Chapter 1 Accounting

An event that causes one asset account to decrease and another asset account to increase is called an asset ___________ transaction.

exchange

True or false: The sacrifices a company incurred in order to produce benefits during the period are reported on the statement of changes in stockholders' equity.

false

The needs of external stakeholders, such as investors and creditors is provided by ______ accounting information.

financial

Companies must follow generally accepted accounting principles (GAAP) for ___________(financial/managerial) accounting reports, but not for _______________ (financial/managerial) accounting reports. (Enter only one word per blank.)

financial, managerial

The complete collection of a company's accounts is called the __________ ledger

general

The assumption that a business is able to continue its operations into the foreseeable future is the _____________________ doctrine.

going concern

Merchandising businesses include _____

grocery stores shoe stores

The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the ______.

income statement

The financial statement that shows all the revenues earned and expenses incurred during the accounting period is the ______.

income statement

An asset source transaction causes a(n) ______.

increase in an asset account and an increase in a liability or stockholders' equity account

Earning cash revenue by providing services to customers will cause the amount of cash to __________ and the amount of retained earnings to ___________.

increase, increase

In a business liquidation, ______.

liabilities are paid in full before funds are distributed to owners creditors may be unable to collect the full amount of the liabilities

Companies that make the goods they sell to their customers are called ___________ businesses.

manufacturing

Stakeholders who use accounting information include ______.

newspaper reporters the federal government creditors investors

The 10k report includes ______.

notes to the financial statements management discussion and analysis (MD&A) financial statements

The right side of the accounting equation for a corporation may be viewed as ______.

obligations and commitments of the business sources of assets claims of creditors and owners

Users of accounting information are commonly called

stakeholders

Cash inflows and outflows are reported on the ______.

statement of cash flows

The financial statement that explains what caused cash to change during an accounting period is the _____

statement of cash flows

Businesses have a(n) __________function, which means that it has a duty to protect and use its assets for the benefit of the owner

stewardship

The accounting records of Woo Company show $2,400 of retained earnings. Based on this information alone, ______

the amount of cash dividends the company is able to pay cannot be determined

Jane Smith started a company by investing $50,000 of her personal money in the company called Jane's Candies. Immediately after Jane's investment, the company borrowed $20,000 from the State Bank. The number of reporting entities described in this scenario is ______.

three

An event that causes assets and liabilities to decrease is an asset transaction

use

X Company purchased land for cash from Y Company. Based on this information alone, the number of reporting entities is ______.

2

Green Company has $10,000 of assets. Fifty percent of the assets were acquired from the issue of common stock and thirty percent were acquired from earnings. Based on this information, the dollar value of liabilities must be ______.

2000

Which of the following is not a normal requirement to have a certified public accountant (CPA) designation?

4 years of work experience

What are the primary categories reported on the statement of cash flows?

Investing Financing Operating

Which of the following is an asset source transaction?

Issuing common stock for cash

Which of the following services is not provided by certified public accountants?

Legal

Which of the following questions are correct?

Many procedures and practices used by accountants are based on a going concern assumption. The going concern doctrine assumes a business will continue operations into the foreseeable future.

Which financial statement(s) reports the effects of transactions on common stock and retained earnings?

Statement of Changes in Stockholders' Equity

Which of the following questions are correct?

The going concern doctrine assumes a business will continue operations into the foreseeable future. Many procedures and practices used by accountants are based on a going concern assumption.

Which of the following statements are true?

The right side of the accounting equation shows the sources of assets. The obligations of the business to creditors are shown on the right side of the accounting equation.

True or false: On the balance sheet, assets must equal liabilities plus stockholder's equity.

True

Detailed information about the accounting equation is maintained in records commonly called

accounts

The resources a business uses to conduct its operations are called

assets

Which statement reports ending balances for total assets, total liabilities, and total stockholders' equity?

balance sheet

The amount of cash dividends a company can pay are limited by the amount of the company's ______.

cash

A general ledger is a(n) ______.

complete list of a company's accounts

An event that increases total assets and total claims is an asset ____________ transaction

source

Monster Media's (MM) accounting records indicate that the company has $500 of cash; $2,500 of land; $1,600 of common stock; and $1,400 of retained earnings. Based on this information, the maximum cash dividend the company can pay is ______.

$500

The accounting records of Direct Marketing Company (DMC) indicate that the company has $500 of cash; $3,500 of land; $1,000 of liabilities; $600 of common stock; and $2,400 of retained earnings. Based on this information, the percent of assets provided by earnings is ______.

60%

Businesses have a(n) ____________ function, which means that it has a duty to protect and use its assets for the benefit of the owner.

?

The Statement of Changes in Stockholder's Equity captures information related to the company's ______.

?

Which of the following is a not-for-profit organization?

Alabama Public Schools

Which of the following is not a business asset?

An obligation to repay debt

The 10k report is prepared ______.

Annually

Which financial statement is most similar to the accounting equation?

Balance sheet

Which items are presented on the statement of changes in stockholders' equity?

Ending retained earnings Net income Total stockholders' equity Beginning common stock Dividends

True or false: All companies use the same number of accounts.

False

When it is liquidated, a business has assets of $500 cash, $800 of liabilities and $400 common stock and ($700) deficit in retained earnings. Based on this information, ______.

creditors will receive $500 owners will receive zero

An asset use event causes a(n) ______.

decrease in an asset account and a decrease in a liability or stockholders' equity account

When a company pays cash to purchase land, the amount of cash ______.

decreases and the amount of land increases

When a company pays cash to purchase land, the total amount of assets and liabilities ______.

do not change

Profit is also called ______.

earnings, income

Resource providers use accounting information to identify companies with high earnings potential because those companies are better able to ______.

pay higher salaries share profits make interest payments

A business that consumes $3,000 of resources to make a product that is sold for $4,000 has earnings or ________________ of $1,000

profit

The difference between the cost of a product or service and the selling price of that product or service is called ______. (Select all that apply.)

profit value added income. earnings.

Compared to financial accounting information, managerial accounting information, ______

provides more detail about the everyday operations of a business contains more estimates

The text defines as ___________ an increase in assets that results from providing goods and services to customers

revenue