mod2 LO 7-10

Question 1

Financial report of profitability; measures the difference between revenues and expenses for the accounting period (whether or not cash has been exchanged). (benefits and sacrifices)

Answer 1

income statement

Question 2

Increase in equity resulting from operating the business.
revenue - expense

Answer 2

net income

Question 3

Decrease in equity resulting from operating the business.

Answer 3

net loss

Question 4

Accounting principle of recognizing expenses in the same accounting period as the revenues they produce, using one of three methods: match expenses directly with revenues (e.g., cost of goods sold); match expenses to the period in which they are incurred (e.g., rent expense), and match expenses systematically with revenues (e.g., depreciation expense).

Answer 4

matching concept

Question 5

Ability to convert assets to cash quickly and meet short-term obligations.

Answer 5

liquidity

Question 6

The financial statement reports a company’s cash inflows and outflows for an accounting period, classifying them as operating, investing, or financing activities.

Answer 6

statement of cash flows

Question 7

Cash inflows and outflows from transactions are reported on the statement of cash flows. This category shows the amount of cash these resource providers supply and the amount of money that is returned to them.

Answer 7

financing activities

Question 8

Cash inflows and outflows associated with buying or selling long-term assets and cash inflows and outflows associated with lending activities and investments in the debt and equity of other companies; one of the three categories of cash inflows and outflows reported on the statement of cash flows.

Answer 8

investing activities

Question 9

Cash inflows from and outflows for routine, everyday business operations, normally resulting from revenue and expense transactions including interest; are one of the three categories of cash inflows and outflows reported on the statement of cash flows.

Answer 9

operating activities

Question 10

Bookkeeping technique of transferring balances from the temporary accounts (Revenue, Expense, and Dividends) to the permanent account (Retained Earnings).

Answer 10

closing (the books)

Question 11

Accounts used to collect retained earnings data applicable to only the current accounting period (revenues, expenses, and distributions); are sometimes called nominal accounts. They get set to zero at closing

Answer 11

temporary accounts

Question 12

Arrangement of a set of financial statements horizontally across a sheet of paper.

Answer 12

horizontal statements model

Question 13

Organizations such as accounting and legal firms, dry cleaners, and insurance companies provide services to consumers.
ex: doctors, dry cleaners, and attorneys.

Answer 13

service businesses

Question 14

Companies that buy and resell merchandise inventory.
like retail, and wholesale companies.

Answer 14

merchandising businesses

Question 15

Companies that make the goods they sell to customers.

Answer 15

manufacturing businesses

Question 16

Document in which an organization provides information to stockholders, usually on an annual basis.

Answer 16

annual report

Question 17

users of accounting information are called?

Answer 17

Stakeholders

Question 18

Resource providers use accounting information to identify companies with high earnings potential because those companies are better able to ______.(3 answers)

Answer 18

pay higher salaries

share profits

make interest payments

Question 19

the transaction includes ______repaying debt paying dividends paying expenses, asset source goes up and total asset goes down.

Answer 19

Asset use transactions

Question 20

Which of the accounts is closed at the end of an accounting period?

Answer 20

Revenue