McGraw Hill Accounting Smartbook Chapter 1

An income statement reports a company's net income or net loss during a period. Which of the following accounts would appear on an income statement? (Check all that apply.)

Wages Expense

Rent Expense

Rent Revenue

Service Revenue

Which of the statement(s) below define(s) an asset? (Check all that apply.)

An amount owned

Resources with expected future benefits

Resources controlled by the business

Given that Jacob's Chocolates Company had beginning retained earnings of $4,000; net income during the period of $10,000; and dividends of $300 calculate the ending balance in the retained earnings account.

$13,700

Reason:

Correct. $4,000 beginning retained earnings+ $10,000 net income - $300 dividends equals $13,700.

Which of the following statements best represents the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

Which list of accounts below, identifies only accounts that would appear on a balance sheet.

Common Stock, Equipment, Accounts Payable

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice.

The three sections of the statement of cash flows includes all of the following:

investing

financing

operating

When recording transactions into the accounting equation, which of the following statements are correct? (Check all that apply.)

After recording the transaction, total assets will always equal total liabilities plus equity.

The accounting equation must always remain in balance.

The correct definition of an income statement includes which of the following?

The statement describes a business's revenues and expenses over a period of time.

The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time. (Select the accounts below which will correctly complete this question.)

dividends

The correct definition of a balance sheet includes which of the following statements? (Check all that apply.)

The statement reports assets, liabilities and equity at a point in time.

The statement reports the financial position of a company at a point in time.

The statement reports the equality of the accounting equation at a point in time.

Buying and selling of long-term assets such as land and equipment would be included in the (operating/investing/financing)

activities section of the Statement of Cash Flows.

Investing

Which of the following statements below lists the rules of entering transactions into the accounting equation?

The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.

True or false: Return on assets is computed as Net Income divided by Total Assets.

False

Define what the income statement reports by completing the following sentence: The income statement describes a company's

(assets/revenues) and

(expenses/liabilities) along with the resulting net income or loss over a period of time due to earnings related activities.

revenues

expenses

Identify which of the following lists of accounts would belong on the statement of retained earnings.

Retained earnings and Dividends

Given the list of accounts below, identify which of them would appear on a balance sheet. (Check all that apply.)

Cash

Accounts Payable

Supplies

Retained earnings, 12/31

Equipment

Boaz Company had beginning of year assets of $100 million and end of year assets of $120 million. Boaz's net income is $5 million. Calculate Boaz Company's return on assets.

4.5%

Identify the importance of accounting by selecting the statement that is correct below.

Accounting is a system that identifies, records and communicates an organization's business activities.

Generally accepted accounting principles (GAAP) wants information to have:

faithful representation

relevance

All of the following are part of the FASB conceptual framework: (Select all that apply).

Qualitative characteristics

Elements

Objectives

Recognition and measurement

Identify the correct definition of an asset:

Something of value that a business owns or controls

Users who do not directly run the organization and have limited access to accounting information are known as

(internal/external) users.

External

True or false: Artificial intelligence includes repetitive tasks such as recording basic transactions.

True

An employee that has unpaid bills might exhibit the following fraud factor:

Pressure

From the following statements, select the one that describes the effect of dividends on equity.

Dividends cause equity to decrease.

Why does a business need accounting information?

Accounting records business transactions and communicates financial information.

Which of the following statements explain how the accounting equation applies to businesses? Check all that apply.

The relation of assets, liabilities and equity is reflected in the equation.

The equation states that Assets = Liabilities + Equity.

The equation applies to all transactions.

The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners.

The FASB conceptual framework consists of all of the following except:

quantitative

Dividends cause a(n) (increase/decrease)

in equity and are recorded directly in the (retained earnings/dividends/equity)

account.

decrease

dividends

Identify which of the following statements is correct as to why accounting is important.

We live in an information age whereby accounting information impacts everyone.