Accounting Chapter 1 and 2 – Flashcards
Unlock all answers in this set
Unlock answersquestion
Net income equals total __ minus total __
answer
revenues, expenses
question
Cash flow and activity of: Purchase of equipment
answer
negative cash flow, investing activity
question
Cash flow and activity of: Sale of equipment
answer
positive cash flow, investing activity
question
Cash flow and activity of: Borrow from a bank
answer
positive cash flow, financing activity
question
Cash flow and activity of: Purchase Inventory
answer
negative cash flow, operating cash flow
question
Net income normally _____ equal the cash generated from operations because ______
answer
negative cash flow, financing activity
question
Cash flow and activity of: Cash collected from customers
answer
positive cash flow, operating cash flow
question
Accounting equation
answer
Assets = Liabilities + Stockholder's Equity
question
Two elements of stockholders' equity
answer
Retained earnings and common stock
question
Profits earned by a company that haven't been paid to the stockholders
answer
Retained earnings
question
___ is a cost of doing business that is necessary to earn _____
answer
Expenses, profit
question
What elements does a balance sheet show?
answer
Assets, liabilities, stockholders' equity
question
Headings and accounts on balance sheet
answer
A, L, SE, Cash, Retained earnings
question
Decide on whether or not to lend money
answer
Creditors
question
Decide on social welfare issues
answer
Regulators
question
Refers to a code or moral system that provides criteria for what is right and wrong
answer
Ethics
question
Net income is:
answer
Revenues less expenses, profit
question
Assets are initially recorded at:
answer
Historical cost
question
Heading for statement of cash flow
answer
For the year ended...
question
Heading for income statement
answer
For the year ended...
question
Heading for statement of stockholders' equity
answer
For the year ended...
question
Classifications of inflow and outflow of cash
answer
Operating, Financing, Investing
question
Shareholders' equity arises mainly from:
answer
amounts invested by shareholders and amounts earned by the corporation
question
What does the statement of stockholders' equity report?
answer
Changes in earnings and dividends for a specific period of time
question
Net income equals:
answer
Revenues minus expenses
question
Line items on a balance sheet
answer
Cash, common stock, retained earnings, accounts receivable
question
Line items on income statement
answer
Sales, income tax expense, cost of goods sold
question
These activities involve purchasing goods, designing and manufacturing products, and selling goods to customers
answer
Operating activities
question
Revenues and expenses relate to which activity on the statement of cash flow?
answer
Operating
question
Legal documents representing ownership in a company
answer
Capital stocks
question
Earned by selling goods or services to customers
answer
Revenues
question
What statements does net income appear on?
answer
Income statement and statement of stockholders' equity
question
Financing activities involve:
answer
Exchanges between a company and its creditors and stockholders
question
Investing activities involve:
answer
Purchases of productive assets
question
Ending cash balance on balance sheet is equal to the sum of what other statements?
answer
The change in cash of statement of cash flows Beginning of the year cash balance
question
Which activities involve the buying and selling of land, buildings, and equipment used in the business?
answer
Investing
question
What kind of activity is involved borrowing money from the bank?
answer
Financing
question
A business's assets are financed by whom?
answer
Creditors and stockholders
question
Heading for a balance sheet
answer
At ......
question
Income statement equation
answer
BEGINNING retained earnings + net income - dividends = ENDING retained earnings
question
Steps of ethical decision making
answer
1) Determine facts of situation 2) Identify the ethical issue and stakeholders 3) Identify the values related to the situation 4) Specify the alternative courses of action 5) Evaluate the courses of action in terms of their consistency
question
Ending retained earnings appear on which statements?
answer
Balance sheet and statement of stockholders' equity
question
Which groups have claims on business's assets?
answer
Stockholders and creditors
question
Services that CPAs perform
answer
Tax planning Assurance services Not-for-profit assurance services
question
Separate legal entity
answer
Corporation
question
Cash is reported on the:
answer
Balance sheet and statement of cash flows
question
An accountant who is employed by a company like Best Buy has a career in:
answer
Private accounting
question
Net income is equal to:
answer
Revenue minus expenses Net amount earned
question
Net income normally _____ equal the cash generated from operations because ______
answer
does not; revenues are earned even if cash has not been collected
question
Steps of the accounting system
answer
1) Analyze transactions 2) Record journal entries 3) Post amounts to general ledger 4) Prepare a trial balance 5) Adjust revenues and expenses
