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Capital Markets: Investors, Creditors Marketplace: Customers, Suppliers Government Internal: Management, Employees

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Who are Stake Holders?

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Generally Accepted Accounting Principle

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GAAP

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A business is separate from its owner, transactions must be recorded separately to accurately reflect a business' financial status

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Business Entity Concept

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Assets = Liabilities + Stockholders Equity

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Accounting Equation

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can be anything the company owns ex. floor cleaner, supplies, equipment

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Assets

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what we owe to our owners(investors and stock holders)

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Stock Holders Equity

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Summarizes transactions Reports for a specific period in time

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Financial Statement

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Economic performance for time period ex. did we make money?

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Income Statement

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Snapshot of assets and claims against assets

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Balance Sheet

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Keep an eye on where we are spending cash

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Statement of Cash Flows

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Ownership interest in the buisness

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Statement of Stockholders Equity

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an ownership interest in the business.

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An investor provides resources to a business in exchange for:

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financial accounting.

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Generally accepted accounting principles (GAAP) are measurement rules for:

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True.

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Accounting is an information system that reports on the economic activities and financial condition of an organization.

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True.

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Investors and creditors use accounting information to identify the businesses they wish to provide resources to.

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liabilities.

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The claims of a business's creditors are called:

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both investments by owners and amounts earned by the business.

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A business's equity comes from:

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a part of stockholders' equity

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Retained Earnings is:

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assets.

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Resources that a business uses to operate the business are called:

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it can be independently verified.

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Accounting information is said to be reliable if:

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True.

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The historical cost concept requires that most assets be reported at the amount paid for them.

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True.

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An asset exchange transaction does not affect the total amount of assets of an entity.

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an asset source transaction.

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If a company receives cash for providing services to customers, that transaction is:

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Payment of cash dividends to owners

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Which of the following transactions is an asset use transaction?

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Expenses are shown on the:

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Expenses are shown on the:

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Balance sheet

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The amount of land owned by a business appears on which financial statement?

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true

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The balance sheet reports a business's assets and the claims to those assets

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Notes Payable

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Which of the following items would appear on a balance sheet?

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balance sheet.

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Liabilities are shown on the:

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false.

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Issuance of common stock is an asset use transaction.

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true

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Net income is an increase in assets as a result of operating a business.

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liabilities to increase.

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If a company purchases supplies on account, this transaction would cause:

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true

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The term "recognition" means to report an economic event in the financial statements.

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an increase in a liability.

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Recording accrued salary expense at the end of an accounting period causes an increase in Salaries Expense and: an increase in a liability.

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expenses and revenues

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The matching concept refers to the "matching" of:

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improve the matching of revenue and expense in the proper period.

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The purpose of the accrual basis of accounting is to:

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Paid cash to purchase land.

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Which of the following is an asset exchange transaction?

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asset source transaction.

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A transaction that increases cash and increases notes payable is a/an:

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asset use transaction.

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A transaction that decreases cash and decreases notes payable is a/an:

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A liability increases and an equity account decreases.

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Which of the following is an example of a claims exchange transaction?

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Purchased machine by issuing a note payable

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Which of the following is an asset source transaction?

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generate revenue by selling goods and include wholesale and retail companies.

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Merchandising businesses:

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the final consumer.

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A retail company sells goods primarily to:

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buy the merchandise they sell from suppliers.

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Merchandising businesses:

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Sales Revenue minus Cost of Goods Sold.

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Gross margin is equal to:

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Gross Margin - Selling and Administrative Expenses = Net Income

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What is the relationship between gross margin and net income?

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Cost of Goods Sold

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Which of the following is not a period cost?

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Rodriguez Department Store

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Which of the following would be primarily a merchandising business?

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It includes the asset, Merchandise Inventory.

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How is the balance sheet of a merchandising firm different from the balance sheet of a service business?

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All costs necessary to acquire inventory and prepare it for sale

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What costs should be included in the Merchandise Inventory account of a merchandising firm?

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as an expense on the income statement.

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Cost of Goods Sold is reported:

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two percent discount can be deducted if the invoice is paid by the tenth day following the date of the sale and the net amount payable within 30 days.

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The credit terms, 2/10, n/30 indicate that a:

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the buyer of the merchandise is responsible for transportation costs.

answer

The term "FOB shipping point" means:

Accounting Terms Ch 1 – Flashcards

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