Identify the three primary financial statements. (Select all that apply).
statement of cash flows
income statement
statement of financial position
What is an income statement?
an activity statement that shows the revenues and expenses for a designated period of time
liquidity
having the financial ability to pay debts as they become due. (61)
negative cash flows
a payment of cash that reduces the enterprises cash balance. in other words, expenses. (43)
operating activities
a category in the statement of cash flows that includes the cash effects of all revenues and expenses included in the income statement. (55)
Which of the following would be considered a source document in an accounting system?
Checks
Sales Receipt
Payroll Records
Purchase Order
The correct definition of an "account" includes which of the following?
A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item
The general ledger can be used to determine which of the following:
Which accounts are being used by a company and their balances at any given time
Increases and decreases in all accounts in a business
Common and unique accounts used by a business
True or False:
Assets are claims (by creditors) against the company.
False
Which of the following accounts would be considered an asset?
Cash
Building
Supplies
Accounts Receivable
Which of the following is the best definition of a source document in the accounting process?
A source document identifies and describes transactions and is the basis for entering an event into the accounting system
Which of the following items would be considered "cash" and reflected in a company's cash account?
Checks
Coin
Money Orders
An account is a record of increases and ___________ in a specific asset, liability, equity, revenue, or expense.
Decreases
Accounts receivable are _________________ by credit sales and are _____________ by customer payments.
Increased
Decreased
Which of the following describes a general ledger?
The general ledger combines sales and expenses to determine the net income of a business
Which of the following statements is the best definition of an asset?
Assets are resources owned or controlled by a company and that have expected future benefits
Notes receivable is considered a(n) _______________ (asset/liabilty).
Asset
Identify which of the following lists include only examples of assets.
Building, Cash, Accounts Receivable
An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time?
The initial payment will be recorded as an increase to a Prepaid Insurance account
As a portion of the policy expires, the expired portion will be removed and transferred to an expense account
Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered the asset.
Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.
Coins, Checks, Money Orders
Supplies are _________ (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as________________ (assets/expenses/liabilitis).
Assets
Expenses
Which of the following statements is (are) true about accounts receivables?
Accounts receivable increased when credit sales are made
Accounts receivable reflects the among
Equipment is a(n) _________________ (asset/liabiltiy/expense) account.
It is reported on the _____________________ (left/right) side of the accounting equiation and is ________________________ (increased/decresed) when equipment is purchased.
Assets
Light
Increased
True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.
False
Given the descriptions below, which is (are) true regarding notes receivable?
-It is the promise of another entity to pay a specific sum of money on a specified future date
-Another name for a note receivable is a promissory note
-Notes receivable is classified as an asset
Which of the following statements is correct about prepaid accounts?
Prepaid accounts are also called prepaid expenses and are considered assets
Which of the following statements is (are) correct regarding a T-account?
-A T-account will show the debit and credit effects of transactions
-A T-account represents a ledger account
-A T-account may be used as a tool visualize the effects of a transaction
Which of the following statements are accurate regarding supplies?
-Unused supplies are treated as assets
-Supplies are assets until they are used
-When supplies are purchased, they are added to the Supplies account
-Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies
Which of the following statements is (are) accurate regarding equipment purchased within a business?
-Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed
-Equipment is an asset
-Equipment is reported on the left side of the accounting equation
-Equipment purchases are reported on the balance sheet
Which of the following accounts has a normal credit balance?
-Common Stock
-Accounts Payable-Unearned Consulting Revenue
Which of the following statements is accurate about the Land account?
-The Land account is increased on the left side of its T-account
-The Land account is used to record the costs of land purchased by the business
-The Land account is an asset
Which statement best describes a T-account?
A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions
Which of the following is correct regarding posting a transaction?
Posting means to transfer journal information to a ledger
Which of the following accounts has a normal debit balance?
-Supplies
-Buildings
-Cash
-Accounts Receivable
On Nov. 1, Lyons Company pays $1000 cash for a 12-month insurance policy. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry.
-Cash would be credited and listed second
-Prepaid insurance would be debited and listed first
Analyzing the accounting equation at the end of the month will reveal the follwowing:
-Revenues and expenses will change the equity account
-Assets = liabilities + equity
A trial balance is a(n) ________________ (list/balance/chart) of accoutns and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of ____________ account balances.
-List
-Credit
Transferring entries from the journal to the ledger is called ________________ (posting/preparing/journalizing)
Posting
Which of the following statements correctly explains how to prepare a trial balance?
-List each account title and its amount from the ledger
-Verify that the total debit balances equals the total credit balances
-If an account has a zero balance, it may be omitted entirely
-Compute the total of debit balances and the total of credit balances
On Mar. 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be included.
-Cash would be credited and listed second
-Dividends would be debited and listed first
Recall the required information in a financial statement heading. Rearrange the following line items as they would appear in a heading.
-Name of business
-Name of financial statement
-Period of time the financial statement covers
True or false: At the end of the period, the assets will still equal the liabilities plus equity.
True
Which of the following statements explains what a trial balance is?
-A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.
Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt.
-If a company has a lot of debt, they may not be able to afford to take on new debt
-A company that finances their assets by borrowing will need to make enough money to pay off the debt
-A company's required debt payments may be greater than its ability to generate money to make those payments
When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.
-List each account title and its amount from the general ledger
-Compute the total of debit balances and the total of credit balances
-Verify that total debit balances equals total credit balances
Which of the following items is (are) required in the heading of every financial statement?
-Name of the financial statement
-Date or period of time covered
-Name of the business
Analyzing the accounting equation at the end of the month will reveal the following.
-Assets = liabilities + equity
-Revenues and expenses will change the equity account
Identify which of the following formulas correctly defines how to calculate the debt ratio.
Total liabilities/Total assets
Given the following information for Jackson's Boots, calculate its Debt Ratio for the current year.
Total assets = $250
Total liabilities = $100
Total equity = $150
0.40
Identify forms of business organization. (Select all that apply).
corporation
partnership
sole proprietorship
The term _____ (or ______) is simply the difference between all of an enterprise's revenues and expenses for a designated period of time.
net income (net loss)
Owner's Equity is separated into two parts: Capital stock & ______________
retained earnings
True or false: A business entity is equivalent to the personal activities of the business owner.
False
When accountants prepare ________, they are describing in financial terms certain attributes of the enterprise that they believe fairly represent its financial activities.
Financial Statements
Assets may have or represent
definite physical characteristics
valuable legal claims or rights
The heading of the financial statement includes:
the name of the statement, the date, and the name of the business
____ represents the amount that owners originally paid into the company to become owners.
Capital Stock
The balance sheet of a business is prepared on the assumption that the business is a continuing enterprise, or a _________.
going concern
A(n) ______ is an economic unit that engages in identifiable business activities.
Business Entity
Liabilities are typically shown on the balance sheet
in the order of which they are repaid
Which asset lacks physical form but provides a valuable legal claim or right?
Patents
Which financial statement describes where an enterprise stands at a specific date?
Statement of Financial Position
Identify each section of the statement of financial position
liabilities, assests, owner's equity
What is typically NOT shown at an amount based on cost?
Accounts Receivable
How so accounts payable differ from notes payable?
Notes payable involve a
written promise
Notes payable involve interest
Owner's equity is a(n) ________
residual amount
An increase in one asset must be accompanied by
a decrease in another asset
Stanga, Inc., issues 1,000 shares of a common stock at $10 per share. As a resuly of this transaction, owners' equity will increase by
$10,000
_______ is an amount that approximates the cash that is expected to be received when the receivable amount is collected.
net realizable value
DeMenna, Inc., bought a piece of equipment for $200,000 cash. What was the immediate effect of this transaction?
There was no effect on total assets
Neel, Inc., reports total assets of $400,000 as of Dec. 31 and total liabilities of $340,000. Owners' equity is ______
$60,000
Summers, Inc., bought a piece of equipment for $100,000 by issuing a long-term note for $80,000 and paying cash of ______
$20,000
True or false: If assets do not equal liabilities plus owners' equity, there must be a mistake in the financial statements.
True
An asset was purchased on account. As a result of this transaction, cash flow will decrease
in the future
When an asset is purchased for cash, the numbers on the right-hand side of the balance sheet are
unchanged
Every business prepares a statement of financial position at the end of each ___.
Blank 1: year
A balance sheet lists: (Select all that apply).
liabilities.
owners' equity.
assets.
When accountants prepare ________, they are describing in financial terms certain attributes of the enterprise that they believe fairly represent its financial activities.
Blank 1: financial
Blank 2: statements
Most large businesses are organized as a
corporation.
Which financial statement is described as "an activity statement"?
income statement
Virtually all businesses prepare a statement of financial position at the end of each
year.
Owners' equity is separated into two parts: capital stock and____________ _____________
Blank 1: retained
Blank 2: earnings
When accountants prepare ___ ___, they are describing in financial terms certain attributes of the enterprise that they believe fairly represent its financial activites.
financial; statements
Owners' equity is separated into two parts: capital stock and ___ ___.
retained; earnings
A corporation is a form of organization that allows many owners to ___ their ___ into a business enterprise that is larger than would be possible based on the financial resources of a single owner or a small number of owners.
combine; resources
A(n) ___ ___ is an economic unit that engages in identifiable business activites
Business; entity
Virtually all businesses prepare a statement of financial positions at the end of each
year.
Which assets lack physical form but provides a valuable legal claim or right?
patents
On the statement of financial position, ___ is listed first, followed by other assets that will soon be converted into cash or be used up in business operations.
cash
The heading of the financial statement includes which of the following? (Select all that apply).
the date
the name of the statement
the name of the business
a(n) ____ ____ is an economic unit that engages in identifiable business activities
business; entity
Financial statements are communicated in terms of a
monetary unit.
Identify forms of business organization. (Select all that apply).
sole proprietorship
corporation
partnership
Which asset lacks physical form but provides a valuable legal claim or right?
patents
Which financial statement describes where an enterprise stands at a specific date?
statement of financial position
The balance sheet of a business is prepared on the assumption that the business is a continuing enterprise, or a _________.
going; concern
____ represents the amount that owners originally paid into the company to become owners.
Capital; Stock
Which term describes a decrease in the value of a monetary unit over time?
inflation
True or false: A business entity is equivalent to the personal activities of the business owner.
False
The person or organization to whom a debt is owed is called a(n) ___.
Blank 1: creditor
Identify the three primary financial statements. (Select all that apply).
income statement
statement of cash flows
statement of financial position
Assets may have or represent: (Select all that apply).
definite physical characteristics.
valuable legal claims or rights.
Owners' equity is a(n) ___ ___.
Blank 1: residual
Blank 2: amount
___ ___ ___ is an amount that approximates the cash that is expected to be received when the receivable is collected.
net; realizable; value
True or false: If assets do not equal liabilities plus owners' equity, there must be a mistake in the financial statements.
True
A limitation of recording assets at historical cost is that
the monetary unit or dollar is not always stable.
Stanga, Inc., issues 1,000 shares of common stock at $10 per share. As a result of this transaction, owners' equity will increase by ___.
Blank 1: $10,000, 10,000, or 10000
Liabilities represent ___ future cash flows for the enterprise.
Blank 1: negative
mangum, inc., purchased a building for $250,000 cash. as a result of this transaction, Mangum's cash reduced by ____
Blank 1: $250,000 or 250,000
Owners' equity is decreased by: (Select all that apply).
losses from unprofitable operation of the business.
dividend payments of cash or transfers of other assets to owners.
When an asset is purchased both by paying cash and by issuing debt, the numbers on the right-hand side of the accounting equation are
increased.
Ranalli, Inc., begins a lawn-mowing service by establishing a small, closely held corporation. Capital stock is issued to Ranalli and family members—5,000 shares for $50,000. What is the effect of this transaction on the accounting equation? (Select all that apply).
Capital Stock increases by $50,000.
Cash increases by $50,000.
Cunningham, Inc., purchased $8,000 of supplies on account. Which immediate effect did this transaction have on owners' equity?
it had no effect on owners' equity
Indicate how accounts payable differ from notes payable. (Select all that apply).
Notes payable involve a written promise.
Notes payable involve interest.
An account payable is settled with cash. As a result of this transaction, cash flow decreases
immediately.
When an asset is purchased for cash, the numbers on the right-hand side of the balance sheet are
unchanged.
revenues ____ the financial interest of owners while expenses ____ the financial interest of owners
Blank 1: enhance or increase
Blank 2: diminish , reduce , or decrease
Neel, Inc., reports total assets of $400,000 as of Dec. 31 and total liabilities of $340,000. Owners' equity is ______
Blank 1: $60,000, 60,000, or 60000
The title "balance sheet" is an alternative name for which financial statement?t
Statement of financial position
Henry, Inc., bought a $500,000 building by making a $100,000 cash down payment and issuing a $400,000 long-term note. Which immediate effect(s) did this transaction have on the accounting equation? (Select all that apply).
The Building account increased by $500,000.
The Cash account decreased by $100,000.
Total assets increased by $400,000.
Total liabilities increased by $400,000.
Chyz, Inc., sold a piece of equipment with a cost of $30,000 for that amount (i.e., with no gain or loss on the sale) on 30-day account. What was the effect of this transaction on the accounting equation?
It had no effect on the accounting equation.
True or false: An income statement is prepared for a period of time.
True
Powers, Inc., pays $22,000 to settle an account payable. What is the effect of this transaction on the accounting equation? (Select all that apply).
Cash decreases by $22,000.
Total liabilities decrease by $22,000.
Total assets decrease by $22,000.
Accounts Payable decreases by $22,000.
The statement of cash flows explains the
change in cash from the beginning to the end of the period.
during the month of December, murphy, inc., earned $80,000 of revenue from performing services and incurred expenses of $40,000 for salaries, $10,000 for advertising, and $7,000 for miscellaneous expenses. During December, Murphy's Retained Earnings balance ____ (increased.decreased) by ____
Blank 1: increased
Blank 2: 23,000 or $23,000
Which of the following are correct statements about the three primary financial statements? (Select all that apply).
The income statement shows revenue and expenses for a period of time
The statement of cash flows and the income statement cover a period of time rather than a point in time
The accounting equation most closely relates to which financial statement?
statement of financial position
Because the balance sheet, income statement, and statement of cash flows are derived from the same underlying financial information they relate closely to each other.
True
When an asset is purchased both by paying cash and by issuing debt, the numbers on the right-hand side of the accounting equation are
increased.
a business succeeds or fails based on its ability to earn ____ in excess of its ____
Blank 1: revenues, revenue, or income
Blank 2: expenses or costs
A sole proprietorship is viewed as
separate from its owner from an accounting perspective but not separate from its owner from a legal perspective.
Identify the major categories in a statement of cash flows. (Select all that apply).
cash flows from investing activities
cash flows from financing activities
cash flows from operating activities
The 3 primary financial statements
are based on the same transactions but present different views of the company.
An advantage of a partnership compared to a sole proprietorship is that a partnership
is able to raise larger amounts of capital.
The term "articulation" refers to which of the following regarding the three primary financial statements?
All three financial statements are related and based on the same underlying information
The fact that the owners of a corporation are not personally liable for its debts is a concept known as ___ ___.
Blank 1: limited
Blank 2: liability
How many capital accounts does the equity section of a sole proprietorship include?
one
The major disadvantage of the sole proprietorship form of business organization is
unlimited liability.
Which features describe a partnership? (Select all that apply).
unincorporated
involves two or more people
An ownership interest in a corporation is represented by
stock certificates.
___ ___ represents the amount that the stockholders originally invested in the business in exchange for shares of the company's stock.
Blank 1: Capital
Blank 2: stock
The most common form of business organization is a
sole proprietorship.
A business that lacks the liquidity to pay its debts as they come due may be forced into ___.
Blank 1: bankruptcy
The cash effects of revenue and expense transactions are included in which section of the statement of cash flows?
Blank 1: bankruptcy
Disclosure is _______ if financial statement users have all of the information necessary for the proper interpretation of the statements.
Blank 1: adequate or sufficient
Which of the following are advantages of the corporate form of organization? (Select all that apply).
ability to accumulate large amounts of capital
limited liability
transferability of ownership
Measures taken by management to make the company appear as strong as possible in its financial statements is described as ___ ___.
Blank 1: window
Blank 2: dressing
Which external users are generally most interested in an entity's profitability?
investors
A material uninsured loss that occurs after the balance sheet date is an example of a(n)
subsequent event.
Measures taken by management to make the company appear as strong as possible are referred to as
window dressing
Which external users are generally most interested in an entity's liquidity?
creditors
Which external users are generally most interested in an entity's profitability?
investors
Author
WatchOnOdysee1
ID
359274
Card Set
Williams: Financial and Managerial Accounting Chapter 2 SmartBook
Description
Williams: Financial and Managerial Accounting Chapter 2 SmartBook
