Exam 1

Question 1

external users - financial statements
summarizes past
measures value

Answer 1

financial

Question 2

internal users
emphasis is on future decisions
detailed

Answer 2

managerial

Question 3

inflows (bank, shareholders, owners)
outflows (dividends, distributions, loan payments)

Answer 3

financing

Question 4

inflows (sale of assets- building, furniture)
outflows (building, equipment)

Answer 4

investing

Question 5

inflows (sale of goods/services)
outflows (utilities, rent, salaries, sales leads; pays for expenses)

Answer 5

operating

Question 6

owned by 1 person
easy to establish (benefit)
complete control of the business (benefit)
personally liable (con)

Answer 6

sole proprietorship

Question 7

2 or more individuals
share capital, risks, rewards
partnership agreement (lawyer)
personally liable

Answer 7

partnership

Question 8

separate legal entity
articles of incorporation
follows state laws governed
double taxation
stockholders are NOT liable
continuity existence
easily transfer ownership

Answer 8

corporation

Question 9

cash
accounts receivable
office supplies
equipment
building

Answer 9

assets

Question 10

obligations a business has to its creditors
accounts payable
notes payable (loan)

Answer 10

liabilities

Question 11

company’s commitment to stockholders
common stock
retained earnings
dividends

Answer 11

stockholders equity

Question 12

assets = liabilities + stockholders equity (common stock + retained earnings [revenue - expenses - dividends])

Answer 12

basic equation

Question 13

used in 1 year or less

Answer 13

current

Question 14

lasts for more than a year

Answer 14

noncurrent

Question 15

reported for a period of time
net income/loss

Answer 15

income statement

Question 16

revenue - expenses

Answer 16

net income/loss equation

Question 17

reported for the same period of time as the income statement

Answer 17

statement of retained earnings

Question 18

beginning retained earnings +/- net income/loss - dividends

Answer 18

ending retained earnings equation

Question 19

balance sheet

Answer 19

covers a point in time

Question 20

assets = liabilities + stockholders equity

Answer 20

balance sheet equation

Question 21

increasing
issuing common stock, borrow from creditors, through earning activities (revenue)

Answer 21

asset source

Question 22

no change
using cash to pay for office supplies, equipment, etc

Answer 22

asset exchange

Question 23

decreasing
cash to pay for expenses or dividends

Answer 23

asset use

Question 24

land

Answer 24

asset

Question 25

dividends

Answer 25

equity

Question 26

retained earnings

Answer 26

equity

Question 27

sales revenue

Answer 27

revenue

Question 28

advertising expense

Answer 28

expense

Question 29

bonds payable

Answer 29

liability

Question 30

office supplies

Answer 30

asset

Question 31

accounts receivable

Answer 31

asset

Question 32

rent expense

Answer 32

expense

Question 33

accounts payable

Answer 33

liability

Question 34

salaries expense

Answer 34

expense

Question 35

sales tax payable

Answer 35

liability

Question 36

building

Answer 36

asset

Question 37

merchandise inventory

Answer 37

asset

Question 38

rent revenue

Answer 38

revenue

Question 39

common stock

Answer 39

equity

Question 40

notes receivable

Answer 40

asset

Question 41

insurance expense

Answer 41

expense

Question 42

supplies expense

Answer 42

expense

Question 43

notes payable

Answer 43

liability

Question 44

service revenue

Answer 44

revenue

Question 45

cash

Answer 45

asset

Question 46

equipment

Answer 46

asset

Question 47

supplies

Answer 47

asset

Question 48

acquired cash from owners

Answer 48

financing

Question 49

borrowed cash from creditors

Answer 49

financing

Question 50

paid cash to purchase land

Answer 50

investing

Question 51

earned cash revenue

Answer 51

operating

Question 52

paid cash for salary expenses

Answer 52

operating

Question 53

paid cash dividend

Answer 53

financing

Question 54

paid cash for interest

Answer 54

operating

Question 55

fraud or theft requires collusion (separated, not duplicated)

Answer 55

separation of duties

Question 56

the process is designed to ensure reliable financial reporting

Answer 56

internal control

Question 57

unadjusted bank balance + deposits in transit - outstanding checks = adjusted cash balance

Answer 57

adjustments to the bank balance equation

Question 58

unadjusted book balance + accounts/notes receivable + interest earned - bank service fees - non-sufficient funds (NSF) = adjusted cash balance

Answer 58

adjustments to the book balance equation