Chapter 2

Understating assets and/or overstating liabilities when making judgments and estimates is driven by which of the following concepts/principles?

Conservatism

Which concept/principle supports the fact that assets such as land, buildings, and equipment are not reported at their fair values?

Cost principle

What are the required financial statements under generally accepted accounting principles and auditing standards?

Income statement Balance sheet Statement of changes in stockholders' equity Statement of cash flows

The three concepts/principles that relate to the entire model are:

accounting equation (assets) , accounting entity, and going concern

The period of time selected for reporting financial statements is known as the _________________

accounting period

Financial statements that show a column for the current year and the prior year are known as _______________ financial statements.

comparative

The concept that refers to the presumption that the entity will continue to operate in the future is known as the:

going concern concept

In the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that net income affects the _______________________ account within stockholders' equity.

retained earnings

The balance sheet is sometimes called the:

statement of financial position

If the total liabilities is equal to $8,000 and the total stockholders' equity is equal to $4,000, then:

the total assets is equal to $12,000