question

Stockholders are creditors of a corporation. T/F

answer

False

question

All corporations acquire financing by issuing stock for sale on public stock exchanges. T/F

answer

False

question

The daily activities involved in running a business, such as buying supplies and paying salaries and wages, are classified as operating activities on the statement of cash flows. T/F

answer

True

question

Stockholders' equity is the difference between a company's assets and its liabilities. T/F

answer

True

question

A company owes $200,000 on a bank loan. It will be reported by the company as Notes Payable. T/F

answer

True

question

Amounts reported on financial statements are sometimes rounded to the nearest million.

answer

True

question

Accounts Payable, Notes Payable, and Salaries and Wages Payable are examples of liabilities.

answer

True

question

Dividends are subtracted from revenues on the income statement.

answer

False

question

If a company reports net income on the income statement, then the statement of cash flows will report the same amount as cash flows from operating activities for the period.

answer

False

question

Revenue is reported on the income statement only if cash was received at the point of sale.

answer

False

question

Generally Accepted Accounting Principles (GAAP) require profitable companies to distribute some of their earnings to their stockholders.

answer

False

question

Common Stock is reported as an asset on the balance sheet.

answer

False

question

Creditors are mainly interested in the profitability of a company.

answer

False

question

A stock that does not pay a dividend is an undesirable investment.

answer

False

question

In the United States, generally accepted accounting principles (GAAP) are established by the PCAOB (Public Company Accounting Oversight Board).

answer

False

question

The Securities and Exchange Commission (SEC) is the government agency that has primary responsibility for setting accounting standards in the U.S.

answer

False

question

The Sarbanes-Oxley Act (SOX) requires top management of companies to sign a report certifying that the financial statements are free of error.

answer

False

question

Public corporations are businesses:

answer

whose stock is bought and sold on a stock exchange.

question

The owner(s) of a business are taxed on the profits of the business if the business is a:

answer

corporation.

question

Accounting systems:

answer

analyze, record, summarize, and the activities affecting its financial condition and performance.

question

Creditors are:

answer

people or organizations to whom a business owes money.

question

Financing that individuals or institutions have provided to a corporation is:

answer

classified as a liability when provided by creditors and as stockholders' equity when provided by owners.

question

An investor who is looking at a company's financial statements cannot determine whether the:

answer

company's owners are financially sound.

question

Which business organization has only one owner?

answer

Sole proprietorship

question

Internal users of financial data include:

answer

management.

question

Which of the following statements about financial accounting is correct?

answer

Financial accounting reports are primarily prepared to provide information for external decision makers.

question

Which of the following statements about organizational forms of a business is not correct?

answer

The owners of a corporation are legally responsible for the corporation's debts and taxes.

question

A legal document called a stock certificate is used to indicate ownership in a:

answer

Corporation.

question

Net income is the amount:

answer

by which revenues exceed expenses.

question

Expenses are reported on the:

answer

income statement in the time period in which they are incurred.

question

Cash flows from (used in) investing activities includes amounts:

answer

received from the sale of the company's office building.

question

Which of the following would not represent a financing activity?

answer

Buying supplies on account.

question

Operating activities include:

answer

interest paid on a bank loan

question

The separate entity assumption means:

answer

a company's financial statements reflect only the business activities of that company.

question

The types of business activities measured by the statement of cash flows are:

answer

operating activities, investing activities, and financing activities.

question

Financial statements are most commonly prepared:

answer

monthly, quarterly and annually.

question

Which of the following statements about a fiscal year is correct?

answer

Companies can choose to end their fiscal year on any date they feel is most relevant.

question

Assets:

answer

represent the resources presently controlled by a company.

ACCT 2401- Chapter 1 – Flashcards

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