Chapter 1

What are the two fundamental qualitative characteristics identified by the Financial Accounting Standards Board's (FASB) conceptual framework?

Relevance and faithful representation.

Traditional careers in public accounting include:

All of the choices are correct. Auditors. Tax preparers/planners. Business consultants.

Financial accounting helps with:

All of the choices are correct. Maintaining records of multiple business transactions. Exchange of goods and services among individuals. Development of more complex societies.

Which of the following represents a resource of the company?

Asset.

Which of the following equations correctly represents the fundamental accounting equation?

Assets = Liabilities + Stockholders' Equity.

The financial statement that shows the financial position of a company at a specific point in time is called the:

Balance Sheet.

Which financial statement reports a company's assets and liabilities?

Balance Sheet.

Which financial statement shows that a company's resources equal claims to those resources?

Balance sheet.

The most lucrative activity of public accountants typically is:

Business consulting.

The underlying foundation for the development of accounting standards and interpretation of accounting information is referred to as the:

Conceptual framework.

Expenses represent:

Costs of providing products or services to customers.

Which of the following describes the cost of selling to customers?

Expenses.

Financial accounting and reporting standards in the United States are established primarily by the

Financial Accounting Standards Board (FASB).

Which body has the primary responsibility for the establishment of Generally Accepted Accounting Principles?

Financial Accounting Standards Board (FASB).

Based on the introductory section of this chapter, which course is most like financial accounting?

Foreign language.

The term GAAP stands for:

Generally Accepted Accounting Principles

The body of rules and procedures that guide the measurement and communication of financial accounting information is known as

Generally Accepted Accounting Principles (GAAP).

What is a benefit to a career in accounting?

High salaries. Wide range of job opportunities. High demand for accounting graduates. All of these answer choices are correct.

Financial accounting provides information primarily to:

Investors and creditors.

Why does financial accounting have a positive impact on our society?

It allows investors and creditors to redirect their resources to successful companies and away from unsuccessful companies.

Financial accounting is often referred to as a:

Language of business.

Amounts owed by the company are referred to as

Liabilities.

Public accounting firms refer to:

Professional service firms that traditionally focus on auditing and tax preparation.

The fundamental qualitative characteristics of accounting information identified by the FASB are:

Relevance, faithful representation.

Based on the introductory section of this chapter, financial accounting can also be described as a way to

Tell the financial story of a company.

Which of the following best describes financial accounting?

Information measurement/communication process.

Financial accounting serves which primary function(s)? I.Measures business activities. II.Communicates business activities to interested parties. III.Makes business decisions on behalf of interested parties.

I and II

In which financial statement does a company report its expenses?

Income Statement.

In which financial statement does a company report its revenues?

Income Statement.

Which financial statement shows a company's revenues and expenses?

Income Statement.

Which financial statement conveys a company's ability to generate profits in the current period?

Income statement.

Amounts owed to creditors are reported as:

Liabilities.

Which of the following represents an obligation of the company?

Liabilities.

Financial accounting information is essential to:

Making good business decisions.

Who ultimately is responsible for properly applying GAAP? The company's:

Management.

The primary function(s) of financial accounting is(are) to:

Measure business activities of a company and communicate information about business activities to outside users.

Which definition best describes financial accounting?

Measuring a company's business activities and communicating those measurements to external parties.

A company reports the following in its income statement: Total revenues of $500,000 and total expenses of $300,000. Which of the following is true?

Net income equals $200,000.

Which single piece of information best explains most companies' stock price performance?

Net income.

A component/aspect of relevant accounting information includes:

Predictive value.

The balance in retained earnings represents:

The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.

Which of the following best describes an important function of financial accounting?

To support the efficient distribution of society's resources.

A company reports the following in its balance sheet: Total assets of $800,000 and total liabilities of $700,000. Which of the following is true?

Total stockholders' equity equals $100,000.

Resources of a company are referred to as

assets

Sales of products or services are referred to as

revenues