Chapter 1 Accounting Study Set
An income statement reports
- Revenue - Net income or loss - Expenses
Which of the following aspects relate to the information provided in an income statement?
Ability to earn a profit from its operations during the current period
The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as
Accounting
Management discussion and analysis and note disclosures to the financial statements are included in the
Annual report (10-K)
The accounting equation is:
Assets = Liabilities + Stockholders Equity
Stockholders' equity arises primarily from amounts invested by shareholders and amounts
Earned by the corporation
The two sources of stockholders' equity are amounts
Earned by the corporation - Paid in from shareholders
A code or moral system that provides criteria for evaluating right and wrong is referred to as
Ethics
Which items are found on an income statement?
Expenses - Revenues
_______________ requires that information is complete, neutral, and free from material error.
Faithful representation
The financial statement that is the 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 are financial statements
Income statement - Statement of stockholders' equity - Balance sheet
The statement of cash flows classifies items as
Operating, investing, and financing
The three most common forms of business organizations are
Partnership - Sole proprietorship - Corporation
Predictive value and confirmatory value are components of which fundamental qualitative characteristic?
Relevance
Which of the following items are found on a balance sheet?
Stockholders' equity - Assets - Liabilities
The purpose of an income statement is to
Summarize the profit-generating activities that occurred during a particular reporting period
Retained earnings represents
The total net income earned over the life of the company that has not been distributed as dividends.
Ethics
a term that refers to a code or moral system that provides criteria for evaluating right or wrong.
The accounting equation is:
assets = liabilities + stockholders' equity
A balance sheet lists the ___________ as of a specific date
assets, liabilities, and stockholders' equity
The financial statement that displays a firm's financial position on a particular date is the
balance sheet
The financial statement that provides information about cash receipts and cash disbursements for the period is the statement of
cash flows.
The primary functions of accounting are
communivate information to decision makers and measure a companys activities
the form of business organization where an entity is legally seperate from its owners and issues shares of stock is a
corporation
companies communicate information about their business activities primarily through
financial statements
Information that best explains companies' stock price performance is reported on the
income statement
Salaries already paid to employees for the month is a expense account that appears on the
income statement
The purpose of a ___________ is to report the profit-generating activities of the firm during a period of time.
income statement
the four financial statements published to provide information to external users include which of the following
income statement, statement of cashflows, statement of stockholders equity, balance sheet
The two main functions of accounting are to
measure business activities and to communicate those measurements to investors and creditors.
The characteristics that a new accounting standard should not favor one group of companies over others or achieve a particular social outcome is an example of
neutrality
identify the three most common forms of business organizations
prtnerships sole proprietorships and corporations
To be useful for decision making, information should possess the fundamental qualities of
relevance and faithful representation
A net loss decreases
retained earning
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 financial statements shows a firm's financial position on a particular date?
Balance sheet
The purpose of a statement of cash flows is to provide information about the
Cash receipts and cash disbursements during a period
Which of the following appear on the balance sheet?
Common stock - Utilities payable - Accounts receivable
The primary functions of accounting are to
Communicate information to decision makers - Measure a company's activities
Faithful representation required information to have which of the following three characteristics?
Completeness - Neutrality - Free from material error
Confirmatory value and predictive value
Confirmatory value = positive income is consistent with effectiveness of management - Predictive value = consistently increasing income helps forecast the company's ability to generate future cash.
The private sector organization that is currently responsible for setting accounting standards in the United States is the
Financial accounting standards board (FASB)
_________ represent a company primary means of communicating information to external users
Financial statements
Which of the following are attributes of FASB?
Full time board members - Private sector organization - Independence
Financial information that may impact investors and creditors decision is referred to as materiality and must be reported under
GAAP
When a company earns net income, its retained earnings:
Increase
The three classifications on the statement of cash flows are cash flows from
Investing activities - Operating activities - Financing activities
The impact of financial accounting information on investors and creditors decisions is closely related to the concept of
Materiality
In our society, the two main functions of accounting are to
Measure business activities - Communicate information to investors and creditors
Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?
Neutrality
A business organization that is legally separate from its owners is called a
Corporation
In addition to the financial statements, which of the following must be included in the annual reports?
Notes disclosures - Management discussion and analysis
Which of these would be found on a company's balance sheet?
Notes payable - Accounts receivable - Equipment
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