ACCT – CH 1 – Flashcards
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What is the primary objective of most businesses?
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To maximize profits
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Which of the following would NOT be an example of a merchandising business?
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For Motor Company
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Which of the items below is NOT a business organization form?
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Venture entrepreneurship
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More that 70% of businesses are organized as what type of business?
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Sole proprietorship
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Which of the following is TRUE in regards to a limited liability company?
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-It is organized as a corporation -It can elect to be taxed as a partnership -It provides tax and liability advantages to the owners
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Under a premium-price emphasis, a business designs products that posses _____ for which customers are willing to pay a premium price.
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unique attributes
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Which of the following is NOT a characteristic of a corporation?
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Corporations make up 20% of all businesses.
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An entity that is organized according to state or federal statues and in which ownership is divided into shares of stock is a
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corporation
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A low-cost emphasis strives to proved
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no-frills, standardizes products and services
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Which of the following businesses use a premium-price emphasis?
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Abercrombie & Fitch
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Motel 6 is an example of a business using which of the following?
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Low-cost emphasis
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Which of the following are business stakeholders?
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-Stockholders -Suppliers -Customers
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The following are examples of internal stakeholders EXCEPT:
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creditors
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Which of the following is NOT an example of a capital market stakeholder?
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Suppliers
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Due to carious fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxlet Act of 2002. The act was responsible for establishing a new oversight board for public accountants called the
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Public Company Accounting Oversight Board
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Capital market stakeholders have an interest in the company because
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the provide major financing for the business
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Who has first preference to assets in case a business fails?
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Long-tem creditors
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Governments have an interest in the economic performance of business because of
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tax collections
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Managers are evaluated primarily on the business's
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economic performance
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Financing activities involve obtaining _____ to operate a business
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funds
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When a business borrows money, it incurs a(n)
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liability
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When a product is sold, this cost is often called
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cost of goods sold
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A note payable requires payment of the amount borrowed plus
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interest
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Shares of ownership are evidenced by issuing
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shares of stock
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The resources a business owns are called
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assets
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The purchase of factory equipment would be an example of which type of business activity?
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investing
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Which of the following is an example of an intangible asset?
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Patent
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Rights to payments from customers are
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Accounts receivable
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Which of the following is considered an asset until consumed?
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Prepaid expense
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______ is the increase in assets from selling products and services.
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Revenue
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Cash collected from sales during the normal course of business would be an example of which type of business activity
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Operating
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Costs incurred in operating a business are also known as
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expenses
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The role of accounting in business is best defines as
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an information system that provides reports to stakeholders about the economic activities and condition of a business
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Debts owned by a business are referred to as
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liabilities
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Reporting the financial condition of a business at a point in time and the changes in the financial condition of a business over a period of time are the two major objectives of
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financial accounting
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Which statement is normally prepared first?
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Income Statement
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A summary of revenue and expenses for a specific period of time is a(n)
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income statement
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Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert's net income for the month of September?
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18,150
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Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2010. Which of the following statements is correct?
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Net income for 2010 totaled $59,000.
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A summary of changes in the earnings retained in the corporations for a specific period of time is a(n)
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retained earnings statement
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Heedy Company had the following account balances in 2010 and 2011, respectively. Assuming dividends of $20,000 were paid in 2011, how much was net income?
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$82,000
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A list of assets, liabilities, and owners; equity as of a specific date is a(n)
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balance sheet
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Given the following list of accounts, calculate Total Assets:
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$39,700
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Which of the following is an appropriate representation of the accounting equation?
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Assets = Liabilities + stockholders' equity
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Using the following information to determine Total Stockholders' Equity:
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$35,000
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A summary of the cast receipts and cast payments for a specific periods of time is a(n)
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statement of cash flows
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The portion of a corporation's net income retained in the business is called
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retained earnings
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The debt created by a business when it makes a purchase on account if referred to as an
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account payable
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If there was no beginning retained earnings, net income of $20,000, and ending retained earnings of $6,000, how much were dividends?
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$14,000
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During 2010, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities of $90,000. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Smith's net income of net loss for 2010.
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Net loss of $25,000
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The "rules" of accounting are called
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Generally Accepted Accounting Principles
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Which principle determines the amount initially entered into the records for purchases?
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cost principle
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Recording revenue when a sale is made most directly relates to which concept?
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Matching concept
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Expressing financial data as if a business will continue operating for an indefinite periods time refers to which concept?
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Going concern concept
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The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)
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Income statement
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Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept?
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Adequate disclosure concept
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Cash investments made by the stockholders of the business are reported on the statement of cash flows in the
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financing activities section
