PR_CH 1

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

Which of the following appear on the statement of stockholders' equity?

Beginning balance of retained earnings Net income Dividends

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

Financial

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

Liabilities

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

Liabilities

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

Neutrality

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

Notes payable Equipment Accounts receivable

Identify the three most common forms of business organization.

Partnership Sole proprietorship Corporation

Which items are found on an income statement?

Revenues Expenses

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

True

The two main functions of _____________________are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.

accounting

A net loss ______ retained earnings.

decreases

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

faithful

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

faithful

The primary functions of accounting are to:

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

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.

The purpose of an income statement is to:

summarize the profit-generating activities that occurred during a particular reporting period

The statement of cash flows classifies items as

operating, investing, and financing.

The private sector organization that is currently responsible for setting accounting standards in the United States is the

Financial Accounting Standards Board.

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

Balance Sheet

The four financial statements published to provide information to external users include which of the following?

Balance Sheet Income Statement Statement of cash flow Statement of Stockholders' Equity

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

Balance sheet

________________ Is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.

FASB

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

Free from material error Neutrality Completeness

The financial statement that summarizes revenues and expenses for a period of time is the ______________ ________________.

Income Statement

Information that best explains companies' stock price performance is reported on the _____________ ______________ .

Income statement

Predictive value and confirmatory value are components of which fundamental qualitative characteristic?

Relevance

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

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

expense; income statement

Faithful representation requires that information is complete, neutral, and

free from material error.

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

material

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

predictive value

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

statement of cash flows.

The three most common forms of business organization are sole proprietorship, ___________________, and _____________________.

partnership corporation

Retained earnings represents

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

The form of business organization where an entity is legally separate from its owners and issues shares of stock is a

corporation.

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

Corporation

Profits earned by a company that have not been paid to stockholders are called

retained earnings

Companies communicate information about their business activities primarily through

financial statements.

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

income statement.

Which of these would be found on a company's balance sheet?

Equipment Notes payable Accounts receivable

is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

Ethics

According to the conceptual framework, for accounting information to be relevant, what two qualities must it possess?

Predictive value Confirmatory value

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

annual report or 10 K

The purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period.

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

In addition to the financial statements, which of the following must be included in the annual reports?

notes disclosures. management discussion and analysis.

The three classifications on the statement of cash flows are cash flows from

operating activities. financing activities. investing activities.

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as _________________________ ___________________________ .

retained earnings