question

True or False? Financial accounting primarily deals with the methods accountants use to provide information to an organizations internal users.

answer

False

question

Which of the following questions is most likely to be asked by a creditor?

answer

Will the company be capable of repaying its debt when it is due?

question

Which of the following questions is most likely to be asked by an investor?

answer

Will the company's stock increase in value?

question

True or False? Ron owns five percent of a corporation's common stock. The concept of limited liability would imply that Ron is personally responsible for only five percent of the financial obligations of the corporations.

answer

False

question

Which of the following is a feature of the corporate form of business ownership? a. Unlimited liability b. Lower tax rates c. Limited resources d. Double taxation

answer

d. Double taxation

question

Which of the following is an alternate form of the accounting equation? a. Assets - Liabilities = Stockholders' Equity b. Revenues - Expenses = Net Income c. Assets = Liabilities - Stockholders' Equity d. Expenses - Dividends = Net Income

answer

a. Assets - Liabilities = Stockholders' Equity

question

True or False? The value of a company to its owners equals total resources of the company.

answer

False

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Amounts owed to a supplier of dress material a. Assets b. Liabilities c. Revenues d. Expenses e. Dividends

answer

b. Liabilities

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Salaries paid to employees a. Assets b. Liabilities c. Revenues d. Expenses e. Dividends

answer

d. Expenses

question

Share of profits paid to owners of a company a. Assets b. Liabilities c. Revenues d. Expenses e. Dividends

answer

e. Dividends

question

Consulting fees earned by a firm a. Assets b. Liabilities c. Revenues d. Expenses e. Dividends

answer

c. Revenues

question

Trucks owned by a transportation company a. Assets b. Liabilities c. Revenues d. Expenses e. Dividends

answer

a. Assets

question

Which of the following demonstrates that the company's resources equal creditor's claims plus owners' claims to those resources? a. The statement of cash flows b. The balance sheet c. The statement of stockholders' equity d. The income statement

answer

b. The balance sheet

question

True or False? The balance of retained earnings represents the amount of earnings paid out in the form of dividends to stockholders.

answer

False

question

True or False? The cash received from customers is reported as part of ending cash balance in the balance sheet and as part of operating cash flows in the statement of cash flows

answer

True

question

This statement tells you if a company is profitable a. The income statement b. The balance sheet c. The statement of cash flows d. The statement of stockholders' equity

answer

a. The income statement

question

This statement has two components: common stock and retained earnings. a. The income statement b. The balance sheet c. The statement of cash flows d. The statement of stockholders' equity

answer

d. The statement of stockholders' equity

question

This statement shows the net change in cash over the period. a. The income statement b. The balance sheet c. The statement of cash flows d. The statement of stockholders' equity

answer

c. The statement of cash flows

question

This statement reports the financial positions of a company at a point in time. a. The income statement b. The balance sheet c. The statement of cash flows d. The statement of stockholders' equity

answer

b. The balance sheet

question

Which of the following best explains a company's stock price performance? a. Dividends b. Net income c. Accounts receivable d. Preferred stock

answer

b. Net income

question

Which of the following is an important indicator of a company management's ability to respond to business situations and the possibility of bankruptcy? a. Inventory b. Accumulated depreciation c. Total stockholders' equity d. Total liabilities

answer

d. Total liabilities

question

True or False? If you are able to predict the change in financial accounting's measure of profitability, you can predict the change in stock prices, too.

answer

True

question

True or False? Investors and creditors rely heavily on managerial accounting information in making investment and lending decisions.

answer

False

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Match the term with the correct description (FASB, SEC and IASB) Standard-setting body responsible for convergence of accounting standards across countries.

answer

IASB

question

an independent, private body that has primary responsibility for the establishment of GAAP in U.S.

answer

Financial accounting standards board (FASB)

question

Investors

answer

Decide whether to invest in stock

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Creditors

answer

Decide whether to lend money

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Customers

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Decide whether to purchase products

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Suppliers

answer

Decide the customers ability to pay for supplies

question

Mangers

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Decide production and expansion

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Employees

answer

Decide employment opportunities

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Competitors

answer

Decide market share and profitability

question

Regulators

answer

Decide on social welfare

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Tax authorities

answer

Decide on taxation policies

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Local communities

answer

Decide on environmental issues

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Accounting information that is provided for internal users is referred to as...? a. Managerial Accounting b. Financial Accounting

answer

a. Managerial Accounting

question

Accounting information that is provided to external users is referred to as...? a. Managerial Accounting b. Financial Accounting

answer

b. Financial Accounting

question

What term defines the 2 functions measuring business activities of a company and then to communicate those measurements to external parties for decision-making-purposes.

answer

Financial Accounting

question

Corporation

answer

is an entity that is legally separate from its owners

question

Sole proprietorship

answer

is a business owned by one person

question

Partnership

answer

is a business owned by two or more persons

question

Limited liability

answer

are not held personally responsible for the financial obligations of the corporation

question

If unable to pay its legal obligations to creditors, the owner(s) might be forced to surrender personal assets to satisfy those debits. a. Corporation b. Sole proprietorship c. Partnership

answer

both a and b.

question

Double taxation

answer

a corporation's income is taxed twice

question

-Cash -Inventories -Buildings -Supplies a. Assets b. Liabilities c. Stockholders' Equity

answer

a. Assets

question

Creditors -Suppliers -Workers -Utility companies -Government a. Assets b. Liabilities c. Stockholders' Equity

answer

b. Liabilities

question

Investors -Owners a. Assets b. Liabilities c. Stockholders' Equity

answer

c. Stockholders' Equity

question

Revenues

answer

are the amounts recorded when the company sells products or provides services to customers

question

Expenses

answer

are the costs of providing products and services

question

Net income

answer

difference between all revenues and all expenses for the period

question

Financial statements

answer

periodic reports published by the company for the purpose of providing information to external users

question

What are the 4 primary financial statements

answer

Income statement, statement of stockholders' equity, balance sheet, statements of cash flows

question

Income statement

answer

a financial statement that reports the company's revenues and expenses over an interval of time

question

Statement of stockholders' equity

answer

a financial statement that summarizes the changes in stockholders' equity over an interval of time

question

Balance sheet

answer

a financial statement that presents the financial position of the company on a particular date. (at a point in time)

question

Statements of cash flows

answer

a financial statement that measures activities involving cash receipts and cash payments over an interval of time

question

-revenues - expenses = net income -account: a record of the business activities related to a particular item over a period of time

answer

Income Statement

question

Common stock

answer

amounts invested by stockholders when they purchase shares of stock -external sources of stockholders

question

Retained earnings

answer

cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends -internal source of stockholders

question

-assets = liabilities + stockholders' equity -at a point in time ex: January 31

answer

Balance sheet

question

Statements of cash flows 3 fundamental business activites

answer

Operating cash flows, Investing cash flows, Financing cash flows

question

Operating cash flows

answer

cash receipts and cash payments for transactions involving revenue and expense activities during the period

question

Investing cash flows

answer

cash transactions for the purchase and sale of investments and long-term assets

question

Financing cash flows

answer

cash transactions with lenders, such as borrowing money and repaying debt, and stockholders' such as issuing stock and paying dividends

question

The rules of financial accounting

answer

Generally accepted accounting principles (GAAP)

question

Public accounting firms refer to: a. firms that have stocks listed on an exchange b. professional service firms that traditionally focus on auditing and tax preparation c. companies that sell merchandise to customers d. government-contolled companies

answer

b. professional service firms that traditionally focus on auditing and tax preparation

question

Which of the following represents a resource of the company? a. expense b. dividend c. asset d. liability

answer

c. asset

question

Financial accounting information is essential to: a. making good business decisions b. paying the appropriate amount of taxes c. marketing the company's products to customers d. quality of the work environment for employees

answer

a. making good business decisions

question

Financial accounting is often referred to as a: a. tax allocation system b. language of business c. mathematical system of equations d. internal reporting structure

answer

b. language of business

question

Transactions are recorded using debits and credits in a(n): a. Annual report b. Journal c. Financial statement d. Chart of accounts

answer

b. Journal

question

Providing services to customers for cash would be recorded with a: a. debit to service expense b. credit to cash c. debit to accounts receivable d. credit to service revenue

answer

d. credit to service revenue

question

Which of the following accounts normally has a credit balance? a. cash b. accounts receivable c. service revenue d. dividends

answer

c. service revenue

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