Principles of Accounting Exam 1
The phrase used to indicate the financial position of a company at the end of the accounting period is ______.
"as of"
Green Company has $10,000 of assets. Fifty percent of the assets were acquired from the issue of common stock and thirty percent were acquired from earnings. Based on this information, the dollar value of liabilities must be ______.
$2000
Taylor Company has $10,000 of assets, $2,000 of liabilities, and $5,000 of common stock. Based on this information alone, the company's retained earnings equal ______
$3,000
Monster Media's (MM) accounting records indicate that the company has $500 of cash; $2,500 of land; $1,600 of common stock; and $1,400 of retained earnings. Based on this information, the maximum cash dividend the company can pay is ______
$500
Jane Smith started a business by investing $50,000 of her personal money in a business called Jane's Candies. Immediately after Jane's investment, the business borrowed $20,000 from the State Bank. The number of reporting entities described in this scenario is ______
3
David Harbert recently started a business. During the first few days of operation, Mr. Harbert transferred cash from his personal account into a business account for a company he named Harbert Enterprises. Mr. Harbert's brother, George, invested cash in Harbert Enterprises for which he received a 25% ownership interest in the company. Harbert Enterprises borrowed cash from First Federal Bank. Harbert Enterprises paid cash to purchase a building from City Properties, Inc. How many reporting entities are mentioned in this scenario?
5
The accounting records of Direct Marketing Company (DMC) indicate that the company has $500 of cash; $3,500 of land; $1,000 of liabilities; $600 of common stock; and $2,400 of retained earnings. Based on this information, the percent of assets provided by retained earnings is ______
60%
Which of the following is not a business asset? Cash held by a bank Buildings A plot of land An obligation to repay debt
An obligation to repay debt
Which of the following statements about assets are true?
Assets are resources used in the process of generating revenue. A business may acquire assets from three sources including creditors, investors, and its operations.
Which of the following statements are true? Businesses may retain assets generated through operations. The increase in a business's commitments to stockholders is called retained earnings. Income is an obligation to deliver assets to creditors. A company that has earnings is required to pay dividends to stockholders.
Businesses may retain assets generated through operations. The increase in a business's commitments to stockholders is called retained earnings.
Which of the following are widely recognized certifications associated with private accounting practice?
Certified Internal Auditor Certified Management Accountant
How does declaring and paying a cash dividend affect the accounting equation?
Decreases stockholder's equity Decreases retained earnings
Which items are presented on the statement of changes in stockholders' equity?
Ending retained earnings Total stockholders' equity Beginning common stock Dividends Net income
The organization with primary authority for establishing accounting standards in the United States is the ______
FASB
True or false: Only investors and creditors rely heavily on accounting information to evaluate which businesses are worthy of receiving resources.
False
True or false: The number of accounts a company will use depends on the nature of the business and is specified by GAAP.
False
The privately funded organization with the primary authority for establishing accounting standards in the United States is the _______ ______ Standards Board
Financial accounting
Which of the following dates are correct for the Statement of Changes in Stockholders' Equity?
For the year ended December 31, Year 3 For the month ended April 30, Year 1 For the quarter ended June 30, Year 2
Which of the following stakeholders would most likely use managerial accounting information?
Restaurant manager
Which financial statement(s) reports the effects of transactions on common stock and retained earnings?
Statement of Changes in Stockholders' Equity
True or false: The only stakeholders with a direct link to businesses are resource providers.
True
"For the period ended" refers to ______.
a span of time
The relationship between a business's assets and the claims on its assets is frequently expressed in an equality called the _______ equation.
accounting
An economic occurrence that changes an enterprise's assets, liabilities or stockholders' equity is called a(n) _____ ______
accounting event
Companies typically report about events occurring over a span of time called a(n) ____ ____
accounting period
Detailed information about the accounting equation is maintained in records commonly called ______
accounts
Accounting information is used by ______
all business and organizations
Borrowing money from creditors will cause the amount of cash ______
and the amount of liabilities to increase
When a company pays cash to purchase land, total assets ______
are unchanged
When a business borrows cash from a creditor, ______ increase
assets and liabilities
The double-entry bookkeeping system derives its name from the fact that every transaction affects the accounting equation in ______ two places
at least
The statement that draws its name from the accounting equation is the _____ _____
balance sheet
The phrase "As of December 31, Year 1" would be used on which financial statement(s)?
balance sheet only
Asset source transactions include ______ paying a cash dividend borrowing money issuing common stock for cash earning through profitable operations
borrowing money issuing common stock for cash earning through profitable operations
Acquiring cash by issuing common stock will cause ______
both the left and right sides of the accounting equation to increase
Stakeholders with an indirect link to conversion agents include ______ resource providers brokers news reporters government agencies
brokers news reporters government agencies
The asset account that increases when a business earns cash revenue is ______
cash
The asset that is listed first on a balance sheet is _____
cash
The acronym CPA stands for _____ _____ accountant
certified public
When a business grants an investor an ownership interest in a business, the specific commitments made to the investor are described in certificates called ______ ______
common stock
Stockholders' equity may be subdivided into additional elements called ______
common stock and retained earnings
The market for business resources involves three distinct participants:
consumers, resource owners, conversion agents
Asset use transactions ______
decrease the total amount of assets and the total amount of claims
The distribution to stockholders of assets generated through earnings is called a(n) _____
dividend
Distribution of assets generated through earnings are called ______
dividends
An accounting event is a(n) ______
economic transaction that changes an enterprise's assets, liabilities or stockholders' equity
The Accounting Equation is composed of three _____ called assets, liabilities and stockholders' equity.
elements
An event that causes one asset account to decrease and another asset account to increase is called an asset ____ transaction
exchange
An economic sacrifice a business incurs to generate revenue is called a(n) ____
expense
GAAP must be followed when preparing ______
financial reports issued to the public
The financial statement that reports how the business performed during a specific accounting period is the ____ ____
financial statement
The information needs to external and internal users ______
frequently overlap
Stakeholders with an indirect link to conversion agents include ______
government agencies brokers news reporters
Liquidity refers to ______
how quickly the asset is converted into cash
The income statement reports ______.
how the business performed during a specific accounting period
Profit is also called?
income, earnings
Earning cash revenue by providing services to customers will cause the amount of cash ______
increase and retained earnings to increase
Labor resources include both ____ and ____ labor
intellectual and physical
Which of the following services is not provided by certified public accountants?
legal
In accounting terms, the obligations a business owes to its creditors are called ______
liabilities
Companies are not required to follow generally accepted accounting principles (GAAP) for _____ accounting reports
managerial
A group of people or entities organized to exchange items of value is a ______
market
Which of the following isn't classified as a physical resource?
money
On the balance sheet, assets ______ equal liabilities plus stockholder's equity
must
A company that has $2,000 in revenue and $1,900 in expenses should report a ______.
net income on the income statement
If expenses exceed revenues, the company reports ______ on the income statement.
net loss
How does an increase in the fair market value of an asset affect the accounting equation?
no affect
The accounting term normally used to describe organizations that are not motivated by earnings is ______
nonprofit
Other terms investors include ______
owners stockholders
A transaction is a(n) ______
particular kind of event that involves transferring something of value between two entities
Reporting entities are ______
people or businesses
In their most primitive form, _____ resources are natural resources such as oils, minerals, or timber
physical
Labor resources include ______ labor.
physical and intellectual
A business that consumes $3,000 of resources to make a product that is sold for $4,000 has earnings or ____ of $1,000.
profit
Compared to financial accounting information, managerial accounting information ______
provides more detail about the everyday operations of a business contains more nonfinancial measures
The normal duties of a private sector accountant include all of the following except ______
providing legal advice
The normal duties of a private sector accountant include all of the following except ______ preparing financial reports paying bills developing budgets providing legal advice
providing legal advice
Asset use transactions include ______ purchasing land repaying debt paying expenses paying dividends
repaying debt paying expenses paying dividends
The people or businesses accountants provide information on are called ___ entities
reporting
When market value can be clearly established, GAAP ______ its use
requires
Which of the following accounts is affected by the recognition of expenses?
retained earnings
Acquiring cash by issuing common stock will have no effect on ______
retained earnings liabilities
The economic benefit a company derives from providing goods and services to its customers is called ______
revenue
Paying cash dividends will cause the ______
right side of the accounting equation to decrease left side of the accounting equation to decrease
An event that increases total assets and total claims is an asset ________ transaction
source
Liabilities may be viewed as ______
sources of assets obligations of the business
Users of Accounting Information are called
stakeholders
A business has a duty to protect and use its assets for the benefits of its owners which is known as a(n) ____ responsibility
stewardship
A business's commitment to owners is called ______
stockholder's equity
The business's commitment to investors described in common stock is called
stockholders' equity
As inducements to provide financial resources, ____ receive an ownership interest in a business and share in the profits of a business, while ___ receive a return of the money loaned and the collection of interest
stockholders; creditors
Revenue is ______
the economic benefit derived from providing goods and services to customers
"As of" indicates that the information reported on the financial statement refers to ______
the financial condition at a specific point in time
A particular kind of event that involves transferring something of value between two entities is called a(n) ______
transaction (examples: acquiring assets from others, borrowing money from creditors, and purchasing/selling goods and services)
True or false: A company cannot pay dividends in excess of the amount of its retained earnings
true
True or false: The only stakeholders with a direct link to businesses are resource providers
true
Under the double-entry accounting system, all transactions affect the accounting equation in at least _____ places
two
An event that causes assets and liabilities to decrease is an asset ____ transaction
use
The typical accounting period for a complete set of financial statements and disclosures is one ______
year
