retained earnings -dividends for the period -net income

The two major categories reported in the income statement are:

-expense -revenue

The three classifications on the statement of cash flows are cash flows from

-financing activities. -investing activities. -operating activities.

The information reported in the statement of cash flows is organized by these activities:

-investing -financing -operating

______ is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.

FASB

(T/F) The SEC has delegated the primary responsibility for setting accounting standards to the AICPA.

False

True or false: Total assets must always be equal to total liabilities less stockholders' equity

False

Information that best explains companies' stock price performance is reported on the

Income Statement

Which of the following items is a financing activity on the statement of cash flows?

Issue Stock

What was the objective of the 1933 Securities Act?

It set forth accounting and disclosure requirements for initial offerings of securities.

A balance sheet lists the assets, ______, and stockholders' equity as of a specific date.

Liabilities

What are the effects on the accounting equation from the adjustment for salaries incurred but not yet paid during the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

(T/F) Financial information that is immaterial in amount or nature need not be reported under GAAP

True

(T/F) The statement of stockholders' equity indicates the changes in the various equity accounts

True

On a classified balance sheet, total liabilities represent the sum of ___ and long-term liabilities.

current

Revenues are:

sales of goods or services to customers

_____ basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.

Accual

Aikman Company has paid dividends of $2410, $0, $1570, and $1,060 over the first four years of the company's existence. If Retained Earnings after year four has an ending balance of $9700, what is the average annual amount of net income (loss)over the past four years for Aikman?

Beg. Retained Earnings ($0)+ Net Income- Dividends ($2410+$0+$1570+1060)=Ending Retained Earnings ($9700). Divide net income amount by 4 to get average. The answer is $3685

When Pizza Company sells three $100 gift cards at the beginning of the month, it should record a $300 debit to ______ and a $300 credit to ______.

Cash; Deferred Revenue

The form of business organization where an entity is legally separate from its owners and issues shares of stock is a

Corporation

Which of the following expressions correctly calculates "total assets?"

Current assets plus long-term assets

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as

closing entries

The post-closing trial balance checks that total ___ equal total ___ at the end of the period.

credits; debits

Sabrina Company recorded an adjusting entry for salaries owed to employees at the end of the year. As a result of this entry, Sabrina Company's:

equity decreases; liabilities increase

A classified balance sheet ______.

groups asset and liabilities into current and long-term categories

Revenues and expenses are reported in the:

income statement

The two roles of financial accounting are to:

-communicate information to external parties for decision making purposes -measure business activities of the company

The two primary functions of financial accounting are to:

-communicate measurements to external parties -measure business activities

In addition to the financial statements, which of the following must be included in the annual reports?

-management discussion and analysis -notes disclosures

Which of the following items are classified as financing activities on the statement of cash flows?

-pay dividend -issue stock

As of December 31, the end of the accounting period, $700 of salaries to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, which two of the following will occur?

-salaries expense will increase by $700 -salaries payable will increase by $700

Generally accepted accounting principles are abbreviated as

GAAP

___ is defined as the "cost of borrowing money."

Interest

_____ refers to information being available to users early enough to allow them to use it in the decision process

Timeliness

Quartz Instruments had retained earnings of $145,000 at December 31, 2017. Net income for 2018 was $90,000, and dividends for 2018 were $30,000. What amount of retained earnings should be reported at December 31, 2018?

$205,000

Ending retained earnings appears on the:

-statement of stockholders' equity -balance sheet

Financial accounting should provide information that:

-tells about economic resources, claims to resources, and changes in resources and claims -helps to predict cash flows -is useful to investors and creditors in making decisions

The two main functions of _____ , are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.

Accounting

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate management

Measuring business activities and reporting those measurements to external parties is the function of ______ accounting.

Financial

Which of the following situations matches a journal entry that debits Deferred Revenue and credits Service Revenue?

Goods or services, for which cash was collected in advance, were provided during the current period.

The financial statement that is most useful in explaining a company's stock price performance is the

Income Statement

The financial statement that summarizes the profit-generating activities of a company during a particular period of time is the

Income Statement

Which financial statement reports revenues and expenses?

Income Statement

Which of the following is classified as an investing activity on the statement of cash flows?

Purchase of land

Which of these appears on both the statement of stockholders' equity and the balance sheet?

Retained Earnings

Which of the following represents the net income earned by a corporation and not yet paid to shareholders?

Retained earnings

is the amount recorded as a result of the sale of products or services to customers

Revenue

To be useful for decision making, information should possess the fundamental qualities of relevance and _____ representation.

faithful

If the SEC does not agree with a standard issued by the private sector, it can

force a change in the standard

Faithful representation requires that information is complete, neutral, and

free from material error

Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as

Assets - Liability

Using the same accounting methods in each period refers to the qualitative characteristic of

Consistency

______ is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

Ethics

What kind of accounting deals with the concepts and methods used to provide information to an organization's internal users

Managerial

The impact of financial accounting information on investors' and creditors' decisions is closely related to the concept of:

Materiality

Which financial statement shows the changes in common stock and retained earnings?

Statement of stockholders' equity

For a corporation, the owners' claims to the resources of a company are called

Stockholders' Equity

Stockholders' equity is

The owners' claim to resources of the corporation

The concept of understandability assumes that the users of financial statements should have

a reasonable understanding of business and economic activities.

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

Stockholders' equity arises primarily from amounts invested by shareholders and amounts ______.

earned by the corporation

When a company earns net income, its retained earnings:

increase

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows.

Expenses are:

the costs of doing business that are necessary to earn revenue

Keepers, Inc.'s balance sheet reported retained earnings as $10,000 at December 31, 2017 and $12,000 at the December 31, 2018. The income statement reported net income of $3,000 for the year ended December 31, 2018. Dividends declared for the year ended December 31, 2018 must equal $

$1000

Which of the following appear(s) on the balance sheet?

-Common stock -Utilities payable -Accounts receivable

Management discussion and analysis and note disclosures to the financial statements are included in the

Annual Report

Which of the following is the accounting equation?

Assets = Liabilities + Stockholders' Equity

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 firm's financial position on a particular date?

Balance sheet

Companies communicate information about their business activities primarily through

Financial Statements

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.

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by ___ entries.

adjusting

The purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period.

Amounts owed to creditors are

liabilities

When the cost of an item can be traced to objective evidence of a transaction, such as a sales receipt, canceled check, and bank statement, the information has the quality of

verifiability.

The four financial statements published to provide information to external users include which of the following?

-Income Statement -Balance Sheet -Statement of Cash Flows -Statement of Stockholders' Equity

Which of the following items are reported on the balance sheet as liabilities?

-Notes Payable -Wages and Salary Payable

Which of these would be found on a company's balance sheet?

Accounts receivable Equipment Notes payable

If the same accounting principles and methods are used for similar events by two different firms, this enhances what accounting qualitative characteristic?

Comparability

If an adjusting entry's credit is to a liability account, then the debit must be to ______.

Expense

The adjusting entry to record salaries owed to employees at the end of the accounting period includes a debit to "Salaries ___" and a credit to "Salaries ___"

Expense; Payable

A(n) ______ is a cost of doing business that is necessary to produce ___.

Expense; Revenue

What is used to represent a company's primary means of communicating information to external users

Financial Statements

Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?

Neutrality

An advantage of the corporate form of organization is that a corporation

Provides Limited Liability to Stockholders

What are the effects on the accounting equation when an adjusting entry is made for goods or services provided during the accounting period related to an amount previously received in advance from a customer?

Total liabilities will decrease and total stockholders' equity will increase.

An enhancing qualitative characteristic of accounting information that refers to the financial statement users' ability to utilize accounting information to differentiate between companies that are reporting similar events is

comparability.

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

The objective of financial accounting is to:

provide useful information for external decision makers

Predictive value and confirmatory value are components of which fundamental qualitative characteristic?

Relevance

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as

Retained Earnings

Which of the following accounts are stockholders' equity accounts?

-Retained earnings -Common stock

Which of the following line items appear on an income statement?

-Supplies expense -Revenues -Salaries expense -Service revenue

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

The heading of an income statement should include which of the following?

-The title of the financial statement -The name of the business -The accounting period covered by the statement

The adjusting entry for an accrued revenue always includes:

-a credit to a revenue account -a debit to an asset account

Which of the following statements is true? A) Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts. B) The balance sheet reports financial activities only for the current accounting period. C) The income statement reports the financial position of a company at a point in time.

A

True or false: Salaries Receivable is the account used to record salaries owed to employees for work performed during the current period.

False

A long-term liability:

is not due within the next year