Exam 1

The term debit means to place the entry on the ______ hand side of the account, and the term credit means to place the entry on the ______ hand side of the account.

(1) Left (2) right

Which of these would be found on a company's balance sheet? - Accounts receivable - Notes payable - Equipment - Depreciation expense - Sales revenue

- Accounts receivable - Notes payable - Equipment

The four financial statements published to provide information to external users include which of the following? Multiple select question. - Balance Sheet - Statement of Assets - Income Statement - Statement of Business Activities - Statement of Stockholders' Equity - Statement of Cash Flows

- Balance Sheet - Income Statement - Statement of Stockholders' Equity - Statement of Cash Flows

Which of the following appear(s) on the balance sheet? - Common stock - Net income - Accounts receivable - Salaries expense - Utilities payable

- Common stock - Accounts receivable - Utilities payable

According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess? - Confirmatory value - Predictive value - Consistency - Freedom from material error

- Confirmatory value - Predictive value

Which items are found on an income statement? - Expenses - Revenues - Equipment - Dividends paid

- Expenses - Revenues

Which of the following are attributes of FASB? (Select all that apply.) - Part-time board members - Independence - Public sector organization - Full-time board members - Private sector organization

- Independence - Full-time board members - Private sector organization

The primary functions of accounting are to: Multiple select question. - communicate information to decision makers. - measure a company's activities. - increase a company's stock market valuation. - provide information to taxing authorities. - increase a company's profitability.

- communicate information to decision makers. - measure a company's activities.

The two roles of financial accounting are to:

- communicate information to external parties for decision making purposes. - measure business activities of the company.

In our society, the two main functions of accounting are to

- communicate information to investors and creditors. - measure business activities

In addition to the financial statements, which of the following must be included in the annual reports? - press releases. - notes disclosures. - corporate income tax returns. - management discussion and analysis.

- notes disclosures. - management discussion and analysis.

Which of these would be found on a company's balance sheet? (Select all that apply.) -Depreciation expense -Accounts receivable -Sales revenue -Equipment -Notes payable

-Accounts receivable -Equipment -Notes payable

Which of the following appear on the statement of stockholders' equity? -Beginning balance of retained earnings -Cash received during the accounting period -Property, plant, and equipment -Dividends -Net income

-Beginning balance of retained earnings -Dividends -Net income

Which of the following appear(s) on the balance sheet?

-Stockholders equity (common stock) -Liabilities (utilities payable) -Assets

The primary functions of accounting are to: -increase a company's stock market valuation. -communicate information to decision makers. -measure a company's activities. -increase a company's profitability. -provide information to taxing authorities.

-communicate information to decision makers. -measure a company's activities.

The three classifications on the statement of cash flows are cash flows from (Select all that apply.) -investing activities. -discontinued activities. -operating activities. -business activities. -financing activities.

-investing activities. -operating activities. -financing activities.

The two sources of stockholders' equity are amounts ______. -paid in from shareholders -borrowed from banks -earned by the corporation -borrowed from related companies

-paid in from shareholders -earned by the corporation

A business organization that is legally separate from its owners is called a(n)

Corporation

What is the account classification of? Dividends- Cash payment paid to stockholders

Dividends

A code or moral system that provides criteria for evaluating right and wrong is referred to as

Ethics

What is the account classification of? Rent- Rent expense

Expense

is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S. (Enter the acronym.)

FASB

To be useful for decision making, information should possess the fundamental qualities of relevance and _____ representation

Faithful

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

False

Which of the following are stockholder equity accounts?

Retained earnings Common stock

Consistent with the ________ recognition principle, companies record revenue at the time goods are provided to customers.

Revenue

Sale of product or services

Revenue

group that has been given power by congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded

Securities and exchange Commission

Change in cash as a result of operating, investing, and financing activities

Statement of cash flow

The accounting equation is: Assets = Liabilities +

Stockholders' equity

A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

Resources of the company

assets

Resources equal creditors' and owners' claims to those resources.

balance sheet

The purpose of a statement of cash flows is to provide information about the -income and related expenses during the period. -cash receipts and cash disbursements during a period. -assets used during the period. -assets, liabilities, and stockholders' equity used during the period.

cash receipts and cash disbursements during a period.

A business owned by one person

sole proprietorship

Amount of cash received from borrowing money from a local bank

statement of cash flows

Change in owners' claims to resources.

statement of stockholders' equity

owners' claims to resources

stockholders equity

Retained earnings represents

the total net income earned over the life of the company that has not been distributed as dividends.

What is the account classification of? interest revenue- Interest earned on savings account

A revenue

Which of the following aspects relate to the information provided in an income statement? - Assurance that the company will pay dividends to stockholders - Ability to earn a profit from its operations during the current period - Assurance that the company will pay its obligations when they become due

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

What is the account classification of? Land- land use for operations

Asset

Independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company's financial statements.

Auditors

The financial statement that displays a firm's financial position on a particular date is the ______ ______

Balance Sheet

Total amounts owed to workers at the end of the year.

Balance sheet

Which of the following financial statements shows a firm's financial position on a particular date?

Balance sheet

Management discussion and analysis and note disclosures to the financial statements are included in the _______ ________

Blank 1: annual or 10 Blank 2: report or K

Accounts on the left side of the accounting equation (assets) are increased with a(n) ________ to the account, whereas accounts on the right side of the accounting equation are increased with a(n) _________

Blank 1: debit, DR, or debits Blank 2: credit, CR, or credits

Statements represent a company's primary means of communicating information to external users.

Financial

Companies communicate information about their business activities primarily through

Financial Statements

Statements represent a company's primary means of communicating information to external users. (Enter one word per blank.)

Financial, Finance, or Financing

The financial statement that is most useful in explaining a company's stock price performance is the

Income Statement

The purpose of a(n) _______ ________ is to report the profit-generating activities of the firm during a period of time.

Income Statement

Revenue earned from sales to customers during the year.

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 of the following are financial statements? (Select all that apply.) Multiple select question. - Income statement - Balance sheet - Statement of assets - Statement of corporate responsibility - Statement of stockholders' equity

Income statement Balance sheet Statement of stockholders' equity Statement of cash flow (not an option but these are the 4 that go here)

When a company earns net income, its retained earnings:

Increase

Body that is attempting to develop a single set of high-quality, understandable global accounting standards.

International accounting Standards board

A balance sheet lists the assets, _______, and stockholders' equity as of a specific date.

Liabilities

The accounting equation is: Assets = ______ + Stockholders' Equity.

Liabilities

What is the account classification of? Accounts payable- Amount owed to suppliers

Liability

Which qualitative characteristic requires that financial information should not influence decision making to achieve a predetermined result?

Neutrality

Faithful representation requires information to have which of the following three characteristics?

Neutrality Free from material error Completeness

In addition to the financial statements, which of the following must be included in the annual reports? -management discussion and analysis. -corporate income tax returns. -press releases. -notes disclosures.

Notes disclosures

Identify the three most common forms of business organization. Select all that apply: -unlimited stock entity -Partnership -Corporation -Enterprise Entity -Sole proprietorship

Partnership Corporation Sole proprietorship

The three most common forms of business organization are sole proprietorship,_________ , and___________ . (Enter one word per blank)

Partnership corporation

Which of the following are external transactions?

Paying salaries to employees Purchasing inventory from suppliers Borrowing money from the bank

Confirmatory value

Positive income is consistent with effectiveness of management

An advantage of the corporate form of organization is that a corporation

Provides limited liability to stockholders

Which of the following is an external transaction?

Purchasing supplies from a vendor

Undistributed profits that have accumulated in the company over time are called _____ earnings

Retained

The financial statement that provides information about cash receipts and cash disbursements for the period is the

Statement of cash flow

The change in retained earnings due to net income and dividends.

Statement of stockholder's equity

True or false: Financial information that is immaterial in amount or nature need not be reported under GAAP.

True

The two components of stockholders' equity are

common stock and retained earnings

Predictive value

consistently increasing income helps forecast the company's ability to generate future cash

Entity legally separate from its owners

corporation

A net loss ______ retained earnings.

decreases

distribution to stockholders

dividends

Which type of account is increased with a debit?

expense

Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.

expense; income statement

cost of selling products or services

expenses

Credits increase revenues, whereas debits increase

expenses and dividends

The types of accounts which affect retained earnings are

expenses. dividends. revenues.

independent, private sector group that is primarily responsible for setting financial reporting standards in the u.s.

financial accounting standards board

Faithful representation requires that information is complete, neutral, and

free from material error.

profitability of the company

income statement

A transaction is initially recorded in the journal, and then subsequently posted to the general ______

ledger

amount owed to creditors

liabilities

Financial information that may impact investors' and creditors' decisions is referred to as ______ and must be reported under GAAP

material or materiality

The impact of financial accounting information on investors' and creditors' decisions is closely related to the concept of:

materiality

The characteristic 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.

The statement of cash flows classifies items as

operating, investing, and financing.

A business owned by two or more people

partnership

The process of transferring information from the journal to the ledger is referred to as

posting

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

The purpose of a journal is to

record a chronological listing of every transaction for a company.

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.