Practice SB CH2 - Exam 1
Accounting or balance sheet equation (must remain imbalance after each transaction is recorded)
A = L + SE is called the
The notes to the financial statements, management's discussion and analysis of the financial statements, the report of the external auditor's examination of the financial statements
A corporation's annual report contains the reporting firm's financial statements and each of the following key components:
The users of the data can easily spot changes in the firm's financial position and its results of operations
A firm prepares comparative financial statement so that
Recognition of revenues when they are earned (at the point of sale) and recognition of expenses when they are incurred
Accrual accounting results in:
Income Statement
An entity's earnings for a reporting period are reported on the:
Accounting Entity
__ refers to the entity for which financial statements are being prepared
Balance Sheet
An entity's financial position at the end of a reporting period is reported on the
Total liabilities is equal to $7000
If the total assets is equal to $10,000 and the total shareholders' equity is equal to $3,000, then:
Retained Earnings
In the horizontal model representation of the financial statements, the arrow going from net income to stockholders' equity means that net income affects the ___ account within stockholders' equity.
Cost
Most assets are not recorded at their current market value because of the limitations imposed by the __ principle
Original (historical) cost
Most assets are reported on the balance sheet based on their
Conservatism
Principle in accounting relates to making judgement and estimates that result in lower profits and asset valuation estimates rather than higher profits and asset valuation estimates Understating assets and/or overstating liabilities when making judgments and estimates is driven by which of the following concepts/principles:
Going concern
The __ concept refers to the presumption that the entity will continue to operate in the future
Full Disclosure
The __ concept requires that the financial statements and notes include all necessary information to prevent a reasonably astute user of the financial statements from being misled
Cost & Original/Historical
The ___ principle refers to the fact that transactions are recorded at their __ cost of entity as measured in dollars
Assets, liabilities, and stockholders' equity
The balance sheet is a listing of the organization's:
Statement of financial position
The balance sheet is sometimes called the:
Accounting period, matching, revenue recognition, and accruaL
The four concepts/principles that relate to bookkeeping procedures and the accounting process are
Consistency, full disclosure, materiality, and conservatism
The four concepts/principles that relate to the financial statements are:
Materiality
The idea that tells absolute exactness in the amounts shown in the financial statements is not necessary is portrayed by the concept of
Expenses incurred to generate revenues must be matched to revenues earned for any period
The matching concept means that
Accounting period
The period of time selected for reporting financial statements is known as the
Accounting equation, accounting entity, and going concern
The three concepts/principles that relate to the entire model (of the flow of data from transactions to financial statements) are:
Unit of measurement, cost principle and objectivity
The three concepts/principles that relate to the transactions are
The total stockholders' equity is equal to $6,000
The total assets is equal to $15,000 and the total liabilities is equal to $9,000 then:
Comparative
Financial statements that show a column for the current year and the prior year are known as ____ financial statements
Financial position at the end of the period, earnings for the period, investments by and distributions to owners (i.e., stockholders) during the period, cash flows during the period
Identify the information that the current generally accepted accounting principles and auditing standards require the financial statements of an entity to show for the reporting period
Objectivity
Which concept/principle suggest that a given transaction should be recorded in the same way in all situations
Cost principle
Which concept/principle supports the fact that assets such as land, buildings, and equipment are not reported at their fair values:
Unit of Measurement
Which concept/principle supports the notion that for companies reporting their financial statements in United States dollars, no adjustments are made for the effects of inflation: In the United States, the dollar is the __ for all transactions
Statement of changes in stockholders' equity, balance sheet, statement of cash flows, income statement
Which of the following are the required financial statements under generally accepted accounting principles and auditing standards:
Accounting entity, going concern, accounting equation
Which of the following concepts/principles relate to the entire model:
Obligations of the organization
Which of the following is true regarding the balance sheet components: liabilities are the
Highlights of the year, including net revenues, diluted earnings per share, and return of stockholders' equity, the reporting firm's financial statements for the year, management's discussion and analysis of the financial statements
Which of the following items are normally included as key components of a corporation's annual report:
