CH 1 Flashcards
Which of the following statements about users of accounting information is incorrect: Management is an internal user, Taxing authorities are external users, Present creditors are external users, and Regulatory authorities are internal users
Regulatory authorities are internal users
Which of the following is not a step in the accounting process: “Identification, Recording, Verification, and communication”.
Verification
The cost principle states that:
1) assets should be initially recorded at cost and adjusted when the market value changes,
2) activities of an entity are to be kept separate and distinct from owner, 3)assets should be recorded at their cost
4) only transaction data capable of being expressed in term of money be included in the accounting records.
Assets are recorded at their costs.
Which of the following statements about basic assumptions is correct:
1) Basic assumptions are the same as accounting principles.
2) The economic entity assumption states that there is a unit of accountability.
3) The monetary unit assumption enable accounting to measure employee morale.
4) Partnerships are not economic entities.
The economic entity assumption states that there is a unit of accountability.
The three types of business entities are:
1) proprietorships, small businesses, and partnerships.
2) Proprietorships, partnerships, and corporations.
3) Proprietorships, partnerships, and large businesses.
4) financial, manufacturing, and service companines.
2) Porpriertorships, partnerships, and corporations.
Net income will result during a time period when:
1) assets exceed liabilities
2) assets exceed revenues
3) expenses exceed revenues
4) revenues exceed expenses
Revenues exceed expenses
Performing services on an account will have the following effects on the components of the basic accounting equation:
1) Increase assets and decrease stockholders’ equity
2) increase assets and increase stockholders’ equity
3) increase assets and increase liabilities.
4) increase liabilities and increase stockholders’ equity
Increase assets and increase stockholders’ equity
As of december 31 2011, stoneland company has assets of 3500. and stockholders’ equity of 2000. What are the liabilities for stoneland company as of 12/31/11?
1) 1500
2) 1000
3) 2500
4) 2000
1500.
3500-2000=1500
Which of the following events is not recorded in the accounting records:
1) equipment is purchased on account
2) an employee is terminated
3) a cash investment is made into the business
4) the company pays a cash dividend
an employee is terminated
During 2011, Gibson company’s assets decreased 50000 and its liabilities decreased 90000. Its stockholders’ equity therefore:
1) increased 40000.
2) decreased 140000.
3) decreased 40000.
4) increased 140000.
increased 40000
Payment of an account payable affects the components of the accounting equation in the following way:
1) Decreases stockholders’ equity and decrease liabilities
2) increases assets and decreases liabilities
3) Decreases assets and increases stockholders’ equity
4) Decreases assets and decreases liabilities
Decreases assets and decreases liabilities
Which of the following statements is false?
1) A statement of cash flows summarizes information about the cash inflows (receipts) and outflows ( payments) for a specific period of time.
2) A balance sheet reports the assets, liabilities, and stockholders’ equity at a specific date.
3) An income statement presents the revenues , expenses, changes in stockholders’ equity, and resulting net income or net loss for a specific period of time.
4) A retained earnings statement summarizes the changes in retained earnings for a specific period of time.
An income statement presents the revenues, expenses, changes in stockholders’ equity that results to either a net income or net loss in a specific time period. ( does not view stockholders’equity).
On the last day of the period, Jim Otto Company buys a $900 machine on their credit. So, the transaction will affect:
1) income statement only
2) balance statement only
3) income statement and retained earning statement only
4) income statement, retained earnings statement, and balance sheet.
Balance sheet only
Service Provided by a public accountant include:
1) auditing, taxation, and management consulting
2) auditing, budgeting, and management consulting
3) auditing, budgeting, and cost accounting
4) internal auditing, budgeting, and management consulting.
Auditing, taxation, and management consulting
Accounting
the information system that identifies , recores, and communicates the economic events of an organization to interested users.
Assets
Resources a business owns
Balance sheet
A financial statement that reports the assets, liabilities, and owner’s equity at a specific date.
Basic accounting equation
Assets= Liabilities + Stockholders’ equity
Bookkeeping
A part of accounting that involves only recording of economic events
Common stock
the total amount paid in by stockholders for the shares they purchase
Corporation
A business organization as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock
Cost principle
An accounting principle that states companies record their assets at a cost
Dividend
A distribution by a corporation to its stockholders on a pro rata ( equal) basis.
Economic entity assumption
An assumption that requires that a business activities are kept separate and distinct from the activities of its owner and all other economic entities.
Ethics
The standards of conduct by which one’s actions are judged by professionalism.
Expenses
The cost of assets consumed or services used in the process of earning revenue.
Fair value principle
An accounting principle for companies that records assets at their fair value.
Faithful representation
It means that the numbers and descriptions of financial information match what really existed or happened-it is factual.
Financial accounting
The field of accounting that provides economic and financial information for investors, creditors, and other external users.
Generally accepted accounting principles (GAAP)
professional standards of accounting to report economic events.
Income statement
A financial statement that presents the revenues and expenses. It shows the results either net income or net loss of a company during a specific period of time.
