Accounting is a system of maintaining records of a company's operations and communication that information to decision makers. - ANSWER-True
What makes
... [Show More] accounting a valuable discipline? - ANSWER-Provides information to make decisions
Financial accounting does not deal with which of the following? - ANSWER-Providing information to internal users
Which of the following groups is not among the external users for whom financial statements are prepared? - ANSWER-Managers
Product profitability reports for a business are considered - ANSWER-Managerial accounting
Preparing a budget for a business is considered - ANSWER-Managerial accounting (Budgets are internal documents and generally not shared outside of the organization)
Which of the following would NOT be an objective of external users reading a company's financial statements? - ANSWER-Assessing the company's contribution to social politics.
What is the primary purpose of financial accounting? - ANSWER-Measure business activities and communicate those measures to external users to make decisions.
When a company receives a product previously ordered, a recordable accounting transaction has occurred - ANSWER-Yes (affects financial position and can be measured in money)
When a company inquires about the availability of inventory, a transaction has occurred - ANSWER-No
When payment is received for services not yet rendered, no entry is recorded until that service has been rendered. - ANSWER-False (affects financial position since cash is received)
Which of the following business events is not a transaction recorded in financial accounting? - ANSWER-Signing an agreement with a supplier
An alternative form of the accounting equation is: - ANSWER-Assets - Liabilities = Stockholders' Equity
The resources of a company are referred to as: - ANSWER-Assets (assets benefit future operations. Examples are cash, inventory, supplies, accounts receivable, buildings and equipment.)
Liabilities can be best described as: - ANSWER-The amount owed to creditors
What is the best definition of an asset? - ANSWER-Resources that benefit future operations
What is the best definition of an accounts receivable? - ANSWER-Amounts owed by customers to a company.
Those who lend money or deliver goods and services before being paid are called - ANSWER-Creditors (Assets = Liabilities( creditors' claims) + Equity (owners' claims))
If total assets increase $30,000 during a period and total liabilities increased $12,000 during the same period, the amount and direction (increase or decrease) of the change in stockholders' equity for that period is: - ANSWER-an $18,000 increase.
assets = liabilities + equity
(+$30,000) - (+$12,000) = x
(+$30,000) - (+$12,000) = (+$18,000)
At the end of its year, J&L Services, Inc., a computer services business, had total assets of $25,000 and equity of $10,000. How much were J&L Services' liabilities? - ANSWER-$15,000
assets - equity = liabilities
$25,000 - $10,000 = $15,000
The amounts recorded when the company sells products or provided services to customers are referred to as: - ANSWER-Revenues (revenues are recorded at the time the company provides products or services to customers)
Which of the following best describes revenue? - ANSWER-Sales of goods and services to a customer
The cost associated with producing revenues are referred to as: - ANSWER-Expenses
Dividends represent a return of the company's profit to its owners, the stockholders. - ANSWER-True (not classified as an "expense")
Which of the following items is not a specific account in a company's accounting records? - ANSWER-Income
Using the information below from the accounting records of Gulf Corporation, stockholders' claims to the company's resources amount to:
Assets $1,000,000
Liabilities $500,000
Net income $200,000
Retained earnings $200,000 - ANSWER-$500,000
assets - liabilities = stockholders' equity
$1,000,000 - $500,000 = $500,000
Use the following amounts to calculate net income: Revenues, $50,000; Liabilities, $10,000; Expenses, $40,000; Assets, $30,000; Dividends, $5,000 - ANSWER-$10,000
Revenues $50,000
Expenses - (40,000)
Net income = $10,000
The financial statements of Royce Corporation contain the following. How much is its net income?
Wages payable $11,000
Revenues 15,000
Accounts receivable 16,000
Expenses 10,000
Cash 7,000 - ANSWER-$5,000 (Net income= Revenues- Expenses)
If a company has stockholders' equity of $5,000 at the end of the year, which of the following statements must be true? - ANSWER-The company's assets exceed liabilities by $5,000.
assets = liabilities + stockholders' equity
assets - liabilities = stockholders' equity
assets - liabilities- $5,000
Which of the following transactions are operating activities? - ANSWER-Provide services to customers for $10,000, Paid employee wages of $3,500, and Purchased $12,000 in supplies.
Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation - ANSWER-True
Transfer of ownership will not affect the continuity of a - ANSWER-corporation
How many of the following accounts would appear in a year-end income statement?
Accounts Payable $4,400
Salaries Expense 12,800
Cash 1,700
Common Stock 2,400
Service Revenue 8,300
Truck Expense 4,300
Retained Earnings 1,100
Utilities Expense 5,000 - ANSWER-Four; Salaries Expense, Service Revenue, Truck Expense, and Utilities Expense (Revenues and Expenses)
The statement of changes in stockholders' equity is a financial statement that summarizes stockholders' equity at a point in time. - ANSWER-False (summarizes the changes in stockholders' equity over an interval of time)
Which of the following best explains the meaning of total stockholders' equity? - ANSWER-The amount of capital invested by stockholders plus profits retained over the life of the company
Retained earnings at the end of the year is calculated using: - ANSWER-Beginning retained earnings, income, and dividends
Given the information below about Woodcrest Corporation, what was the amount of dividends the company paid in the current period?
Beginning retained earnings 50,000
Ending retained earnings 100,000
Decrease in cash 50,000
Income 75,000
Change in stockholders' equity 15,000 - ANSWER-25,000
Beginning R/E 50,000
Income + 75,000
= 125,000
Less dividends - 25,000
Ending R/E = 100,000
The benefits of a statement of cash flows are to - ANSWER-Determine ability to pay indebtedness and cash dividends, Estimate future cash flows, and Evaluate asset management
What would affect operating cash flows reported in the statement of cash flows (all transactions involve cash)? - ANSWER-Decrease in wages payable of $12,000 during the year and Increase in inventory of $10,000
Which of the following is false regarding the balance sheet?
The balance sheet summarizes the net changes in specific account balances over a period in time.
The retained earnings balance on the balance sheet agrees with the ending retained earnings balance shown on the statement of changes in stockholders' equity
The accounts on the balance sheet represent the basic accounting equation for a company
The balance sheet reports the amount of assets, liabilities, and stockholders' equity of a company at a point in time - ANSWER-The balance sheet summarizes the net changes in specific account balances over a period in time.
How many of the following accounts would appear in a year-end balance sheet?
Wages Expense
Salaries Payable
Fees Earned
Common Stock
Supplies
Service Revenue
Retained Earnings
Cash - ANSWER-Five; Salaries Payable, Common Stock, Supplies, Retained Earnings, and Cash
Income (loss) appears in which two financial statements? - ANSWER-Income statement and the statement of changes in stockholders' equity
In what order are the following financial statements prepared: (1) statement of changes in stockholders' equity, (2) income statement, (3) balance sheet? - ANSWER-2, 1, 3
Which financial statements best reveals to investors and creditors information about a company's indebtedness? - ANSWER-Balance sheet
Which of the following best represents value created for stockholders during the current period? - ANSWER-Earnings (earnings reflect profits earned (value created) by the company during the current period)
The most important objective for financial accounting is to provide information useful for: - ANSWER-Predicting cash flows
The economic entity concept requires that - ANSWER-A company should maintain separate set of financial records for each business entity or subsidiary
A list of all account names used to record transactions of a company is referred to as the: - ANSWER-Chart of accounts
The accounting equation is in balance if there is a - ANSWER-decrease in assets and a decrease in equity
Which of the following is not possible when recording a transaction?
Stockholders' equity increases and assets increase
One asset increases and another asset decreases
Liabilities increase and assets decrease
Stockholders' equity decreases and assets decrease - ANSWER-Liabilities increase and assets decrease
The accounting equations is in balance if there is a:
Decrease in assets and a decrease in liabilities
increase in liabilities and an increase in equity
decrease in assets and an increase in equity
decrease in equity and an increase in assets - ANSWER-decrease in assets and a decrease in liabilities
Receiving cash from an account receivable: - ANSWER-Increases one asset and decreases another asset
Which of the following would increase assets and increase liabilities?
Provide services to customers on account
Pay dividends to stockholders
Receive a utility bill but do not pay it immediately
Purchase office supplies on account - ANSWER-Purchases office supplies on account
Washington, Inc. sold $300 of office supplies to a customer on account on September 12. On September 30, Washington collected the cash from that customer. What is the impact on Washington's accounting equation from the collection of cash? - ANSWER-No net effect to the accounting equation (increases asset and decreases asset)
Following the transactions of Newco, Inc. during the month of October:
1. Issued 10,000 shares of common stock for $25,000 cash.
2. Purchased land for $50,000, signing a note payable for the full amount
3. Received cash of $10,000 for services provided to customers during the month
4. Purchased $500 of office supplies on account
5. Purchased office equipment for $5,000 cash
What was the total amount of Newco's liabilities following these five transactions? - ANSWER-$50,500 (2+4=50,500)
The purchase of $5,000 of liability insurance policy for the next year on account will - ANSWER-Increase both assets and liabilities by $5,000
What transaction changes only the mix of assets and does not affect liabilities or stockholders equity? - ANSWER-Purchased equipment for $25,000 cash
assume that J&K, Inc. performed advertising services for a bakery on account for $1,500. How would this transaction affect J&K, Inc.? - ANSWER-Increase both assets and equity by $1,500
When a company pays employees' salaries or the current period, how will the basic accounting equation be affected? - ANSWER-Stockholders' equity decreases
Following are transactions of Beverly, Inc., a new company:
1. Purchased office equipment for $500 cash
2. Purchased land for $20,000, signing a note payable for the full amount
3. paid cash of $10,000 for repair services provided last month
4. Purchased $300 of office supplies on account
5. Issued 10,000 shares of common stock for $50,000 cash
6. Paid employees $25,000 for their first month's salaries
How many of these transactions decreases Beverly's total assets? - ANSWER-Two; Paid cash of $10,000 for repair services last month and Paid employees for $25,000 for their first month's salaries
Assume that Perfect Clean, Inc. performed cleaning services for a business on account for $200. How would this transaction affect Perfect Clean, Inc.? - ANSWER-Increase both assets and equity by $200
An increase to an asset account is shown with a ________. An increase to a liability account is shown with a __________-. - ANSWER-Debit; credit
Which of the following is true?
The debit is on the right side of the account
The credit is on the left side of a liability account
The debit is on the right side of an expense account
The debit is on the left side of the account - ANSWER-The debit is on the left side of the account
The left side of an account is used to record what? - ANSWER-Debits
Which of the following is correct?
Prepaid expenses are decreased with a debit
Unearned revenue liability is increase with [Show Less]