CH1 MC
Question Content Area Which of the following is incurred by a business when it borrows money? a.A liability b.A loss c.An accrued expenditure d.An accumulated depletion
(a.A liability) A liability is incurred by a business when it borrows money. A liability is an obligation or debt that a business has incurred and is required to pay in the future. When a business borrows money, it becomes obligated to repay the loan according to the terms of the loan agreement. This creates a liability on the business's balance sheet. A loss is an adverse financial event, such as a decrease in revenue or an increase in expenses, that results in a decrease in the profitability of a business. An accrued expenditure is an expense that has been incurred but has not yet been paid. It is recorded on a business's financial statements as a liability until the expense is actually paid. Accumulated depletion is a term used in the context of accounting for natural resource depletion. It represents the depletion of natural resources that has been incurred but has not yet been charged against the profits of a business. It is recorded on a business's financial statements as an asset until the depletion is charged against profits.
The "rules" of accounting are called: a.Generally Accepted Accounting Principles. b.Internet rules. c.income tax regulations. d.SEC regulations.
(a.Generally Accepted Accounting Principles.) The "rules" of accounting are called Generally Accepted Accounting Principles (GAAP). GAAP is a set of standards, conventions, and rules that prescribe the proper method of recording and reporting financial transactions and preparing financial statements. It provides a common language for accounting and a basis for comparison between different companies. GAAP is established by the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) and is followed by most companies in the United States. Internet rules are not related to accounting. Income tax regulations refer to the laws and rules that govern the reporting and payment of income taxes. SEC regulations refer to the rules and regulations established by the Securities and Exchange Commission (SEC), which is a federal agency responsible for regulating the securities industry. These regulations apply to companies that are publicly traded and that are required to file financial reports with the SEC.
Pelican, Inc. had revenues of $395,000, expenses of $155,000, and dividends of $54,000 during the current year. Based on the given information, which of the following statements is true? a.Net income for the current year totaled $186,000. b.Net income for the current year totaled $240,000. c.Total retained earnings decreased by $186,000 during the current year. d.Total retained earnings increased by $240,000 during the current year.
(a.Net income for the current year totaled $186,000.) Based on the given information, the correct answer is: Net income for the current year totaled $186,000. Net income is calculated by subtracting expenses from revenues. In this case, the net income for the current year would be calculated as follows: Revenues - Expenses - Dividends = Net income $395,000 - $155,000 - $54,000 = $186,000 Total retained earnings increased by $186,000 during the current year. Retained earnings are the portion of a company's profits that are not distributed to shareholders as dividends but are instead retained in the business. Retained earnings are an important source of capital for a company and can be used to fund operations, pay off debt, or make investments. Option (a) is the correct answer because it states the correct amount of net income. Option (b) is incorrect because it states an incorrect amount of net income. Option (c) is incorrect because it states the wrong direction of change in retained earnings. Option (d) is incorrect because it states an incorrect amount of change in retained earnings.
Cash collected from sales during the normal course of business would be an example of which type of business activity? a.Operating b.Investing c.Financing d.None of these choices are correct.
(a.Operating) Cash collected from sales during the normal course of business would be an example of operating activity. Operating activities refer to the activities that are necessary to generate revenues and incur expenses in the course of running a business. Examples of operating activities include the sale of goods or services, the purchase of raw materials and supplies, and the payment of salaries and other operating expenses. Investing activities involve the use of a company's financial resources to acquire long-term assets or to make investments in other companies. Examples of investing activities include the purchase of property, plant, and equipment, the purchase of investments in stocks or bonds, and the acquisition of other businesses. Financing activities involve obtaining funds to operate a business. They can include obtaining loans, issuing debt or equity securities, and obtaining capital from shareholders or other investors. None of the other choices are correct.
Which of the following is an intangible asset? a.Patent b.Equipment c.Cash d.Land
(a.Patent) An intangible asset is an asset that lacks physical substance and is not touchable. Some examples of intangible assets include intellectual property (such as patents, trademarks, and copyrights), brand value, and goodwill. A patent is an example of an intangible asset. A patent is a legal document that grants the holder exclusive rights to make, use, and sell an invention for a certain period of time.
The debt created by a business when it borrows from a vendor or supplier is called a(n): a.account payable. b.contingent liability. c.account receivable. d.intangible asset.
(a.account payable.) The debt created by a business when it borrows from a vendor or supplier is called an account payable. An account payable is a liability that represents the amount of money that a business owes to its suppliers or vendors for goods or services that have been received but not yet paid for. An account payable is typically recorded in the accounts payable account in the company's general ledger. It is a short-term liability that is expected to be paid within a year or less. A contingent liability is a potential liability that may or may not arise depending on the outcome of a future event. It is not a debt that has been incurred but is a potential future liability that may be incurred. An account receivable is an asset that represents the amount of money that a business is owed by its customers for goods or services that have been delivered but not yet paid for. An intangible asset is a nonphysical asset that has value but does not have a physical form. Examples of intangible assets include patents, trademarks, copyrights, and goodwill.
Reporting the financial condition of a business at a point in time and reporting the changes in the financial condition of a business over a period of time are the two major objectives of: a.financial accounting. b.forensic accounting. c.not-for-profit accounting. d.fund accounting.
(a.financial accounting.) Reporting the financial condition of a business at a point in time and reporting the changes in the financial condition of a business over a period of time are the two major objectives of financial accounting. Financial accounting is the process of preparing financial statements that summarize a company's financial position, performance, and cash flows. Financial statements include the balance sheet, income statement, statement of changes in equity, and statement of cash flows. The balance sheet presents a snapshot of a company's financial position at a specific point in time, while the income statement, statement of changes in equity, and statement of cash flows report the changes in the financial condition of a business over a period of time. Forensic accounting is the use of accounting principles and techniques to investigate and examine financial records in the context of litigation or dispute resolution. Not-for-profit accounting is the process of preparing financial statements for organizations that do not operate for the purpose of making a profit, such as charities and other nonprofit organizations. Fund accounting is a type of accounting that is used by organizations that manage funds on behalf of others, such as government agencies and universities. It involves tracking and reporting the financial transactions of each fund separately and ensuring that funds are used in accordance with their intended purposes.
The role of accounting in business is best defined as: a.the policies, procedures, and strategies used in a business. b.an information system that provides reports to stakeholders about the economic activities and condition of a business. c.transaction analysis. d.a method of forecasting the future profitability of a company.
(b.an information system that provides reports to stakeholders about the economic activities and condition of a business.) The role of accounting in business is best defined as an information system that provides reports to stakeholders about the economic activities and condition of a business. Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. It is an information system that collects, processes, and communicates financial information about a business to a wide range of stakeholders, including investors, creditors, managers, and regulators. Accounting provides a systematic way to record and report on the financial activities of a business. It helps stakeholders understand the financial position and performance of the business and assess its risk and potential return. Accounting also plays a critical role in planning, decision-making, and control by providing information about the costs and benefits of different courses of action. The policies, procedures, and strategies used in a business are not part of accounting. Transaction analysis is a process that involves identifying and analyzing the effects of financial transactions on a company's financial statements. It is a fundamental aspect of accounting, but it is not the same as the role of accounting in business. Forecasting the future profitability of a company is not the primary role of accounting. While accounting information can be used to make projections about the future performance of a business, it is not the main purpose of accounting.
A list of assets, liabilities, and owners' equity as of a specific date is a(n): a.statement of cash flows. b.balance sheet. c.income statement. d.retained earnings statement.
(b.balance sheet.) A list of assets, liabilities, and owners' equity as of a specific date is a balance sheet. The balance sheet is one of the primary financial statements used to report a company's financial position. It presents a snapshot of the company's financial position at a specific point in time and lists the company's assets, liabilities, and stockholders' equity. The balance sheet is used to evaluate the financial strength and stability of a company, and it is an important tool for investors and creditors in assessing the risk and potential return of an investment. A statement of cash flows is a financial statement that summarizes the cash receipts and cash payments of a company for a specific period of time. It reports the cash inflows and outflows resulting from a company's operating, investing, and financing activities. An income statement reports a company's revenues and expenses for a specific period of time and shows the profit or loss of the company. A retained earnings statement shows the changes in a company's retained earnings over a specific period of time. It includes the beginning retained earnings, net income or loss, and dividends paid, and shows the ending retained earnings.
A note payable requires payment of the amount borrowed plus: a.tax. b.interest. c.overhead. d.dividend.
(b.interest.) A note payable requires payment of the amount borrowed plus interest. A note payable is a debt that is recorded in the liabilities section of a company's balance sheet. It represents money that a company has borrowed and is obligated to pay back at a future date. When a company borrows money, it is typically required to pay an additional charge called interest, which represents the cost of borrowing the money. Interest is typically expressed as a percentage of the amount borrowed and is paid to the lender as compensation for the use of the money. Tax is a financial obligation that is imposed by governments on businesses and individuals. It is typically based on the income or wealth of the taxpayer and is used to fund public services and other government expenses. Overhead refers to the indirect costs of running a business, such as rent, utilities, and administrative expenses. Dividends are payments made to shareholders out of the profits of a company. They represent a portion of the company's earnings that are distributed to shareholders as a return on their investment.
Cash investments made by the stockholders of the business are reported on the statement of cash flows in the: a.financing activities section. b.investing activities section. c.operating activities section. d.supplemental statement.
(b.investing activities section.) Cash investments made by the stockholders of the business are reported on the statement of cash flows in the investing activities section. The statement of cash flows is a financial statement that summarizes the cash receipts and cash payments of a company for a specific period of time. It is used to provide information about a company's liquidity, financial flexibility, and ability to generate cash. The statement of cash flows is divided into three main sections: operating activities, investing activities, and financing activities. Investing activities include cash flows related to the acquisition or disposal of long-term assets such as property, plant, and equipment. They also include cash flows related to investments in other companies or securities. Cash investments made by the stockholders of the business would be reported in the investing activities section because they represent the use of cash to acquire long-term assets or investments. Financing activities include cash flows related to the borrowing and repayment of debt, as well as the issuance and repurchase of stock. Operating activities include cash flows related to the day-to-day operations of the business, such as the sale of goods or services and the payment of expenses. The supplemental statement is not a valid answer choice.
Financing activities_____ . a.involve obtaining assets such as buildings and equipment b.involve obtaining funds to operate a business c.help to make wise investments in other companies d.help to earn revenues and profits
(b.involve obtaining funds to operate a business) Financing activities involve obtaining funds to operate a business. These activities can include obtaining loans, issuing debt or equity securities, and obtaining capital from shareholders or other investors. The funds obtained through financing activities can be used to finance the operation and growth of the business, including purchasing assets such as buildings and equipment. Financing activities do not directly help to earn revenues and profits, although they can indirectly contribute to the profitability of a business by providing the necessary funds to invest in growth opportunities or to meet the financial needs of the business. Financing activities also do not directly involve making wise investments in other companies, although a business may use the funds obtained through financing activities to make investments in other companies as part of its overall strategy for growth and diversification.
In the case of a failing company, the first claim to the company's assets lies with: a.the owners of the company. b.the creditors of the company. c.the managers of the company. d.the state governments.
(b.the creditors of the company.) In the case of a failing company, the first claim to the company's assets generally lies with the creditors of the company. This is because creditors are typically owed money by the company and have a legal right to seek repayment. The order in which creditors are paid is typically determined by the priority of their claims, with secured creditors (those who hold collateral for their loans) being paid before unsecured creditors. The owners of the company and the managers of the company do not generally have a claim on the company's assets before the creditors. The state governments may also have a claim on the company's assets, but this would depend on specific circumstances and legal issues.
A financial statement that summarizes the cash receipts and cash payments of a company for a specific period of time is: a.the cash analysis statement. b.the statement of cash flows. c.the bank reconciliation statement. d.the statement of retained and nonretained cash earnings.
(b.the statement of cash flows) A financial statement that summarizes the cash receipts and cash payments of a company for a specific period of time is the statement of cash flows. The statement of cash flows is one of the primary financial statements used to report a company's financial performance and is typically prepared using the indirect method. It reports the cash inflows and outflows resulting from a company's operating, investing, and financing activities. The statement of cash flows helps investors and analysts understand how a company is generating and using cash and whether it has sufficient cash to meet its financial obligations. The cash analysis statement is not a standard financial statement. The bank reconciliation statement is a document that reconciles the balance of a company's cash account as recorded in its accounting records with the balance of its cash account as recorded on its bank statement. It is used to identify and resolve discrepancies between the two balances. The statement of retained and nonretained cash earnings is not a standard financial statement.
Use the following information to determine Total Stockholders' Equity:Total Assets$85,000Total Liabilities21,000Total Stockholders' EquityxTotal Retained Earnings9,000 a.$55,000 b.$40,000 c.$64,000 d.$58,000
(c.$64,000) To determine Total Stockholders' Equity, we can use the formula for calculating stockholders' equity: stockholders' equity = total assets - total liabilities. In this case, we are given the total assets and total liabilities and need to calculate total stockholders' equity. Plugging the given values into the formula, we get: Total Stockholders' Equity = $85,000 - $21,000 Solving for Total Stockholders' Equity, we find that it is equal to $64,000. Therefore, the correct answer is (c) $64,000. Total Retained Earnings represents the portion of net income that has been retained by the business rather than being distributed to shareholders as dividends. It is a component of stockholders' equity, along with capital stock.
_____ are an example of internal stakeholders. a.Stockholders b.Suppliers c.Managers d.Creditors
(c.Managers) Managers are an example of internal stakeholders. Stakeholders are individuals or organizations that have an interest in or are affected by the activities of a business. Internal stakeholders are those who are directly involved in the operations of the business, such as employees, managers, and owners. They have a vested interest in the success of the business and can influence its operations and decision-making. Stockholders are external stakeholders who own shares of stock in a company and have an ownership interest in the business. Suppliers are external stakeholders who provide goods or services to a business. Creditors are external stakeholders who lend money to a business or are owed money by the business.
During 2016, Banigo Corporation experienced an increase in total assets of $72,600 and an increase in total liabilities of $40,900. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Banigo's net income or net loss for 2016. a.Net income of $26,700 b.Net loss of $45,900 c.Net loss of $31,700 d.Net income of $67,600
(c.Net loss of $31,700) To calculate Banigo's net income or net loss for 2016, we need to use the formula for calculating net income: net income = revenues - expenses. We are not given information about Banigo's revenues and expenses for 2016, so we cannot use this formula to directly calculate net income. However, we can use the information provided to calculate Banigo's net change in equity for 2016. The net change in equity is equal to the increase in assets minus the increase in liabilities. In this case, the net change in equity is $72,600 - $40,900 = $31,700. If we assume that the increase in capital stock represents an inflow of cash into the business and that no dividends were paid, then the net change in equity represents Banigo's net income or net loss for 2016. In this case, the net change in equity is a net loss of $31,700, so the correct answer is (c) Net loss of $31,700.
Which of the following types of business is popular for its ease and low cost of organizing? a.Corporation b.Partnership c.Proprietorship d.Not-for-profit
(c.Proprietorship) A proprietorship is a type of business that is popular for its ease and low cost of organizing. A proprietorship is a business owned and operated by a single individual, who is referred to as the proprietor. A proprietorship is the simplest and least formal type of business organization. It is easy to start and operate, and it does not require any special legal procedures to set up. The proprietor is personally responsible for all debts and obligations of the business and receives all of the profits. A corporation is a more complex and formal type of business organization that requires more legal procedures to set up and operate. It is owned by shareholders, who elect a board of directors to oversee the management of the corporation. A corporation is a separate legal entity from its owners and is subject to corporate income tax. A partnership is a type of business organization in which two or more individuals (called partners) come together to operate a business. A partnership is relatively easy to set up, but it requires more legal formalities than a proprietorship. Partners are personally responsible for the debts and obligations of the partnership and share in the profits. A not-for-profit organization is a type of business that is organized for a charitable, educational, or other public purpose and does not operate for the purpose of making a profit. It is typically set up as a corporation or a trust and is exempt from income tax.
The resources a business owns are called: a.stockholders' equity. b.earnings. c.assets. d.liabilities.
(c.assets.) The resources a business owns are called assets. Assets are resources that a business owns and that are expected to provide economic benefits to the business in the future. They can be tangible (such as buildings, equipment, and inventory) or intangible (such as patents, trademarks, and copyrights). Assets are typically classified on a company's balance sheet as either current assets (which are expected to be converted into cash or used up within one year) or long-term assets (which are expected to provide economic benefits beyond one year). Stockholders' equity refers to the residual interest in the assets of a business after all liabilities have been paid. It represents the ownership interest of the shareholders in the business and includes capital stock and retained earnings. Earnings refer to the profits or net income of a business. They represent the difference between a business's revenues and expenses. Liabilities are obligations or debts that a business has incurred and is required to pay in the future. They can be short-term (such as accounts payable) or long-term (such as a mortgage or a loan). Liabilities are typically classified on a company's balance sheet as either current liabilities (which are due within one year) or long-term liabilities (which are due after one year).
Costs incurred to earn revenue are referred to as _____. a.liabilities b.common stock c.expenses d.retained earnings
(c.expenses) Costs incurred to earn revenue are referred to as expenses. Expenses are the costs that a business incurs in the process of generating revenues. They represent the costs of goods and services consumed or used in the process of operating the business. Expenses are recorded on the income statement and are subtracted from revenues to determine a company's net income or loss. Liabilities are debts or obligations that a business owes to others. They represent amounts of money that a business is required to pay in the future and are recorded in the liabilities section of the balance sheet. Common stock is a type of ownership interest in a company that represents a claim on the company's assets and earnings. It is issued to shareholders and typically entitles them to a share of the company's profits and certain voting rights. Retained earnings are the portion of a company's profits that are not distributed to shareholders as dividends but are instead retained in the business. They are an important source of capital for a company and can be used to fund operations, pay off debt, or make investments.
Debts owed by a business are referred to as: a.stockholders' equity. b.equities. c.liabilities. d.accounts receivable.
(c.liabilities.) Debts owed by a business are referred to as liabilities. Liabilities are obligations or debts that a business has incurred and is required to pay in the future. They can be short-term (such as accounts payable) or long-term (such as a mortgage or a loan). Liabilities are typically classified on a company's balance sheet as either current liabilities (which are due within one year) or long-term liabilities (which are due after one year). Stockholders' equity refers to the residual interest in the assets of a business after all liabilities have been paid. It represents the ownership interest of the shareholders in the business and includes capital stock and retained earnings. Equities refer to ownership interests in a business, such as the equity held by shareholders in a corporation or the equity held by the owner in a sole proprietorship. Accounts receivable are amounts that are owed to a business by its customers for goods or services that have been delivered but not yet paid for. They are considered assets for the business.
The portion of a corporation's net income retained in the business is called: a.dividends. b.interest earnings. c.retained earnings. d.tax expense.
(c.retained earnings) The portion of a corporation's net income retained in the business is called retained earnings. Retained earnings are the portion of a company's profits that are not distributed to shareholders as dividends but are instead retained in the business. Retained earnings are an important source of capital for a company and can be used to fund operations, pay off debt, or make investments. Dividends are payments made to shareholders out of the profits of a company. They represent a portion of the company's earnings that are distributed to shareholders as a return on their investment. Interest earnings are the amounts of money that a company earns from its investments or other sources of interest income. Tax expense is the amount of money that a company owes in taxes. It is a reduction in a company's net income and is recorded as an expense on the income statement.
Shares of ownership are evidenced by issuing: a.commercial paper. b.notes payable. c.shares of stock. d.shares payable.
(c.shares of stock.) Shares of ownership are evidenced by issuing shares of stock. Shares of stock represent ownership interests in a company and are typically issued to raise capital for the business. When a company issues shares of stock, it is selling ownership stakes in the company to investors in exchange for cash or other assets. The investors become shareholders in the company and are entitled to a share of the company's profits, as well as certain voting rights and other privileges. Commercial paper is a short-term debt instrument that is issued by companies to raise capital for a period of less than 270 days. It is a form of unsecured promissory note that is typically issued at a discount to face value. Notes payable are debts that are recorded in the liabilities section of a company's balance sheet. They represent money that a company has borrowed and is obligated to pay back at a future date. Shares payable is not a financial term and is not a valid answer choice.
A summary of the cash receipts and cash payments for a specific period of time is a(n): a.balance sheet. b.income statement. c.statement of cash flows. d.retained earnings statement.
(c.statement of cash flows.) A summary of the cash receipts and cash payments for a specific period of time is a statement of cash flows. The statement of cash flows is one of the primary financial statements used to report a company's financial performance and is typically prepared using the indirect method. It reports the cash inflows and outflows resulting from a company's operating, investing, and financing activities. The statement of cash flows helps investors and analysts understand how a company is generating and using cash and whether it has sufficient cash to meet its financial obligations. A balance sheet presents a snapshot of a company's financial position at a specific point in time. It lists the company's assets, liabilities, and stockholders' equity. An income statement reports a company's revenues and expenses for a specific period of time and shows the profit or loss of the company. A retained earnings statement shows the changes in a company's retained earnings over a specific period of time. It includes the beginning retained earnings, net income or loss, and dividends paid, and shows the ending retained earnings.
If there was no beginning retained earnings, net income of $30,300, and ending retained earnings of $8,000, how much were dividends? a.$6,000 b.$8,000 c.$38,300 d.$22,300
(d.$22,300) To calculate the amount of dividends paid, we can use the following formula: dividends = beginning retained earnings + net income - ending retained earnings. In this case, we are given the values for net income and ending retained earnings, and we are told that there was no beginning retained earnings. Plugging these values into the formula, we get: Dividends = $0 + $30,300 - $8,000 Solving for dividends, we find that they are equal to $22,300. Therefore, the correct answer is (d) $22,300. Note that this assumes that all of the net income was distributed to shareholders as dividends, and that none of it was retained by the business. If some of the net income was retained, the amount of dividends paid would be lower.
Which of the following is not a characteristic of a corporation? a.Corporations experience an ease in obtaining large amounts of resources by issuing stock. b.Ownership is divided into shares of stock. c.Corporations are organized as a separate legal taxable entity. d.A corporation can elect to be taxed as a partnership.
(d.A corporation can elect to be taxed as a partnership.) A corporation cannot elect to be taxed as a partnership. This is not a characteristic of a corporation. A corporation is a separate legal entity that is organized according to state or federal statutes and is owned by shareholders who hold shares of stock in the company. One of the key characteristics of a corporation is that ownership is divided into shares of stock, which represent ownership interests in the company. Another characteristic of a corporation is that it can experience an ease in obtaining large amounts of resources by issuing stock, which allows it to raise capital by selling ownership stakes in the company. Additionally, corporations are taxed as separate legal taxable entities, meaning that they are subject to corporate income tax on their profits. Option (a) is correct because it is a characteristic of a corporation. Option (b) is correct because it is a characteristic of a corporation. Option (c) is correct because it is a characteristic of a corporation. Option (d) is incorrect because it is not a characteristic of a corporation.
Which of the following businesses buys products from other businesses to sell them to customers? a.An investment business b.A service business c.A manufacturing business d.A merchandising business
(d.A merchandising business) A merchandising business buys products from other businesses to sell them to customers. A merchandising business, also known as a retail business, is in the business of buying and selling goods. It purchases products from manufacturers or wholesalers and sells them to customers at a markup. Examples of merchandising businesses include department stores, grocery stores, and online retailers. An investment business is a business that invests in securities or other assets for the purpose of generating profits. It does not typically buy and sell goods to customers. A service business is a business that provides services to customers, rather than goods. Examples of service businesses include consulting firms, law firms, and hair salons. A manufacturing business is a business that produces goods by transforming raw materials into finished products. It does not typically buy and sell goods to customers, although it may sell the goods it produces to wholesalers or retailers.
Which of the following is a business stakeholder? a.A federal government b.An employee c.A bank d.All of these choices are correct.
(d.All of these choices are correct.) All of these choices are correct. A stakeholder is an individual or group that has an interest or concern in something, especially a business. Business stakeholders are individuals or groups that have a direct or indirect relationship with a business and are affected by or have the ability to impact its actions. A federal government is a stakeholder in a business because it has an interest in the business's operations and has the ability to regulate and tax it. An employee is a stakeholder in a business because their well-being and job security are directly tied to the success of the business. A bank is a stakeholder in a business because it has loaned the business money and has a financial interest in its success.
Question Content Area Which of the following is an appropriate representation of the accounting equation? a.Assets = Liabilities b.Assets = Liabilities + Retained earnings c.Assets + Liabilities = Stockholders' equity d.Assets = Liabilities + Stockholders' equity
(d.Assets = Liabilities + Stockholders' equity) The appropriate representation of the accounting equation is: Assets = Liabilities + Stockholders' equity. The accounting equation is a fundamental principle of accounting that represents the relationship between a company's assets, liabilities, and stockholders' equity. It states that a company's assets are financed either by borrowing money (liabilities) or by the investment of capital by the shareholders (stockholders' equity). The accounting equation can be expressed as follows: Assets = Liabilities + Stockholders' equity This equation indicates that the total assets of a company are equal to the total amount of money that has been borrowed (liabilities) plus the capital invested by the shareholders (stockholders' equity). The accounting equation is a basic tool for understanding the financial position of a company and is used to prepare financial statements such as the balance sheet. Option (a) is incorrect because it does not include stockholders' equity in the equation. Option (b) is incorrect because retained earnings are a component of stockholders' equity, not a separate element. Option (c) is incorrect because it reverses the order of the elements in the equation.
Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept? a.Objectivity concept b.Adequate disclosure concept c.Business entity concept d.Going concern concept
(d.Going concern concept) Expressing financial data as if a business will continue operating for an indefinite period time refers to the going concern concept. The going concern concept is a fundamental principle of accounting that assumes that a business will continue to operate in the future and that it will not be forced to liquidate its assets in the near term. This assumption is based on the idea that a business has the ability to generate sufficient cash flows to meet its financial obligations as they come due. As a result, financial statements are prepared under the assumption that a business will continue to operate as a going concern and that it will not be required to sell its assets to meet its financial obligations. The objectivity concept is a principle of accounting that requires financial information to be based on objective evidence and to be free from bias or personal opinion. The adequate disclosure concept is a principle of accounting that requires financial statements to include sufficient information to enable users to understand the nature and extent of a company's financial activities and condition. The business entity concept is a principle of accounting that assumes that a business is a separate entity from its owners and should be treated as such in financial reporting. It requires that the financial activities of a business be kept separate from the personal financial activities of its owners.
According to which of the following concepts should the expenses incurred when generating revenue be reported in the same period as the related revenue? a.The cost concept b.The periodicity concept c.The adequate disclosure concept d.The matching concept
(d.The matching concept) According to the matching concept, the expenses incurred when generating revenue should be reported in the same period as the related revenue. The matching concept is a principle of accounting that requires expenses to be matched with the revenues they helped to generate. It is based on the idea that the expenses incurred by a business in the process of generating revenues should be recognized in the same period as the revenues they helped to create. This ensures that the income and expenses of a business are reported in a way that reflects the relationship between the two. The cost concept is a principle of accounting that requires that assets be recorded at their original acquisition cost. The periodicity concept is a principle of accounting that requires financial statements to be prepared on a periodic basis, such as monthly, quarterly, or annually. The adequate disclosure concept is a principle of accounting that requires financial statements to include sufficient information to enable users to understand the nature and extent of a company's financial activities and condition.
What is the primary objective of most businesses? a.To pay dividends to stockholders b.To manufacture a quality product c.To provide a benefit to society d.To maximize profits
(d.To maximize profits) primary objective of most businesses is typically to maximize profits. This means that the business seeks to generate as much revenue as possible and to minimize costs in order to maximize the difference between the two. While paying dividends to stockholders and manufacturing a quality product may be important goals for some businesses, they are often secondary to the primary objective of maximizing profits. Providing a benefit to society is not typically the primary objective of most businesses, although many businesses do aim to have a positive impact on society through their operations and corporate social responsibility efforts.
Revenues received from providing services are referred to as: a.net income. b.retained earnings. c.gross income. d.fees earned.
(d.fees earned.) Revenues received from providing services are referred to as fees earned. Fees earned refer to the amounts of money that a business receives in exchange for providing services to its customers. They represent the revenues generated from the sale of services and are recorded on the income statement. Net income is the amount of profit that a business generates after subtracting expenses from revenues. It represents the amount of money that a business has earned after taking into account all of its operating costs and other expenses. Retained earnings are the portion of a company's profits that are not distributed to shareholders as dividends but are instead retained in the business. They are an important source of capital for a company and can be used to fund operations, pay off debt, or make investments. Gross income is the total amount of money that a business earns before deducting any expenses. It represents the total revenues generated by the business before any costs are subtracted.
A corporation is an entity _____. a.that is known for its ease of formation b.that terminates its existence with the death of the owner c.that pays tax on the owner's tax returns d.that is organized according to state or federal statutes and in which ownership is divided into shares of stock
(d.that is organized according to state or federal statutes and in which ownership is divided into shares of stock) A corporation is an entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock. A corporation is a separate legal entity from its owners and is subject to corporate income tax. It is owned by shareholders, who elect a board of directors to oversee the management of the corporation. A corporation is not known for its ease of formation. It requires more legal procedures to set up and operate than other types of business organizations, such as a proprietorship or a partnership. A corporation does not terminate its existence with the death of the owner. A corporation is a separate legal entity from its owners and continues to exist even if the owners change or the business is sold. A corporation does not pay tax on the owner's tax returns. The corporation itself is subject to corporate income tax, and the owners may have to pay tax on their share of the corporation's profits.
The purchase of factory equipment would be an example of which type of business activity? a.Financing b.Operating c.Investing d.All of these choices are correct.
The purchase of factory equipment would be an example of investing activity. Investing activities involve the use of a company's financial resources to acquire long-term assets or to make investments in other companies. Examples of investing activities include the purchase of property, plant, and equipment (such as factory equipment), the purchase of investments in stocks or bonds, and the acquisition of other businesses. Financing activities involve obtaining funds to operate a business. They can include obtaining loans, issuing debt or equity securities, and obtaining capital from shareholders or other investors. Operating activities refer to the activities that are necessary to generate revenues and incur expenses in the course of running a business. Examples of operating activities include the sale of goods or services, the purchase of raw materials and supplies, and the payment of salaries and other operating expenses.
