Chapter 1
Which of the following is found on both the statement of retained earnings and the balance sheet?
retained earnings
Net income increases when
Revenues are greater than expenses The company incurs expenses that are less than the price of goods or services sold to its customers
Which of the following statements are true about the balance sheet?
-it reports the assets, liabilities, and stockholders' equity at a point in time -it is sometimes called the statement of financial position -it reports the economic resources and claims on those resources
A company started the month with $1,000 of Retained Earnings. During the month, it had Revenue of $5,000 and Expenses of $4,500. It also distributed a Dividend of $100 among its stockholders. The company's Retained Earnings at the end of the period equals $ ______
1,400
Over Armour, Inc., made shirts at a cost of $6 Per shirt. It's sold five shirts to its customers for A price of $10 per shirt total revenue equals $_____ and the expense equals $_____
50 , 30
Which of the following are true about an accounting system
Its purpose is to analyze, record, and summarize business activities. It captures information about the business and finalizing activities of a company
_____ Are measurable amounts that the company owes the creditors
Liabilities or liability
_____are measurable amounts that the company owes to creditors.
Liabilities or liability
______ accounting reports include Detailed financial reports about the companies operating performance that are continuously updated and used by internal users(employees) ______Accounting reports are prepared periodically to provide information to external users
Managerial and Financial
Liabilities are
Measurable amounts that the company owes to creditors
Select all of the true statements about net income and net loss
Net income increases retained earnings Net income equals revenues minus expenses Net losses decrease retained earnings When revenues are less than expenses a net loss exist
Which of the following accounts are liabilities? (Check all that apply.)
Note Payable Taxes Payable Wages Payable Accounts Payable
The_____to the financial statements help users understand how financial statement amounts were derived and includes other information that may affect the users' decision
Notes or Footnotes
The_____to the financial statements help users understand how financial statement amounts were derived and includes other information that may affect the users' decisions.
Notes or Footnotes
Mauricio, The Pizza owner of Pizza Aroma, spent $2500 of his own money to take his family to Disney World. Pizza Aroma's financial statements will report.
Nothing about this trip
An amount owed to a supplier for prior purchases on account is an Account ____ which is an ____
Payable liability
An amount owed to a supplier for a prior purchases on account is an account _____ which a _____ Account
Payable, liability
Mauricio, the owner of Pizza Aroma inc, arranged for the business to borrow $25,000 from Riverbank which entity should show the liability on its Balance sheet
Pizza Aroma
Which type of accounting is hired by a business as an employee and provides accounting services for that particular business
Private accountant
Which type of accounting is contracted by a variety of different companies for advice and other services
Public accountant
Accounts______ is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit. (Enter one word per blank.)
Receivable
Which of the following characteristics are needed in order for financial information to be useful
Relevance Faithful representation
Profits owned by a company that have not been paid to stockholders at the end of an accounting. Are called ___ earnings
Retained
Place the single-step income statement items in the proper order from top to bottom.
Revenues Expenses Net Income
Net income equals total ______ minus total _____
Revenues - Expenses
Identify the primary ways in which a business maybe organize
So proprietorship, Partnership and corporation
Through common forms of business organization include
Sole proprietorship, Corporation and partnership
Cash Flows Provided by ______ activities on the statement of cash flows reports the cash activity with stockholders and creditors such as banks.
financing
Paying a cash dividend to stockholders is a(n)
financing activity
How is accounting knowledge beneficial to different business majors? Accounting knowledge helps
in setting prices by brand managers to assess the value of investing options by investment analysts to determine supply chain options to forecast revenue by financial analysts
Notes to the financial statements _____
include other information that may affect users' decisions. help users to understand how the financial statement amounts were derived
Which financial statement reports revenues and expenses?
income statement
When a company earns net income, its retained earnings ____
increase
Retained earnings are
increased by net income decreased by dividends
When a company obtains financing by issuing shares that are traded on a stock exchange it is called _____ offering, or IPO,
initial public
Which of the following are the main groups of external users of financial statements
investors, creditors, government
An initial public offering, IPO, is when a company:
issues shares that are traded on a stock exchange
A company might report negative Cash Flows used by Financing Activities when
it has paid a large cash dividend to its stockholders
Which of these appears on both the income statement and the statement of retained earnings?
net income
Which of the following represents the written promise to repay a bank?
notes payable
If an external user of financial statements wants to know how amounts were derived, it would look at the
notes to the financial statements
Financial statements can be prepared on a monthly basis ______
on a monthly basis on a quarterly basis on a fiscal year basis
Net Income is reported
on both the income statement and statement of retained earnings
The statement of retained earnings is:
one of the 4 financial statements
The______activities section on the statement of cash flows reports the activities directly related to running the business to earn profit.
operating
An asset is an amount ______, while a liability is an amount ______.
owned; owed
Operating activities include the ______
payment of wages
The main reason companies exist is to maximize their
profits and owners wealth
The statement of retained earnings reports the
profits that have accumulated in the company over time
A(n) ___ accountant is contracted to provide advice to a variety of businesses whereas a(n) ___ accountant works as an employee for one business.
public private or you can also put managerial
The unit-of-measure assumption states that
results of business activities should be reported in an appropriate monetary unit
Which of these appears on both the statement of retained earnings and the balance sheet?
retained earnings
Which of the following cause Retained Earnings to increase?
revenues greater than expenses net income selling goods or services at a price higher than the costs incurred to operate business
A financial statement heading states that it was prepared: "For the Year Ended December 31, 2020." What types of financial statements could this be?
statement of cash flows statement of retained earnings income statement
Which financial statement reports the accumulation of profits kept by the business during the current accounting period with that of prior periods?
statement of retained earnings
An income statement is referred to as a single-step income statement because
the format separates total revenues from expenses and reports a single measure of income
The heading of an income statement should include
the name of the business the accounting period covered by the statement the title "income statement"
The amount of cash reported on the balance sheet is ___ the ending cash balance reported on the statement of cash flows
the same as
The primary goal of most companies is to
to make a profit
Accounts are:
used to accumulate and report the effects of each different business activity
Creditors want to see that a company that owes them money has ______.
assets that are greater than its liabilities
A balance sheet shows
assets, liabilities, and stockholders' equity at a single point in time
A company's profits ____
- equal revenues minus expenses - Are called net income - Belong to the owners
Ace Electronics paid $4,000 of the $5,000 its employees had earned during the period. Ace Electronics should report Wages Expense of $5,000 on the income statement and Wages Payable of ____ on the balance sheet prepared in accordance with generally accepted accounting principles.
$1,000
At December 31, Equate, Inc.'s assets equal $50,000 and liabilities equal $30,000. Stockholders' equity must equal
$20,000
Axis Company just bought a piece of land for $25,000. What a deal! The land next door was sold last month for $27,000. Axis immediately put the land back on the market for $29,000, but so far hasn't had any offers. This land would appear on Axis Company's balance sheet at a value of ______.
$25,000
Ace Electronics bought equipment for $4,000. Normally the equipment would have cost $4,500, but the supplier gave Ace a special discount. Ace's balance sheet should report equipment of
$4000
Shirts Inc. made shirts at a cost of seven dollars per shirt and so turn shirts to its customers for $10 each. Shirts should Record a total of ______ As an expense for the cost of the goods sold
70
Which of the are true about the income statement?
A dollar sign appears only at the top and bottom of the column of numbers. Net Income has a double underline. Revenues are listed before expenses. Each major caption has an underlined subtotal, such as Total Expenses.
Alpha sold $2,000 of merchandise to Beta on credit. Beta promised to pay for it next month. Alpha report a $2,000
Account Receivable
Distinguish between receivables and payables by selecting the correct statements.
Accounts Payable is a liability and reports the amount of cash to be paid in the future for purchase made on account. Accounts Receivable is an asset and reports the amount of cash to be received in the future for sales made on account.
Pizza Aroma delivered $500 of pizzas to the local high school, but hasn't received payment yet. Pizza Aroma will report ______.
Accounts Receivable of $500
When a company is owed for sales made to customers on credit, the asset called:
Accounts Receivable will be reported on the balance sheet
Ace electronics received $200 of copy paper from its supplier and promise to pay for it next month. Ace should report
Accounts payable of 200 on its balance sheet
It company profits
Are called net income Equal revenues minus expenses Belong to the company's owners
Which of the following is the basic accounting equation
Assets = Liabilities + stockholders Equity
Which of the following are ways of expressing the basic accounting equation
Assets = liability + stockholders equity Assets - Stockholders equity = liabilities Assets - liabilities = stockholders equity
The main goal of an accounting system is two
Capture information about a business so that it can be reported to decision makers
Which of the following would be included in the operating activity section of the statement
Cash paid to suppliers Cash paid to employees Cash received from customers
A positive cash flow under Cash from Financing Activities is a result of which of the following?
Cash received from owners for company stock Cash received on loan from bank
And owner gives $5000 to his company in exchange for stock this will increase the companies
Cash, Common stock, total stockholders equity
Maricio invested $3000 in Pizza Aroma in exchange for its stock. Aroma now has a balance and it's ____ Account
Common stock
Paid in capital is called ______
Common stock
Which of the following represents the amount of owners claim that the owners contribute directly to the company
Common stock paid in capital
It owner gives $5000 cash to his company in exchange for stock this will increase the companies
Common stock, total stockholders equity and cash
Click and drPlace the following in order (top down) of how they would appear in the heading of Deli Llama's annual income statement for the fiscal year ended March 31. 2020.
Deli Llama, Inc. Income Statement For the year ended March 31, 2020
Which of the Following causes between earnings to decrease
Dividends and Expenses
Revenues are
Earned by selling goods or services to Customers
Which of the following represents owners claims on profits the company and for them business operations
Earned capital Retained earnings
An asset is defined as a
Economic resource expected to benefit the company in the future
Managerial Accounting Reports are used by the companies
Employees
A single-step income statement includes which of the following
Expenses Revenues Net Income
Which of the following characteristics are needed in order for financial information to be useful?
Faithful representation Relevance
True or false: Dividends are expenses that decrease net income
False
True or false: Financial statements must have a year end of December
False
True or false: Net income equals the net amount of cash collected during the accounting period
False
True or false: The order of the heading of an income statement indicates the name of the statement first, the period of time covered, and the name of the company third.
False
True or false: The order of the heading of an income statement indicates the name of the stateme the period of time covered, and the name of the company third.
False
Which group is responsible for creating the US GAAP?
Financial Accounting Standards Board (FASB)
The underlying rules of accounting in the US are called
Generally Accepted Accounting Principles (GAAP)
Businesses earn profit by
Having revenue is greater than expenses Providing services or Selling goods at more than the cost to provide the service or deliver the goods
Which of the following are external users of the company's financial statements
Stockholders, Creditors and securities and exchange commission (SEC)
Which of the following are expenses
Supplies expense And wages expense
The separation entity assumption assumes
The financial reports of the business include only the results of the business activity
The heading of a balance sheet should include which of the following? (Check all that apply.)
The title "Balance Sheet" At December 31, 2020 The name of the business
Which of the following are true of financial statements?
They may have a fiscal year end other than December 31. They may be prepared more than once a year.
True or false: A fiscal year can end on a date other than December 31. A calendar year ends on December 31.
True
True or false: Creditors would like a company that owes them money to have a large positive cash flow from operating activities.
True Cash flow from operating activities can be used to repay loans
The unit of measure concept is the idea that a company should report its financial results on its financial statements using ______.
a single monetary unit, such as the US dollar
______ is referred to as the language of business because it is such a key part of business and its terms are typically used in discussing business ______
accounting
Individual expenses are accumulated in separate _____
accounts
The balance sheet balances when
assets equal liabilities plus stockholders equity
Which financial statement reports the financial position of the business at a point in time?
balance sheet
Cash is reported on which of the following financial statements?
balance sheet and statement of cash flows
Cash Flows from (used in) Investing Activities on the statement of cash flows reports the cash activity from the
buying and selling of equipment
Which of these would be reported as Cash Flows from (used in) Investing Activities?
cash paid to build a new corporate headquarters cash paid to buy equipment
Place the balance sheet line items in the proper order from top to bottom.
cash, supplies, equipment, accounts payable, common stock, retained earnings
Financial information is enhanced when it is
comparable verifiable understandable timely
Net losses cause retained earnings to _______.
decrease
A net loss will
decrease retained earnings
Retained ____ Represents the capital earned by the company
earnings
Which line item appear on the statement retained earnings
ending balance of Retained Earnings Net Income Dividends
Which of the following are assets
equipment, cash, land and Supplies
The order in which liabilities are reported on the balance sheet is based on when the liability is ______.
expected to be paid or settled