Accounting - Fundamentals of Accounting Self Study - Chapter 1

Place the balance sheet line items in the proper order from top to bottom.

1. Cash 2. Supplies 3. Equipment 4. Accounts Payable 5. Common Stock 6. Retained Earnings.

Place the single-step income statement in the proper order from top to bottom.

1. Revenues. 2. Expenses 3. Net Income.

Companies typically compare ___ financial statements each accounting period.

4

Shirts, Inc., sold 10 shirts that cost $7 each to its customers for $10 each. Shirts should record a total of $___ as an expense for the cost of the goods sold.

70

The primary goal of most companies is to ___.

Make a profit

The statement of retained earnings is ___.

One of the 4 financial statements

The equation for the income statement is ___.

Revenue - Expenses = Net Income.

The line item Net Income appears on the ___.

Statement of retained earnings. Income statement.

Which of the following is a characteristic of a sole proprietorship?

The owner is personally responsible for the debts of the business even if the debts are more than the owner has invested in the business.

Ace Electronics paid $4,000 of the $5,000 its employees had earned during the period. Ace Electronics should report Wages Expense of $5,000 on the income statement and Wages Payable of ___ on the balance sheet prepared in accordance with generally accepted accounting principles.

$1,000

A company started the month with $1,000 of Retained Earnings. During the month, it had revenue of $5,000 and expenses of $4,500. It also distributed a dividend of $100 to its stockholders. The company's retained earnings at the end of the period equal $___.

$1,400

At December 31, Aloe, Inc.'s assets equal $8,000 and stockholders' equity equals $5,000. Liabilities must equal $___.

$3,000

Ace Electronics bought equipment for $4,000. Normally the equipment would have cost $4,500, but the supplier gave Ace a special discount. Ace's balance sheet should report the equipment of ___.

$4,000

Ace Electronics had the following increases in the cash account during the month: $20,000 from owners for stock; $5,000 from sales to customers; and $15,000 borrowed from River Bank. Ace's revenue for the month was ___.

$5,000

Place these items in order in which they appear on the statement of cash flows.

1. Cash flows provided by (used in) operating activities. 2. Cash flows provided by (used in) investing activities. 3. Cash flowers provided by (used in) financing activities.

Place the following in order (top down) of how they would appear in the heading of the Deli Llama's annual income statement for the fiscal year ended March 31, 2017.

1. Deli Llama, Inc. 2. Income Statement 3. For the year ended March 31, 2017.

Prepare a statement of retained earnings for the month of September from top to bottom.

1. Retained Earnings, September 1. 2. Net Income. 3. Dividends. 4. Retained Earnings, September 30.

Prepare a single-step income statement in its proper order starting from top to the bottom.

1. Sales revenue of $9,000. 2. Salaries and wages expense of $5,000. 3. Utilities expense of 1,400. 4. Advertising expense of $100. 5. Net income of $2,500

Over Amour, Inc., sold 5 shirts to its customers for a price of $10 per shirt that costs $6 per shirt. Total revenue equals $___ and expense equals $___.

50; 30

___ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together.

Accounts

Distinguish between receivables and payables by selecting the correct statements. (Select all that apply.)

Accounts Payable is liability and reports the amount of cash to be paid in the future for purchases made on account. Accounts Receivable is an asset and reports the amount of cash to be received in the future for sales made on account.

Accounts Payable

Amount owed to suppliers for purchases made on account.

Revenues

Amounts earned by selling goods and services.

Expenses

Amounts used to generate profits.

Which of the following statements are true regarding the income statement? Income statements ___.

Are sometimes called the statement of operations. Report revenues minus expenses.

Match the financial statement that reports each of the following.

Assets - balance sheet Net income - income statement Investing activities - statement of cash flows.

Which of the following is another way to express the accounting equation?

Assets = Liabilities + Stockholders' Equity

A balance sheet shows ___.

Assets, liabilities, and stockholders' equity at a single point in time.

The purpose of the balance sheet is to report the amount of ___.

Assets, liabilities, and stockholders' equity at a specific point in time.

Which of the following would be included in the operating activity section of the statement of cash flows? (Select all that apply.)

Cash received from customers. Cash paid to suppliers.

Partnerships

Legal liability is the responsibility of two or more owners.

___ are measurable accounts that the company owes to creditors.

Liabilities

___ accounting reports include detailed financial reports about the company's operating performance that are continually updated and used by internal users (employees). ___ accounting reports are prepared periodically to provide information to external users.

Managerial; Financial

Financial statements ___. (Select all that apply.)

May have a fiscal year end other than December 31. May be prepared more than once a year.

Which of the following are true about the income statement? (Select all that apply.)

Net income has a double underline. A dollar sign appears only at the top and bottom of the column of numbers. Each major caption has an underlined subtotal, such as Total Expenses. Revenues are listed before expenses.

Select all of the true statements about net income and net loss.

Net income increases retained earnings. When revenues are less than expenses, a net loss exists. Net losses decrease retained earnings. Net income equals revenues minus expenses.

An income statement includes which of the following item(s). (Select all that apply.)

Net income, revenues, expenses.

Net income is reported ___.

On both the income statement and statement of retained earnings.

The ___ activities section of the statement of cash flowers reports the activities directly related to running the business to earn profit.

Operating

Which of the following are key characteristics of a partnership? (Check all that apply.)

Owners are personally responsible for the debts of the partnership, even if the debts are more than the amount owners have invested in the business. Partnerships have more than one owner.

Partnerships and Sole Proprietorships

Owners have unlimited liability.

Stockholders' Equity

Owners' claim to economic resources.

The main reason companies exist is to maximize their ___. (check all that apply.)

Owners' wealth Profits

An amount owed to a supplier for prior purchases on account is an Account ___ which is a(n) ___ account

Payable; liability

Maurico, the owner of Pizza Aroma, Inc., arranged for the business to borrow $25,000 from River Bank. Which entity should show the liability on its balance sheet?

Pizza Aroma

Which of the following issue stock to represent ownership? (Select all that apply.)

Private corporations. Public corporations.

The statement of retained earnings reports the ___.

Profits that have accumulated in the company over time.

Accounts ___ is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit

Receivable.

Statement of Retained Earnings

Reports the accumulation of profits kept by the business during the current accounting period with that of prior periods.

Income Statement

Reports the financial performance of the business during the current accounting period.

Balance Sheet

Reports the financial position of the business at a point in time.

Statement of cash flows.

Reports the operating, investing, and financial activities effect on cash.

The unit-of-measure assumption states that ___.

Results of business activities should be reported in an appropriate monetary unit.

Profits that have accumulated in the company over time are ___ earnings.

Retained

Which of the following statements are true?

Retained earnings increase when a company earns and keeps it profit.

___ are earned by selling goods or services to customers and is the first line item reported on an income statement.

Revenue

Net income equals ___.

Revenue minus expenses

Net income equals total ___ minus total ___.

Revenue; expenses

___ are earned by selling goods or services to customers and is the first line item reported on the income statement.

Revenues

Select all the statements below that are true regarding revenues and expenses.

Revenues and expenses are reported on the income statement. Expenses are the costs of doing business necessary to earn revenues. Revenues equal the price ties the quantity of goods or services delivered to a customer.

Net Income increases when ___.

Revenues are greater than expenses. The company incurs expenses that are less than the price of the goods or services sold to its customers.

Which of the following cause Retained Earnings to increase? (Select all that apply.)

Revenues greater than expenses. Net income. Selling goods or services at a price higher than the cost incurred to operate the business.

A single-step income statement includes which of the following? (Select all that apply.)

Revenues, net incomes, expenses.

A corporation earns profits for its stockholders by ___. (Check all that apply.)

Selling goods at more than cost. Providing services at more than cost.

Which business organization's owner has unlimited liability?

Sole proprietorship

Cash paid for supplies

Statement of cash flows.

Investing Activities

Statement of cash flows.

The ending retained earnings balance appears on the ___. (Check all that apply.)

Statement of retained earnings. Balance sheet.

Expenses are ___.

The costs of doing business that are necessary to earn revenue.

The heading of the balance sheet might include which of the following? (check all that apply.)

The name of the business. The title "Balance Sheet" At December 31, 2018

Accounts Receivable

The right to collect for sales/services provided on account.

The amount of cash reported on a balance sheet is ___ the ending cash balance reported on the statement of cash flows.

The same as

The financial reports of a business include only the results of the business's activities. This is ___.

The separate entity assumption.

The balance sheet balanced when ___

Assets = liabilities + stockholders' equity

Ace Electronics receive $200 of copy paper from its supplier and promises to pay for it net month. Ace should report ___.

Accounts payable of $200 on its balance sheet.

Retained Earnings

Accumulated profits kept in the business.

Notes Payable

Amount of loan owed to the bank.

Common Stock

Amount stockholders contributed to the company.

___ is referred to as the language of business because it is such a key part of business, and its terms are typically used in discussing business.

Accounting

Individual expenses are accumulated in separate ___.

Accounts

Supplies

Balance sheet

Which of these would be reported in the financing activities section of the statement of cash flows? (Check all that apply.)

Cash paid to reduce the principal borrowed from banks. Cash borrowed from the bank. Cash dividends paid to stockholders.

A(n) ___ is a separate legal entity whereby the owners are not personally liable for the debts of the business.

Corporation

Sole proprietorship, ___ , and ___ are the three primary forms of business organization.

Corporation; partnership

Liabilities

Creditor's claim to economic resources.

Net losses cause retained earnings to ___.

Decrease

Retained earnings are ___. (select all that apply.)

Decreased by dividends Increased by net income.

Net Income

Income Statement

Profits earned by a company that are paid to stockholders are called

Dividends

Revenues are ___.

Earned by selling goods or services to customers.

Retained ___ represents the capital earned by the company.

Earnings.

Assets

Economic resources that will provide future benefit. Balance sheet

Which of the following statements are true? (Select all that apply)

Equipment is furniture or machinery that can be used for years. Supplies are assets that can be used in the process of earning revenue in the near future.

A(n)___ is a cost of doing business that is necessary to earn ___.

Expense; revenue

Business earn profits by ___.

Having revenues greater than expenses. Selling goods or services at more than the cost to deliver the goods or services.

Corporations

Income is taxed twice.

Supplies expense

Income statement

When a company earns net income, its retained earnings ___.

Increase

Cash flows from (used in) ___ Activities on the statement of cash flows reports the cash activity from the buying and selling of productive resources such as land, buildings, and equipment.

Investing

Which of the following statements are true about the balance sheet. (Select all that apply.)

It is sometimes called the statement of financial position. It reports the assets, liabilities, and stockholders' equity at a point in time.