Acc-1A Chapter 1 – Flashcards
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A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to:
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Decrease an asset, decrease a liability.
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An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a
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Corporation.
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Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the
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Financing activities section
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Which of the following financial statements reports information as of a specific date?
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Balance sheet
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The assets section of the balance sheet normally presents assets in
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In the order that they will be converted into cash or used in operations.
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How does the purchase of equipment by signing a note affect the accounting equation?
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Assets increase; liabilities increase
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If total liabilities decreased by $46,000 during a period of time and stockholders' equity increased by $60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is:
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$14,000 increase.
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Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The retained earnings statement (RE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?
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Income Statement, Retained Earnings Statement, Balance Sheet
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All of the following statements regarding the ratio of liabilities to stockholders' equity are true except
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The higher this ratio, the better able a business is to withstand poor business conditions and pay creditors.
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Transactions affecting stockholders' equity include
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Shares of capital stock issued to stockholders, dividends declared and paid to stockholders, revenues, and expenses.
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The year-end balance of the retained earnings account appears in
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Both the retained earnings statement and the balance sheet.
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Two common areas of accounting that respectively provide information to internal and external users are
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Managerial accounting and financial accounting.
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Goods purchased on account for future use in the business, such as supplies, are called
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Prepaid expenses.
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Land, originally purchased for $30,000, is sold for $62,000 in cash. What is the effect of the sale on the accounting equation?
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Assets increase $32,000; stockholders' equity increases $32,000
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Equipment with an estimated market value of $30,000 is offered for sale at $45,000. The equipment is acquired for $15,000 in cash and a note payable of $20,000 due in 30 days. The amount used in the buyer's accounting records to record this acquisition is:
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$35,000
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The business entity concept means that
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The entity is an individual economic unit for which data are recorded, analyzed, and reported.
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Which of the following best describes accounting?
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It is an information system that provides reports to users regarding economic activities and condition of a business.
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The accounting equation may be expressed as
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Assets - Liabilities = Stockholders' Equity
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The initials GAAP stand for
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Generally Accepted Accounting Principles.
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Declaring and paying cash dividends
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Decrease stockholders' equity.
