Review Financial
Where is the time period covered by the income statement found?
In the heading
Revenues cause retained earnings to
increase
Revenues are:
sales of goods or services to customers
Expenses are:
the costs of doing business that are necessary to produce revenue
In accounting, the term net is used to describe
the difference between two amounts.
Stockholders' equity is
the owners' claims to resources of the corporation.
A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a(n) ____ ____ .
trial balance
For a corporation, the owners' claims to the resources of a company are called
stockholders' equity.
The purpose of an income statement is to:
summarize the profit-generating activities that occurred during a particular reporting period
Resources owned by a company are called
Assets
Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as
Assets - Liabilities.
Which of the following is the accounting equation?
Assets = Liabilities + Stockholders' equity
Which type of account is increased with a debit?
Expense
Which type of account is increased with a credit?
Revenue
A(n) ______ is a cost of doing business that is necessary to produce ___.
expense; revenue
The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as ____ .
Accounting
The basic ____ ____ is referred to as the fundamental model of business valuation.
Accounting Equation
The fundamental model of business valuation is commonly referred to as the:
Accounting equation
When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?
Accounts receivable
A(n) ____ is a resource, such as cash, land, or buildings, that is owned by a company.
Asset
The financial statement that displays a firm's financial position on a particular date is the ____ .
Balance sheet
Which of the following financial statements shows a firm's financial position on a particular date?
Balance sheet
Which of the following are financial statements?
Balance sheet Income statement Statement of stockholders' equity
Jackson Corp. has beginning retained earnings of $400. During the year Jackson had $800 of revenues and $200 in expenses. Jackson paid a dividend of $100. What is retained earnings at year-end? $1,300 $300 $1,100 $900
Beginning balance $400 + $800 revenues - $200 expenses - $100 dividend = $900 retained earnings at year-end.
Geo Corporation issues stock to investors for $100,000. Recording this transaction will include which of the following?
Credit common stock Debit to cash
True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.
False. A trial balance is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity.
The statement used to predict future profitability and a company's future cash-generating ability is the
Income Statement
The four financial statements published to provide information to external users include which of the following?
Income Statement Balance Sheet Statement of Stockholders' Equity Statement of Cash Flows
Information that best explains companies' stock price performance is reported on the ____ ____ .
Income statement
Any amount owed to a creditor is classified in the balance sheet as a/an ____
Liability
Undistributed profits that have accumulated in the company over time are called ____ earnings.
Retained
The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as ____ ____ .
Retained Earnings
Which of the following are stockholder equity accounts?
Retained earnings Common stock
____ is the amount recorded as a result of the sale of products or services to customers.
Revenue
Which of the following item(s) is (are) assets?
Supplies Inventory
A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.
account; general ledger
The purpose of a statement of cash flows is to provide information about the
cash receipts and cash disbursements during a period.
In our society, the two main functions of accounting are to
communicate information to investors and creditors. measure business activities.
Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:
credit to notes payable debit to cash
True or false: A ledger provides a chronological record of all transactions affecting the firm.
false
True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.
false
Information that best explains companies' stock price performance is reported on the ____ .
income statement
The financial statement that is most useful in explaining a company's stock price performance is the
income statement.
A transaction is initially recorded in the journal, and then subsequently posted to the general ____ .
ledger
The term debit means to place the entry on the ____ hand side of the account, and the term credit means to place the entry on the ____ hand side of the account.
left right
Amounts owed to creditors are
liabilities
The statement of cash flows classifies items as
operating, investing, and financing.
The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as ____ .
posting
The process of transferring information from the journal to the ledger is referred to as
posting
Consistent with the ____ recognition principle, companies record revenue at the time goods are provided to customers
revenue
An simplified version that is used informally for analysis instead of drawing a formal general ledger account is referred to as a:
t-account
The type of information included in an account includes
the account title. columns for debits and credits.
The financial statement that provides information about cash receipts and cash disbursements for the period is the
statement of cash flows.
Accounts receivable are assets which represent
the amounts owed by customers.
Net income ______ retained earnings.
increases
Which of the following appear(s) on the balance sheet?
Accounts receivable Common stock Utilities payable
Rawlings Corp. borrows $3,000 on a note payable from Third National Bank. Which of the following is used to record this transaction?
Debit cash $3,000; credit note payable $3,000.
Carnival Company issues common stock to investors for $50,000. Which of the following is used to record this transaction?
Debit cash; credit common stock.
What is the effect of dividends on retained earnings?
Decrease
Identify the three components of retained earnings.
Dividends Expenses Revenues
____ Statements represent a company's primary means of communicating information to external users.
Financial
Which of the following contains a list of transactions affecting each account and the account's balance?
General ledger
Which of the following represents a common advantage of a computerized accounting system?
Journal entries are instantly posted to the ledger
Which of the following includes the list of transactions affecting each individual account and the account's balance?
Ledger
A company reports a net loss if its revenues are ____ than its expenses.
Less
A balance sheet lists the assets, ____ , and stockholders' equity as of a specific date.
Liabilities
The accounting equation is: Assets = ______ + Stockholders' Equity.
Liabilities
Which of the following items are found on a balance sheet?
Liabilities Assets Stockholders' equity
An income statement includes which of the following items?
Net income Revenues Expenses
Which of the following line items appear on an income statement?
Service revenue Salaries expense Supplies expense
The accounting equation is: Assets = Liabilities +
Stockholders' Equity
The two main functions of ____ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.
accounting
The types of accounts which affect retained earnings are
expenses. dividends. revenues.
Accounts receivable are
assets.
Accounts on the left side of the accounting equation (assets) are increased with a(n) ____ to the account, whereas accounts on the right side of the accounting equation are increased with a(n) ____ .
debit credit
An account should have an account title, account number, a place for the date of the transaction, and two columns for
debits and credits.
Dividends paid to stockholders will cause retained earnings to
decrease
A(n) ____ is a distribution of net income to the stockholders of a corporation.
dividend
____ is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.
fasb
Companies communicate information about their business activities primarily through
financial statements.
The three classifications on the statement of cash flows are cash flows from
financing activities. operating activities. investing activities.
The income statement is considered most useful for predicting
future profitability.
____ activities involve the buying and selling of land, buildings, and equipment used in the business. (Enter one word per blank)
investiment
In addition to the financial statements, which of the following must be included in the annual reports?
management discussion and analysis. notes disclosures.
The purpose of a general ledger is to
provide in a single location the list of transactions affecting each account and the account's balance.
Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company
provided goods or services to a customer.
Indigo Company's journal reveals that equipment was debited and notes payable was credited, both for $10,000. Indigo Company must have
purchased equipment and signed a note for the purchase price
The purpose of a journal is to
record a chronological listing of every transaction for a company.
Which items are found on an income statement?
Expenses Revenues
Net income equals:
Revenues - Expenses
Credits increase revenues, whereas debits increase
expenses and dividends.
Keepers, Inc.'s balance sheet reported retained earnings as $10,000 at December 31, 2017 and $12,000 at the December 31, 2018. The income statement reported net income of $3,000 for the year ended December 31, 2018. Dividends declared for the year ended December 31, 2018 must equal $ ____.
2017 - 10,000 2018 - 12,000 *2,000 2018 Net income - 3,000 Dividends declared in the end of 2018 is $1,000
Which of the following appear on the statement of stockholders' equity?
Beginning balance of retained earnings Net income Dividends
Which of the following accounts is on the statement of stockholders' equity?
Common stock
True or false: The fundamental activities of a business are selling activities and marketing activities
False
When revenues are greater than expenses, a company has net ____ , whereas when revenues are less than expenses, a company has a net ____
Income Loss
____ activities involve purchasing goods from suppliers, designing and manufacturing products, and selling products to customers.
Operating
The heading of an income statement should include which of the following?
The accounting period covered by the statement The title of the financial statement The name of the business
Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.
expense; income statement
An income statement reports:
expenses net income or loss revenues
The primary functions of accounting are to:
measure a company's activities. communicate information to decision makers.
Quartz Instruments had retained earnings of $145,000 at December 31, 2017. Net income for 2018 was $90,000, and dividends for 2018 were $30,000. What amount of retained earnings should be reported at December 31, 2018? $235,000 $175,000 $140,000 $205,000
$145,000 + $90,000 - $30,000 = $205,000 $205,000
Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2? $11,000 $19,000 $31,000 $39,000
$31,000 For total stockholders' equity, you must add the amount in the common stock account. $20,000 + $5,000 + $10,000 - $4,000 = $31,000.
Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year? $43,000 $27,000 $38,000 $33,000
$33,000
Management discussion and analysis and note disclosures to the financial statements are included in the ____ ____.
Annual Report
Which of the following accounts are stockholders' equity accounts?
Common stock Retained earnings
Which of these would be found on a company's balance sheet?
Equipment Notes payable Accounts receivable
Fill in the blanks to complete the sentence. The financial statement that summarizes revenues and expenses for a period of time is the ____ ____ .
Income Statement
The purpose of a(n) ____ ____ is to report the profit-generating activities of the firm during a period of time. (Enter one word per blank)
Income Statement
What effect does revenue have on retained earnings?
Increases
What is the effect of net income on retained earnings?
Increases retained earnings
Which of the following are attributes of FASB?
Independence Full-time board members Private sector organization
In financial accounting which of the following are the three types of business activities of a company?
Operating activities Financing activities Investing activities
Which of the following are operating activities?
Paying advertising expenses Paying salaries to employees Providing services to customers
Which of the following is an investing activity?
Paying cash to buy equipment
Which of the following are external transactions?
Purchasing inventory from suppliers Borrowing money from the bank Paying salaries to employees
Which of the following is an external transaction?
Purchasing supplies from a vendor
A net loss ______ retained earnings.
decreases
A distribution of net income to owners is called a(n)
dividend.
Stockholders' equity arises primarily from amounts invested by shareholders and amounts ______.
earned by the corporation
When a company earns net income, its retained earnings:
increase
The difference between two amounts is described using the term ____ .
net
Revenues minus expenses equals
net income
Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is:
net income of $5,000
When expenses are greater than revenues, it is referred to as
net loss.
The two sources of stockholders' equity are amounts ______.
earned by the corporation paid in from shareholders
____ is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.
ethics
A code or moral system that provides criteria for evaluating right and wrong is referred to as
ethics.