Financial Accounting Final

Normal Balances of Accounting

Assets - Debit Liabilities - Credit Stockholders' Equity - Credit Revenues - Credit Expenses - Debit

The purchase price of an asset leads to depreciation expense over many years because

Assets generate revenues over some estimated period and their purchase price must be matched with the revenues

Statement that would not be included in the operating activities section of a statement of cash flow

Cash outflows to reacquire treasury stock

A private organization which establishes broad accounting principles as well as specific accounting rules is the

Financial Accounting Standards Board

The inventory methods that result in the most currents costs in the income statement and balance sheet

Income Statement - LIFO Balance Sheet - FIFO

Capitalizing a cash outflow will involve

a credit to cash and a debit to an asset

Examples of assets

accounts receivable, building, accumulated depreciation

The "term" receivable refers to

amounts due from individuals or companies

If an increase in an expense is one side of a journal entry, the other

decreases assets

Account that is closed at the end of an accounting period

insurance expense account

If a department store fails to make the entry to accrue the finance charges due from customers

interest revenue will be understated

All of the following are intangible assets except

land improvements

Depreciation as used in accounting is a typical example of

matching

If ending inventory is understated, net income and assets will be

net income - understated assets - understated

A periodic inventory system

requires the use of an inventory count to calculate cost of goods sold

A statement that financial statement information has been checked and that no errors were detected is found in the

the auditor's report

The necessity of making adjusting entries relates mostly to the

time period assumption

Depletion expense is computed using the

units-of-extraction method