Review Study Guide

Flashcard maker : Lily Taylor
TF: A business organized as a separate legal entity owned by stockholders is a partnership.
FALSE. A Corporation is a separate legal entity owned by stockholders. A partnership is A voluntary association of two or more persons for the purpose
of conducting a business.
The liability of corporate stockholders is limited to the amount of their investment. TF
Name the accounting Equation
Assets= Liabilities +Stockholders Equity
If the assets owned by a business total 100,000 and liabilities total 70,000 stockholder’s equity totals 30,000. TF
True. Assets = 100. Liabilities =70. 100-70.
Accounting communicates financial information about a business to both internal and external users.
Name two external users of accounting information
Investors and Creditors
Three Types of Business Activities
The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.
The balance sheet reports assets and claims to those assets at a specific point in time,
A business organized as a corporation is owned by it’s ________
A big advantage of corporations relative to partnerships and sole proprietorships
the fact there’s a reduced legal liability for investors.
What is the modern def. of accounting
The information system that indetifies records and communities the economic events of an organization to interested users.
3 Steps to the Accounting Process
. Identify the relevant economic activity
2. Quantify these activities
3. Record the results
Expenses are incurred to _______
To generate revenues
The cost of assets consumed or services used is also know as _______
As an expense
Resources owned by a business are referred to as _______
Net Income =
Revenues > Expenses
Liabilities =
Are debts and obligations.
Stockholders equity =
owners on total assets
The Balance Sheet indicates
whether the company relies on debt or stockholder’s equity to finance its assets.
Things that are Assets
Accounts Receivable
Prepaid Accounts
Assets on the balance sheet are recorded at historical cost or their exchange value TF
The accounting period in which service revenue is recognized is generally the period when cash is collected. TF
The payment of a cash dividend to schokholders reduces stockholders equity TF
An income statement presents the revenues expenses and net income or net loss of the business for a period of time. TF
When a company ships products to a customer and bills the customer the company should not recognize revenue until the cash is collected. TF
Accounting measures and reports financial data for profit making businesses as well as not for profit organizations.
One of the disadvantages of a corporation when compared to a partnership is the limited liability of the owners. TF
FALSE, Although there is protective liability over some of the owners the company, (Stockholders)
Revenue has the the effect of increasing what?
Retained Earning
TF: For account purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business
An intangible asset _________
derives its value from the rights and privileges of its owners.
Which of the Following is not an asset?
Equipment, Dividends, Accounts Recievable, Inventory.
B. Dividends
On a classified balance sheet companies usually list current asset in
The order in which they are expected to be converted into cash.
Issuing new shares of common stock will______
Increase common stock
Declaring a cash dividend will
Decrease retained earnings
The primary purpose of the balance sheet is to _____
Report the financial position of the reporting entity at a particular point in time.
Things that are Retained Earnings
Beginning Balance, Revenues,
To find: Revenues- Expenses. Then Subtract dividends to find Retained Earnings.
A paid dividend will do what to assists and stockholders equity?
It will decrease assets and stockholders equity.
What has an effect on retained Earnings
Land purchase WILL NOT have any effect.
Receipts from customers that are given in advance are not treated as _______
revenue. Revenue cannot be recognized until the work is performed.
The normal balance of any account in on what side?
The side which increases the account.
The double entry system requires that each transaction must be recorded in _____
in at least two different accounts
The retained earnings account is classified on the balance sheet as a liability.
The separate entity assumption assumes a stable monetary unit
Liabilities are recorded in their order of maturity meaning when they will paid or satisfied by providing goods or services.
Transactions have a dual economic effect on the fundamental accounting midel
An account is a standardized format used to accumulate the effects of transactions on each financial state item
The purchase of a delivery truck for cash increases assets and stockholder’s equity
Normally, asset accounts will have credit balances and liability accounts will have debit accounts
the cash account is debited shen stock is sold to investors and a stockholders equity is credited.
When a company borrows money from a bank, it leads to a cash inflow from an investing activity.
The revenue recognition principle dictates that revenue be recognized in the accounting period in which it is earned.
Expense recognition often follows revenue recognition.
The revenue recognition principle and the matching principle are helpful guides used in determining net income or net loss for a period.
Revenue received before it is earned expenses paid before being used or consumed are both initially recorded as liabilities.
Accrued Revenues are revenues that have been received but not yet earned.

Get instant access to
all materials

Become a Member