Chapter 1 Smartbook assignment

the system that maintains records of a company's operations and then communicates that information to decision makers is referred to as _______:

accounting

a business organization that is legally separate from its owners is called a(n):

corporation

the three most common forms of business organization are:

sole proprietorship, partnership, and corporation

__________ __________ represent a company's primary means of communicating information to external users.

financial statements

which of the following are financial statements?

* statement of assets

* statements of corporate responsibility

* balance sheet

* statement of SHE

* income statement

balance sheet, statement of SHE, income statement

the primary functions of accounting are to:

* measure a company's activities

* communicate information to decision makers.

the form of business organization where an entity is legally separate from its owners and issues shares of stock is a

corporation

the financial statement that summarizes the profit-generating activities of a company during a particular period of time is the

income statement

identify the three most common forms of business organization:

* corporation

* sole proprietorship

* unlimited stock entity

* enterprise entity

* partnership

corporation, sole proprietorship, partnership

which of the following aspects relate to the information provided in an income statement?

ability to earn a profit from its operations during the current period

companies communicate information about their business activities primarily through

financial statements

when revenues are greater than expenses, a company has net ________, whereas when revenues are less than expenses, a company has a net_______.

income, loss

the four financial statements published to provide information to external users include which of the following?

*statement of cash flows

*statement of business activities

*statement of SHE

*statement of assets

*income statement

*balance sheet

statement of cash flows, statement of SHE, income statement, balance sheet

the heading of an income statement should include which of the following?

*the title of the financial statement

*the accounting period covered by the statement

*the name of the business

*the date on which the statement was prepared

*the name of the person who prepared the statement

the title of the financial statement, the accounting period covered by the statement, the name of the business

the system that maintains records of a company's operations and then communicates that information to decision makers if referred to as ___________.

accounting

an income statement reports:

expenses, revenues, net income or loss.

the purpose of a(n) _________ _________ is to report the profit-generating activities of the firm during a period of time.

income statement

the income statement is considered most useful for predicting:

future profitability

if revenues are less than expenses, a company has:

a net loss

which of the following appear in the statement of SHE?

-Dividends

-Net income

-Beginning balance of retained earnings.

where is the time period covered by the income statement found?

in the heading

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total SHE at the end of the year.

a. $38,000

b. $43,000

c. $27,000

d. $33,000

Answer: $33,000

Explanation: In simple words, stockholders equity is that amount of assets in the company, that is not financed by a liability. Thus, we can say that it is the difference between the assets and liabilities of the business.

It can be computed using following formula :-

stockholders equity = issuance of common stock + net income - dividend paid

= $30,000 + $8,000 - $5,000

= $33,000

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undistributed profits that have accumulated in the company over time are called ____________ earnings.

retained

which of the following line items appear on an income statement?

*Supplies

*Revenues

*Supplies Expense

*Salaries Expense

*Accounts Receivable

*Cash

Revenues, Supplies Expense, salaries expense

the statement used to predict future profitability and a company's future cash-generated ability is the_________.

income statement

profits earned by a company that have not been paid to stockholders are called ___________ earnings.

retained

shareholders' equity arises from amounts invested by shareholders and amounts __________.

earned by the corporation

which of the following financial statements shows a firm's financial position on a particular date?

balance sheet

Rahls issues a stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to SHE of $4,000. What is the balance in SHE at the end of year 2?

$11,000 is the ending balance in retained earnings. For total stockholders' equity, you must add the amount in the common stock account. $20,000 + $5,000 + $10,000 - $4,000 = $31,000.

the accounting equation is:

Assets = Liabilities + SHE

which of the following represents the net income earned by a corporation and not yet paid to shareholders?

retained earnings

Accounts receivable, Notes payable, Equipment would be found on what type of financial statement?

balance sheet

which of the following line items appear on an income statement?

*Cash

*Salaries expense

*Service revenue

*Supplies expense

*Supplies Inventory

*Accounts payable

*Salaries expense

*Service revenue

*Supplies expense

A balance sheet lists the assets, __________, and SHE as of a specific date.

liabilities

Ending retained earnings is calculated as:

beginning retained earnings + net income - dividends

The financial statement that provides information about cash receipts and cash disbursements for the period is the:

statement of cash flows

the financial statement that displays a firm's financial position on a particular date is the _______ _______

balance sheet

the statement of cash flows classifies items as

operating, investing, financing

which of the following appear(s) on the balance sheet?

-Salaries Expense

-common stock

-utilities payable

-accounts receivable

-net income

common stock, utilities payable, accounts receivable

Two other types of information in addition to the financial statements that must be reported in the annual reports include

notes disclosures, management discussion and analysis.

the purpose of a statement of cash flows is to provide information about the:

cash receipts and cash disbursements during a period.

The financial statement that is most useful in explaining a company's stock price performance is the

income statement

the three classifications on the statement of cash flows are cash flows from

operating activities, financing activities, investing activities

salaries paid to employees for the month is a(n) _________ account that appears on the ________ ________.

expense, income statement

Management discussion and analysis and note disclosures to the financial statements are included in the __________ _________

annual report

the private sector organization that is currently responsible for setting accounting standards in the united states is the _______ _______ _______ _________.

Financial Accounting Standards Board

A balance sheet lists the assets, ___________, and SHE as of a specific date.

liabilities

information that best explains companies' stock price performance is reported on the _________ ________.

income statement

a code or moral system that provides criteria for evaluating right and wrong is referred to as:

ethics

the two main functions of __________ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors.

accounting

The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of:

relevance and faithful representation

Which of the following are attributes of FASB?

Full-time board members, Private sector organization, Independence.

Which of the following items are found on a balance sheet?

SHE, Assets, Liabilities

Predictive value and confirmatory value are components of which fundamental qualitative characteristics?

Relevance

_________ is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

ethics

financial information that may impact investors' and creditors' decisions is referred to as ___________ and must be reported under GAAP.

material

To be useful for decision making, information should possess the fundamental qualities of relevance and ________ representation

faithful

Faithful representation requires that information is complete, neutral, and:

free from material error

which items are found on an income statement?

expenses, revenues, net income/loss

The characteristic that a new accounting standard should not favor one group of companies over others or achieve a particular social outcome is an example of ____________.

neutrality

___________ is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S.

FASB

Positive income is consistent with effectiveness of management, and this is called:

confirmatory value.

the consistent increase of income helps forecast the company's ability to generate future cash, and this is called:

predictive value.

if the same accounting principles and methods are used for similar events by two different firms, this enhances what accounting qualitative characteristics.

compatibility

true or false: financial information that is immaterial in amount or nature need not be reported under GAAP.

this is true because information that will not affect external users' decisions need to be reported.

faithful representation requires information to have which of the following three characteristics?

free from material error, completeness, neutrality

which of the qualitative characteristics requires that financial information should not influence decision making to achieve a predetermined result?

neutrality

An enhancing qualitative characteristic of accounting information that refers to the financial statement users' ability to utilize accounting information to differentiate between companies that are reporting similar events is called:

comparability.