CH 1: connect Flashcards
A system that collects and processes financial information about an organization and reports that information to decision makers.
Accounting
Information that helps evaluate the company’s past behavior and predict its future.
relevant information
An unincorporated business owned by two or more persons.
partnership
The organization for which financial data are to be collected (separate and distinct from its owners).
Accounting entity
An incorporated entity that issues shares of stock as evidence of ownership
Corporation
An examination of the financial reports to ensure that they represent what they claim and conform with generally accepted accounting principles.
audit
An unincorporated business owned by one person.
sole proprietorship
Certified Public Accountant.
CPA
A report that describes the auditor’s opinion of the fairness of the financial statement presentations and the evidence gathered to support that opinion.
audit report
Securities and Exchange Commission.
SEC
Financial Accounting Standards Board.
FASB
Generally accepted accounting principles.
GAAP
A company with stock that can be bought and sold by investors on established stock exchanges.
publicly traded
accounts receivable
asset
cash/cash equivalents
assets
net sales
revenue
Debt due within one year
liability
taxes payable
Liability
retained earnings
Stockholders’ equity
Cost of products sold
expense
Selling, general, and administrative expense
expense
Income taxes
expense
accts payable
Liability
Trademarks and other intangible assets
Asset
Property, plant, and equipment
Asset
land
asset
Long-term debt
liability
Inventories
asset
Interest expense
Expense
A balance sheet shows
assets, liabilities, and stockholders’ equity at a single point in time
The two sources of stockholders’ equity are amounts Blank
-paid in from shareholders
-earned and retained by the corporation
does revenue include payments not actually made yet
YES on inc statement
The statement of stockholders’ equity reports the
changes in earnings and dividends for a specified period of time
what is on inc sheet and retained earnings
Which of the following is a disadvantage of a corporation when compared to a partnership?
The corporation and its stockholders are subject to double taxation.
Which of the following statements is true about a sole proprietorship?
The owner and the business are separate accounting entities but not separate legal entities.
Which of the following groups has primary responsibility for the information contained in the financial statements?
The company’s management
Which of the following is not reported as a liability on a balance sheet?
Common stock
In what order would the items on the balance sheet appear?
Assets, liabilities, common stock, and retained earnings
Sources of financing for the company’s economic resources include:
Liabilities and stockholders’ equity.
Which of the following describes the amount of insurance expense reported on the income statement?
The amount of insurance used (incurred) in the current period to help generate revenue.
Which financial statement would you use to determine a company’s earnings performance during an accounting period?
Income statement
Which of the following equations is the balance sheet equation?
Assets = Liabilities + Stockholders’ Equity
Which of the following statements describes the balance sheet?
Assets are generally reported on the balance sheet at the cost incurred to acquire them.
bank loans
liability
Dividends payable
Liability
Retained earnings
shareholders equity
Provision for income taxes*
expense
Machinery and equipment
assest
Rental and royalty costs
expenses
Investments (in other companies)
Asset
Why does a company hire independent auditors?
To report on the fairness of financial statement presentation.
Which of the following would most likely increase retained earnings?
An increase in revenues.
