Accounting Exam 1

An accounting ______ is an economic occurrence that changes an enterprises assets, liabilities, or stockholder's equity

event

An event that causes one asset account to decrease and another asset to increase is called an asset _________ transaction

exchange

Things present on the income statement

expense, revenue, and net income

Conversion agents are provided with physical resources, labor resources, and ________ resources by the resource owners

financial

________ accounting is meant to meet the needs of external stakeholders, such as investors and creditors

financial

Companies must follow generally accepted accounting principals (GAAP) for _______ accounting reports, but not for _________ accounting reports

financial, managerial

Assets are normally shown on the company's books at the amount of their:

historical cost

Liquidity refers to

how quickly assets are converted to cash

West company has $200 cash, $1200 land, $600 liabilities, and $800 stockholders equity. West has earned profits every year since its inception. Based on this information:

if the liabilities are due immediately, West could be forced into bankruptcy, and West may be forced to sell its land in order to pay its debt

The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the

income statement

The financial statement that shows all the revenues earned and expenses incurred during the accounting period is

income statement

Which statements report what happened over a span of time

income statement, statement of changes in stockholders equity, and statement of cash flows

What effect does earning cash revenue have on financial statements

increase retained earnings, increases cash flow from operating activities, increases net income, increases total stockholder's equity, and increases total assets

What effect does earning cash revenue have on the balance sheet?

increases total assets, increases retained earnings, and increases total stockholders equity

Activities dealing with purchasing and selling long-term assets used in the operations of a business are

investing activities

What are the primary categories reported on the statement of cash flows

investing, operating, and financing

Dividends are paid to _________ while interest is paid to creditors

investors

Which of the following are benefits that motivate investors to provide resources to businesses

investors share in the company's earning, and investors receive and ownership interest in the business

Which of the following may be included in the list of stakeholders who use accounting information

investors, newspaper reporters, the federal government, and creditors

Which of the following activities are considered financing activities

issuing common stock, repaying the principal on a loan, and paying a dividend to stockholders

Intellectual and physical labor are examples of _______ resources

labor

Businesses that sell goods are called

merchandising companies

How does an increase in the fair market value of an asset affect the financial statements

no affect

How does borrowing from creditors affect the income statement

no effect

The accounting term normally used to describe organizations that are NOT motivated by profit are:

not-for-profit, and nonprofit

Activities dealing with purchasing and selling short-term assets are

operating activities

The market for business resources involves three distinct participants; consumers, conversion agents, and resource ________

owners

Which of the following terms that mean the same thing as the term investors

owners and stockholders

The wordings "as of" in the date line of a balance sheet indicates that the information reported on it refers to

the financial condition of the company at a specific point in time

The idea that sacrifices should be paired to benefits is called

the matching concept

When a company pays cash to purchase land, the result is that

total assets are not affected

A __________ is a particular event that involves transferring something of value between two entities

transaction

Acquiring cash from the issuing of common stock will affect the accounting equation in at least _____ places

two

An event that causes assets and liabilities to decrease is an asset ______ transaction

use

Which of the following shows the effects of borrowing from creditors on the financial statements

Increases assets, increases cash flow from financing activities, and increases liabilities

What items are NOT present in the statement of changes in stockholder's equity

Land, revenue, cash, notes payable, expense, liabilities, and assets

Which of the following are NOT presented on the balance sheet

Net cash flow from operating activities, expense, net cash flow from financing activities, net income, revenue, net cash flow from investing activities, and dividends

If expenses exceed revenue, the company reports which of the following on the income statement

Net loss

How does declaring and paying a cash dividend affect the income statement

No effect

Which of the following statements are true

The right side of the accounting equation shows the sources of assets, and the obligations of a business to creditors are shown on the right side of the accounting equation

Which of the following stakeholders would most likely use MANAGERIAL accounting information

a manager of a company

The relationship between a businesses assets and the claims on its assets is frequently expressed in an equality called the _________________ equation.

accounting

The balance sheet reports assets, liabilities, and stockholders' equity as of the end of the:

accounting period

Borrowing money from creditors will cause the

amount of cash and amount of liabilities to increase

Earning cash revenue by providing services to customers will cause the

amount of retained earnings to increase, and amount of cash to increase

Recognizing cash expenses will cause the amount of cash

and the amount of retained earnings to decrease

The resources a business uses to conduct its operations are called:

assets

When a company pays cash to purchase land, the total amount of the:

assets is not affected, and liabilities is not affected

Which of the following includes only items that are reported on the balance sheet

assets, liabilities, common stock, and retained earnings

Ending balances for assets, liabilities, and stockholders equity are reported on the _______ ________

balance sheet

When a business borrows cash from a creditors

both its assets and liabilities increase

Paying a cash dividend will cause the amount of

cash and the amount of retained earnings to decrease

Paying cash expenses will cause the amount of

cash to decrease, and retained earnings to decrease

The amount of cash dividends a company can pay are limited by the amount of the company's

cash, and retained earnings

Which of the following contains language that describes the rights and privileges of ownership in a company

common stock certificate

A general ledger is a:

complete list of a company's accounts

The horizontal statements method is

A teaching tool used to show how transactions affect the income statement, balance sheet, and statement of cash flows

How does incurring cash expenses affect the financial statement

Decreases retained earnings, decreases assets, decreases net income, decreases operating cash flow, and decreases stockholders equity

Profit may also be called which of the following:

Earnings and income

When it is liquidated a business has assets of $500 cash, $800 of liabilities and $400 of common stock and ($700) deficit in retained earnings. Based on this information:

Creditors will receive $500, and owners will receive zero

An event that causes assets and liabilities to increase is an asset ______ transaction

source

How does incurring cash expenses affect the income statement?

decrease net income, and increases expenses

Paying cash to purchase land will cause the cash account on the assets side of the accounting equation to _______ and the land account on the assets side to _____

decrease, increase

How does declaring and paying a cash dividend affect the financial statements

decreases retained earnings, and decreases stockholders equity

Which of the following are asset use transactions

pay expenses, pay dividends, and repay debt

Resource providers use accounting information to identify companies with high earnings potential because those companies are better able to:

pay higher salaries, make interest payments, and share profits

In their most primitive form, _______ resources are natural resources such as oils, minerals, or timber

physical

The normal duties of a private sector accountant include all of the following except

providing legal advice

Temporary account balances are closed to which of the following accounts

retained earnings

Acquiring cash by issuing common stock will have no effect on the amount of

retained earnings, and liabilities

Paying cash expenses will cause the

right side of the accounting equation to decrease, and the left side of the accounting equation to decrease