ACC. Chapter 1
Real world financial statements may also report
comprehensive income
A business may borrow assets from
creditors
Companies must follow generally accepted accounting principles (GAAP) for [blank] accounting reports but not for [blank] accounting reports
external/internal
[blank] accounting practice is designed to meet the needs of external stakeholders, such as investors and stakeholders
financial
The measurement rules established by the financial accounting standards board are called
generally accepted accounting principles/ gaap
The statement of changes in stockholders equity shows
how common stock and retained earnings changed over the accounting period
Liquidity refers to
how quickly assets are converted into cash
The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the
income statement
Businesses frequently trade one asset for another asset. The amount of asset decreases and the amount of another asset [blank], while the total amount of asset is not affected.
increase
Earning cash revenue by providing services to customers will cause the amount of cash to [blank] and the amount of retained earnings to [blank]
increase/increase
Dividends are paid to [blank] while interest is paid to [blank]
investors/creditors
Recognizing cash revenue will cause assets on the [blank] side of the accounting equation to [blank] and retained earnings on the [blank] side of the accounting equation to [blank]
left/increase/right/increase
In accounting terms, the obligations a business owes to it creditors are called
liabilities
The quickness in which an asset can be sold for cash is referred to as
liquidity
The term used to describe pairing expenses with revenues earned during the accounting period is the
matching concept
A company that has 2000 revenue and 1900 expenses should report
net income on the income statement
How does an increase in the fair market value of an asset affect the financial statements?
no affect
What shows how issuing stock affects the income statement?
no affect
What affect does purchasing land with cash have on total assets?
no effect on total assets
Liabilities
obligations to pay creditors
The criteria for granting CPA is established at
state level
Accounts that only hold a balance for one accounting period is called
temporary account
The accounting records of woo company show 2400 of retained earnings. based on this information alone
the amount of cash dividends the company is able to pay cannot be determined
One of the biggest limitation of the annual report is that
the info is historical
Assets are normally shown on the company's book at the amount of
their historical cost
dividend
wealth transfers from a business to its owners/investors
For the period ended, indicates that the information reported on the financial statement refers to
what happened over the accounting period
Which financial statement only reports account balances as of a specific point in time?
-balance sheet
What items are presented on the statement of changes on stockholder's equity?
-beginning of common stock -ending of retained earnings -net income -dividends -total stockholders equity
Which items are presented on the statement of cash flows?
-cash payments for dividends -net cash flow from investing activities -net cash flow from financing activities -net cash flow from financing activities -cash receipts for borrowing funds -ending cash balance
Which of the following are widely recognized certifications associated with private accounting practice?
-certified internal auditor -certified management accountant
Acquiring cash by issuing common stock will cause the amount of
-common stock to increase -cash to increase
How does incurring cash expenses affect the income statement?
-decreases net income -increase expenses
How does declaring and paying a cash dividend affect the financial statements?
-decreases retained earnings -decreases stockholder's equity
Profit may also be called
-income -value added -earnings
Which of the following are among the four financial statements that are normally included in public reports?
-income statement -statement of changes in stockholders equity -balance sheet -statement of cash flows
Which of the following show the effects of borrowing from creditors on the financial statement?
-increase cash flow from financing activities -increases assets -increases liabilities
Which shows how issuing stock affect the statement of cash flows?
-increases cash flow from financing activities
What affect does earning cash revenue have on financial statements?
-increases cash flow from operating activities -increases total stockholder's equity -increases retained earnings -increases total assets -increases net income
What effect does borrowing from creditors have on liabilities?
-increases notes payable
What affect does earning cash revenue have on balance sheet?
-increases total assets -increases retained earnings -increases total stockholders equity
What effect does cash revenue have on financial statements?
-increases total stockholders equity -increases retained earnings -increases net income
Which stakeholders may use the accounting equation?
-investors -creditors -the federal gov -newspaper reporters
Which of the following activities are considered financing activities?
-issuing common stock -repaying the principal on a loan -paying a dividend to stockholders
Service companies
-law firm -accounting firm -doctor
In business liquidation
-liabilities are paid in full before funds are distributed to owners -creditors may be unable to collect the full amount of liabilities
The 10k report includes
-management discussions and analysis -financial statements -notes to the financial statements
The accounting term used to describe organizations that are not motivated by profit is
-not for profit entities -nonprofit
Which terms means the same thing as as the term investors?
-owners -stockholders
Which of the following are operating activities?
-paying employees -paying expenses -cash receipts from customers
the normal duties of a private sector account includes
-preparing financial reports -developing budgets -paying bills
Managerial accounting practices
-provide more detail about the daily operation of a business -contains more estimates
Asset use transaction
-repaying debt with cash -paying a cash dividend
The amount of dividends a company can pay are limited by the amount of the company's
-retained earnings -cash
Borrowing money from credits will cause the
-right side of the accounting equation to increase -left side of the accounting equation to increase
What is considered an investing activity?
-selling equipment
Which statement reports happen over a span of time?
-statement of changes in stockholder's equity -income statement -statement of cash flows
These are true
-the right side of the accounting equation shows the sources of assets -the obligations of the business to creditors are shown on the right side of the accounting equation
What items are presented on the income statement?
1) Net income 2) Expense 3) Revenue
Acquiring cash from the issue of stock will affect the accounting equation in at least [blank] places
2
Taylor company has 10000 assets, 2000 liabilities, and 5000 common stock. Based on this information, the company has retained earnings to amount
3000
What are the primary categories reported on the statement of cash flows?
Financing, investing and operating
[blank] accounting practice is designed to meet the needs of internal stakeholders, such as managers and employees
Managerial
Common stock
a certificate(Receipt) that describes the rights and responsibilities of the ownership when a company acquires cash from its investors
The horizontal statement model is
a teaching tool used to show how transactions affect the income statement, balance sheet and statement of cash flows
The income statement reports revenues and expenses over the
accounting period
permanent account
accounts payable
The interrelationships among the various elements of financial statements is known as
articulation
cash and land are
asset accounts
An event that causes assets and liabilities to decrease is an
asset use transaction
Which financial statement is most similar to the accounting equation?
balance sheet
cash inflows and cash outflows are reported on the statement of
cash flows
The process of transferring the balances in temporary accounts to the permanent account retained earnings is called
closing
Which of the following lists includes only items that are reported on the balance sheet?
Assets, liabilities, stockholder's equity, and retained earnings
What is not include in the company's annual report?
customer opinions on quality of goods
Paying cash dividends will cause the left side of the accounting equation to [blank] and right right of the equation to [blank]
decrease/decrease
Paying cash will cause the amount of cash to [blank] and the amount of retained earnings to [blank]
decrease/decrease
Using cash to pay off debt will cause the amount of cash to [blank] and the amount of liabilities to [blank]
decrease/decrease
Revenue
economic benefits caused by operating a business
Expenses
economic sacrifices incurred to generate revenue
An event that causes assets and stockholders equity to increase is an asset [blank] transaction
source
Which of the following is considered a financing activity?
paying a dividend to stockholders
[blank] resources are natural resources
physical
What is considered an investing activity?
purchasing land
Businesses convert [blank] to goods and services that are demanded by consumers
resources