Chapter 1 - Frameworks of Financial Accounting

Partnership

A business owned by two or more persons is referred to as a:

Assets = Liabilities + Stockholders' Equity

The accounting equation reports:

Balance Sheet

If an investor was looking to find the assets of a company, it would be best for them to check the:

Corporation

An advantage of a ___ is that the stockholders have limited liability:

Assets

Accounts receivable, supplies, and equipment are examples of a company's:

To measure business activity of a company and to communicate those measurements to external parties for decision making purposes.

The two primary functions of financial accounting are:

Operating Activities - Daily Activities

Activities associated with running the business day to day such as buying inventory are:

Revenues and Expenses

To determine a company's net income, the following will be needed:

170,000

A company reports the following for the year ended:

- Cash: 100,000

- Liabilities: 90,000

- Stockholders' Equity: 10,000

- Revenues: 200,000

- Rent Expenses: 15,000

- Supplies Expenses: 15,000

Retained Earnings and Common Stock

The following two accounts make up the stockholders' equity on the balance sheet:

20,000

A company reports the following at year end:

- Cash: 10,000

- Equipment: 20,000

- Accounts Receivable: 30,000

- Supplies: 10,000

- Accounts Payable: 20,000

- Notes Payable: 30,000

1. Asset

2. Liability

3. Stockholders' Equity

4. Stockholders' Equity

5. Asset

6. Liability

7. Stockholders' Equity

8. Asset

Determine what category (asset, liability, or stockholders' equity) each account belongs to:

1. Equipment: _________

2. Accounts Payable: _________

3. Service Revenue: _________

4. Salaries Expense: _________

5. Supplies: _________

6. Income Tax Payable: _________

7. Rent Expense: _________

8. Land: _________

Income Statement

Which financial statement does a company report its expenses?

Balance Sheet

Which financial statement reports the assets and liabilities of a company?

Retained Earnings

The amount of income earned in the company's life minus total dividends paid.

Language of Business

Financial accounting is referred to as:

Creditors and Investors

Financial accounting provides info primarily to:

Balance Sheet

Which financial statement shows that a company's resources equal claims to those resources?

FASB (Financial Accounting Standards Board)

Which body has the responsibility for establishing GAAP (Generally Accepted Accounting Principles)?

Materiality

The nature or amount of an item that has the ability to affect decisions:

Predictive Value

Information is useful in helping to forecast future outcomes:

Completeness matches with Definition A

Free From Error matches with Definition C

Neutrality matches with Definition B

Match the following terms to their definitions

Completeness

Free From Error

Neutrality

Definition A: All information necessary to describe an item is reported.

Definition B: Information that does not bias the decision maker.

Definition C: Reported amounts reflect the best available information.

Income Statement

Which statement best describes a company's ability to generate profits in a period?

Liabilities

Amounts owed to creditors by a company are known as:

Expenses

Costs of selling goods and/or services to customers are:

Asset

Which of the following represents a resource of the company?

GAAP (Generally Accepted Accounting Principles)

Body of rules that guide the measurement and communication of financial accounting information is known as:

Management

Who is responsible for applying GAAP properly?

Cash Flow Statement

This statement shows the movement of cash:

Stockholders' Equity

Owners' claims to resources are referred to as"

Liability

An obligation of the company is what?

Best definition of Financial Accounting

Measuring a company's business activities and communicating those measurements to external parties.

Dividend

A distribution to a stockholder is a(n):

Financial accounting information

Making good business decisions comes from:

Asset

This category falls under the accounts of Equipment, Supplies, Land, any good that helps out your company.

Liability

This category falls under any accounts that are payables.

Stockholders' Equity

This category falls under any accounts that are revenues or expenses.