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Financial accounting is focused on the __________ financial statements of a company.
external
-
Large corporations must follow the ___________ basis of accounting..
accrual
-
.
Corporations whose stock is publicly traded must have their financial statements ________ by independent certified public accountants.
audited
-
The U.S. government agency with authority over the financial reporting
requirements of publicly traded corporations is the _______.
SEC
-
The non-government organization that researches and develops new accounting standards is the _______.
FASB
-
The acronym for the common rules and standards that companies must follow when preparing its external financial statements is ______.
GAAP
-
The profitability of a company for a specified period of time is reported on the ___________ statement.
Income Statement
-
The main components or elements of the income statement are ___________, ___________, _________, and __________.
Revenue, Expenses, Gains, Losses
-
Prepaid insurance is reported as an _________ on a company's balance sheet.
Asset
-
The word "___________" is often in the title of liability accounts.
Payable
-
The statement of cash flows explains the changes in cash and cash ______________ during the specified time interval.
equivelents
-
The first section of the statement of cash flows is the ____________ activities.
operating
-
Client Jay pays ABC Co. $1,000 in December for ABC to perform services
for Jay in 45 days. ABC uses the accrual basis of accounting. In
December ABC will debit Cash for $1,000. What will be the other account
involved in the December accounting entry prepared by ABC (and what
type of account is it)?
Unearned Revenues (liability) should be credited, Company has not earned the money and must provide service in the future.
-
ABC Co. performed services for Client Kay in December and billed Kay
$4,000 with terms of net 30 days. ABC follows the accrual basis of
accounting. In January ABC received the $4,000 from Kay. In January
ABC will debit Cash, since cash was received. What account should ABC
credit in the January entry?
Accounts Receivable - In Jan ABC collects account receivable. The receivable was established in Dec when the service was performed which established a right to receive the money in Jan.
-
ABC Co. follows the accrual basis of accounting and performs a service
on account (on credit) in December. The service was billed at the
agreed upon amount of $3,500. ABC Co. debited Accounts Receivable for
$3,500 and credited Service Revenue for $3,500. The effect of this
entry on the balance sheet of ABC is to increase assets by $3,500 and to
-
Increase owner's (stockholders') equity by $3,500
-
Which of the following would not be a current asset?
Accounts Receivable
Land
Prepaid Insurance
Supplies
Land (Land will not turn into cash within one year)
-
Which of the following would normally be a current liability?
Note Payable due in two years
Unearned Revenue
Unearned Revenue (will most likely be earned within one year of the balance sheet date)
-
When an owner draws
$5,000 from a sole proprietorship or when a corporation declares and
pays a $5,000 dividend, the asset Cash decreases by $5,000. What is the
other effect on the balance sheet?
Owner's/stockholders' equity decreases
None
Owners stockholders equity will decrease to keep the balance sheet in balance
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ABC Co. incurs cleanup
expense of $500 on December 30. The supplier's invoice states that the
$500 is due by January 10 and ABC will pay the invoice on January 9.
ABC follows the accrual basis of accounting and its accounting year ends
on December 31. What is the effect of the cleanup service on the
December balance sheet of ABC?
Assets decreased
Liabilities increased
No effect on owner's equity
Liabilities increased. In December an expense and liability is recorded. liabilities increased owners equity decreased.
-
Deferred credits will appear on the balance sheet with the
Assets
Liabilities
Owner's/Stockholders' Equity
Liabilities
-
Notes Payable could not appear as a line on the balance sheet in which classification?
Current Assets
Current Liabilities
Long-term Liabilities
Current Assets
-
On December 1, ABC Co.
hired Juanita Perez to begin working on January 2 at a monthly salary
of $4,000. ABC's balance sheet of December 31 will show a liability of
$4,000
$48,000
No Liability
No Liability
-
ABC Co. has current
assets of $50,000 and total assets of $150,000. ABC has current
liabilities of $30,000 and total liabilities of $80,000. What is the
amount of ABC's owner's equity?
$20,000
$30,000
$70,000
$120,000
70,000
-
The _____________ of a corporation is the total amount of stockholders' equity reported on the balance sheet.
book value
-
Which of the following names is NOT associated with the income statement?
P & L
Statement of Financial Position
Statement of Operations
Statement of Financial position
-
The income statement heading will specify which of the following?
a POINT in time
a PERIOD of time
a PERIOD of time
-
Amounts earned by a company in its main operating activities are
revenues
gains
revenues
-
A company disposes of
equipment that it no longer uses in its business. The amount received
by the company is more than the amount the asset is carried at in the
accounting records. The company will report a(n)
expense
gain
loss
revenue
gain - because the sale of equipment is outside of the main business activities and the amount received was greater than the amount for which the asset was carried on the company books. The amount of the gain is the amount by which the proceeds from the sale exceed the amount carried on the books.
-
On December 1 a
company borrowed $100,000 at 12% per year. The interest will be paid
quarterly, with the first payment due on March 1. What should the
company report on its income statement for December?
nothing
Interest Expense of $1,000
income statement must record the interest incurred regardless of the date the interest was paid. 100,000*.12 *1/12 = 1000
-
Is a retailer's Interest Expense an operating expense or a non-operating expense?
operating expense
non-operating expense
non-operating expense
-
The income statement line gross profit will appear on which income statement format?
single-step
multiple-step
multiple-step - it will appear as a result of subtracting the cost of goods sold from net sales.
-
The income statement
format that segregates the operating revenues and expenses from the
non-operating revenues and expenses is the
single-step
multiple-step
Multi step
-
______________ shows operating revenues and expenses separate from non operating revenues and expenses
multiple step
-
Interest earned on investments would appear in which section of a retailer's multiple-step income statement?
non-operating
operating
would not appear
non operating
-
Under the accrual basis of accounting, revenues are recognized in the accounting period in which
cash is received
revenues are earned
revenues are earned
-
Net Sales minus the Cost of Goods Sold equals
gross profit
income from operations
net income
gross profit
-
The combination of Selling Expenses and Administrative Expenses is referred to as
general expenses
operating expenses
total expenses
operating expenses
-
Which basis of accounting best measures profitability during a short time interval?
accrual basis
cash basis
accrual
-
Gross Profit minus Operating Expenses is best defined as
net income
net sales
operating income
operating income
-
When an entire division of a company is eliminated, it is referred to as a(n)
discontinued operation
extraordinary item
change in accounting principle
discontinued operation
-
A gain or loss that is unusual in nature and infrequent in occurrence is a(n)
discontinued operation
extraordinary item
change in accounting principle
extraordinary item
-
When a company changes its book depreciation from an accelerated method to the straight-line method, it is considered to be a(n)
discontinued operation
extraordinary item
change in accounting principle
change in accounting principle
-
If a company's stock is publicly traded, it is a requirement that the ________ ___ ______ appear on the income statement?
earnings per share
-
It is acceptable that some of the expenses reported on the ____________ be estimates?
income statement
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