Acct Chapter 1 Questions And Answers

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Financial accounting is often referred to as a?
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Language of business.
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Financial accounting helps with:
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Maintaining records of multiple business transactions, Exchange of goods and services among individuals, Development of more complex societies.
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The primary function(s) of financial accounting is(are) to:
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Measure business activities of a company and communicate information about business activities to outside users.
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Financial accounting provides information primarily to:
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Investors and creditors.
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Which of the following represents a resource of the company?
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Asset
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Which of the following equations correctly represents the fundamental accounting equation?
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Assets = Liabilities + Stockholders’ Equity.
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Expenses represent:
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Costs of providing products or services to customers.
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Amounts owed to creditors are reported as:
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Liabilities
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In which financial statement does a company report its revenues?
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Income Statement.
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The financial statement that shows the financial position of a company at a specific point in time is called the:
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Balance Sheet.
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In which financial statement does a company report its expenses?
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Income Statement
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The balance in retained earnings represents:
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The amount of income earned over the company’s life minus the dividends paid to shareholders over the company’s life.
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Financial accounting information is essential to:
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Making good business decisions.
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Which single piece of information best explains most companies’ stock price performance?
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Net Income
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Who ultimately is responsible for properly applying GAAP? The company’s:
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Management
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The term GAAP stands for:
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Generally Accepted Accounting Principles
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Public accounting firms refer to:
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Professional service firms that traditionally focus on auditing and tax preparation.
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The most lucrative activity of public accountants typically is:
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Business consulting.
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The underlying foundation for the development of accounting standards and interpretation of accounting information is referred to as the:
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Conceptual framework.
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The fundamental qualitative characteristics of accounting information identified by the FASB are:
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Relevance, faithful representation.

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