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Accounting For Decision Makers > Chapter 2 & 3 > Flashcards

Chapter 2 & 3 Flashcards

1
Q

A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty from the lender with regard to repayment. True or false?

A

True

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2
Q

Which of the following is not one of the three primary financial statements?
- The statement of retained earnings
- The balance sheet
- The statement of cash flows
- The income statement

A

The statement of retained earnings 

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3
Q

One reason for a companies preparing and providing financial statements is to reduce uncertainty for an investor regarding the firms future financial performance. True or false?

A

True 

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4
Q

What is another name for a balance sheet?
- statement of financial position.
- Statement of cash flows.
- retained earning statement.
- Statement of earnings

A

Statement of financial position 

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5
Q

Which of the following distinguishes between current and long-term assets?
- liquidity balance sheet
- classified balance sheet
- Income statement
- comparative balance sheet

A

Classified balance sheet

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6
Q

A company purchased land for $90,000 in 2010. In 2013, the land is valued at $115,000. The land would appear on the companies books in 2013 at what value?
- 75,000
- 25,000
- 115,000
- 90,000

A

$90,000

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7
Q

Economic resources that are owned or controlled by an enterprise are called what
- Gaines
- Liabilities
- Revenues
- assets

A

Assets

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8
Q

Which of the following is the reason that the accounting equation is true by definition
- Liabilities are the source that funds the purchases of assets
- assets are the source that funds the purchase of liabilities and owners equity
- Liabilities and equity are the sources fund the purchase of assets
- None of these are true, the accounting equation is merely coincidence

A

Liabilities and owners equity are the sources that funded the purchase of assets

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9
Q

Revenue causes
- An increase in liabilities
- An increase in net assets
- No change in net assets
- A decrease in assets

A

An increase in assets

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10
Q

What will increase from the sale of goods or services?
Assets
Revenues
Net income.
Gains

A

Revenues

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11
Q

Which of the following would be included on an income statement?
Cash
rent expense
Accounts receivable
Land

A

Rent expense

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12
Q

Which of the following is an overall measure of the performance of a business entities activities?
- owners equity
- net income (or loss)
- revenues
- assets

A

Net income (or loss)

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13
Q

Expense and revenue accounts appear on the:
- retained earnings statement
- Income statement
- balance sheet
- Funds statement

A

Income statement

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14
Q

Which of the following classifications refers to those activities that are part of the day-to-day business of a company?
- Operating
- Financing
- investing
- borrowing

A

Operating

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15
Q

Which of the following activities would not be classified as an investing activity?
- sale of equipment
- sale of land
- Purchase of inventory
- Purchase of land

A

Purchase of inventory

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16
Q

Which of the following activities will be classified as a financing activity?
- Selling goods
- repayment of a loan
- Purchase of equipment
- Payment of wages

A

Repayment of a loan

17
Q

Which of the following classifications refers to those activities whereby cash is obtained or repaid to owners and creditors?
- Operating
- investing
- borrowing
- Financing

A

Financing

18
Q

Which of the following classifications does not appear on the statement of cash flows?
- Operating
- borrowing
- Financing
- investing

A

Borrowing

19
Q

Vital information that cannot be captured solely by Dollar amounts is reported in a firms:
- balance sheet
- notes to financial statements
- Income statement
- Statement of retained earnings

A

Notes to financial statement

20
Q

Which of the following is not one of the four general types of financial statement notes?
- Summary of significant accounting policies
- Additional information about the summary totals found in the financial statements
- disclosure of important information that is not recognized in the financial statements
- Supplementary information required by the IRS

A

Supplementary information required by the IRS

21
Q

Which of the following is an example of a significant accounting policy that would be explained in the notes to the financial statements?
- The disclosure of the uncertain, potential outcome of a lawsuit
- The method used to estimate depreciation on a piece of equipment
- The disclosure of quarterly financial information
- The description of all the individual items that comprise notes payable

A

The method used to estimate depreciation on a piece of equipment

22
Q

Which of the following is an example of a disclosure of information not recognized that would be explained in the notes of financial statements?

  • The disclosure of the uncertain, potential outcome of a lawsuit
  • The method used to estimate depreciation on a piece of equipment
  • The disclosure of quarterly financial information
  • The description of all the individual items that comprise notes payable
A

The disclosure of the uncertain potential outcome of a lawsuit

23
Q

Which of the following is an example of additional information about summary totals that would be explained in the notes to financial statements?

  • The disclosure of the uncertain, potential outcome of a lawsuit
  • The method used to estimate depreciation on a piece of equipment
  • The disclosure of quarterly financial information
  • The description of all the individual items that comprise notes payable
A

The description of all the individual items that comprise notes payable

24
Q

What does GAAP stand for?

A

Generally Accepted Accounting Principles

25
Q

What does GAAS stand for?

A

Generally Accepted Auditing Standards

26
Q

An independent audit report is usually issued by
- a private detective
- a government accountant
- management
- a certified public accountant

A

A certified public accountant

27
Q

In completing an audit of a company’s financial statements, auditors
- examine every transaction underlying the financial statements
- assume responsibility for the accuracy of the financial statements
- guarantee that the financial statements are not misleading

A

Provide some assurance that the financial statements are not misleading

28
Q

The accuracy of the information contained in the financial statements is the responsibility of the
- Securities and Exchange Commission
- Certified Public Accountants
- Management
- Stickholders

A

Management

29
Q

The accuracy of the information contained in the financial statements is the responsibility of the
- Securities and Exchange Commission
- Certified Public Accountants
- Management
- Stickholders

A

Management

30
Q

Which of the following are the two economic factors that enable us to trust an independent auditor despite fact that the auditor hired by the company being audited.
- Reputation of auditor and government policy
- Risk of lawsuits and integrity of auditor
- Reputation of auditor and risk of lawsuits
- Integrity of auditor and
Government policy

A

Reputation of auditor and risk of lawsuits

31
Q

The idea that certain figures on an operating statement helped to explain changes and figures on comparative balance sheet is referred to as
- Liquidity
- double entry
- Articulation
- Classification

A

Articulation

32
Q

The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as
- Relevance
- Comparability
- Conservatism
- Materiality

A

Comparability

33
Q

The notion that went doubt exists concerning two or more more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities is referred to as
- relevance
- Materiality
- Comparability
- Conservatism

A

Conservatism

34
Q

Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as
- Conservatism
- Comparability
- Relevance
- Materiality

A

Materiality

35
Q

The notion that information will be more useful if it will impact the decision is referred to as
- Relevance
- Comparability
- Materiality
- Conservatism

A

Relevance

Accounting For Decision Makers (10 decks)

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