Module 1 - Exam 1 Study Deck

Question 1

Within the United States, the dominant body in the primary development of accounting principles is the

Answer 1

Financial Accounting Standards Board (FASB)

Question 2

Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States?
a. All of them
b. SEC
c. IASB
d. FASB

Answer 2

c. IASB

Question 3

What is the objective of financial reporting?

Answer 3

Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors

Question 4

Which one of the following is NOT a Fundamental Qualitative Characteristic?

a. Faithful Representation
b. materiality
c. Relevance
d. All of the above

Answer 4

materiality

Question 5

Which of the four GAAP assumptions does the following situation speaks to? Forray Inc does not record CEO’s Ferrari (luxury sports car) on its balance sheet.

a. Monetary Unit Assumption
b. Periodicity Assumption
c. Economic Entity Assumption
d. Going Concern Assumption

Answer 5

c. Economic Entity Assumption

Question 6

Assumptions for the GAAP: Identify all economic events with a particular economic activity. The economic activities of the individual should be separate form the economic activities of the employee

Answer 6

Economic Entity Assumption

Question 7

Assumptions for the GAAP: Need a unit or scale of measurement ($USD)

Answer 7

Monetary Unit Assumption

Question 8

Assumptions for the GAAP: Provide information of an enterprise at regular time periods. Economic Activities should be seperable based on time of occurance.

Answer 8

Periodicity Assumption

Question 9

Assumptions for the GAAP: Business entity will continue to operate indefinitely. In the absence of information to the contrary, a business entity will assume to be operable for the near future

Answer 9

Going Concern Assumption

Question 10

The accounting equation can be stated as:

Answer 10

Assets = Liabilities + Stockholder’s Equity

Question 11

What is the expanded Components of Stockholder’s Equity?

Answer 11

Stockholders Equity = Revenues - Expenses = Net Income. Net Income - Expenses = Stockholders Equity

Question 12

An economic resource of an entity is:

Answer 12

An asset.

Question 13

Four Financial Statements in a row talked about in Module 1:

Answer 13

Income Statement, Stockholder’s Equity Statement, Balance Sheet, and Statement of Cash Flows

Question 14

The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year:

Answer 14

Plus net income, minus dividends.

Question 15

Liabilities are reported on the

Answer 15

balance sheet

Question 16

Which of the following is INCORRECT about general ledger:
a. General ledger is the step after general journal
b. General ledger is where you can find all the T accounts
c. General ledger is prepared before trial balance
d. The debits and credits information on the general ledger is different from that of general journal

Answer 16

d. The debits and credits information on the general ledger is different from that of general journal

Question 17

An accounting record in which lists all the increases and decreases in each account in one place is called the

Answer 17

a.ledger

Question 18

Which of the following account has a balance whereby credits normally exceed debits?

Answer 18

b. Unearned revenue

Question 19

What would be the following accounts’ usual balance?

1. Prepaid rent 2. Dividends

Answer 19

1. Debit 2. Debit

Question 20

Correct order of initial steps of accounting cycle

Answer 20

Analyzing, journalizing, posting

Question 21

Expenses have what effect on the accounting equation?

Answer 21

Decrease stockholders’ equity.

Question 22

LSUS Company recorded journal entries for the issuance of common stock for $200,000, and the payment of salaries expense of $105,000. What is the net effect of these entries on stockholders’ equity?

Answer 22

a. increase of $95,000

Question 23

Mary Parker Co. invested $15,000 in ABC Corporation and received common stock in exchange. Mary Parker Co.’s journal entry to record this transaction would include a:

Answer 23

C. Debit to investments.

Question 24

A purchase on account would be recorded by:

Answer 24

Credit liabilities

Question 25

Incurring an expense for advertising on account would be recorded by:

Answer 25

Debit an expense, credit a liability

Question 26

Scottsdale paid $12,000 for 12 months' rent in advance. How should Scottsdale record this transaction?

Answer 26

c. Debit Prepaid Rent for $12,000; credit Cash for $12,000.

Question 27

Which of the following is a key feature of the double-entry accounting system? a. All cash-based accounting transactions b. Single-sided journal entries c. Ignoring the impact of transactions on equity d. Equality of total debits and total credits

Answer 27

d. Equality of total debits and total credits

Question 28

On July 1st, Annie Sanders purchased a pair of climbing shoes on account (she will pay next month). How would this be recorded in Annie Sanders' accounts on July 1st.

Answer 28

d. Debit assets; credit liabilities

Question 29

If a company's liabilities are $25,000 and its equity is $50,000, what are its assets?

Answer 29

b. $75,000

Question 30

Ann wishes to invest in Howdy, Inc., a public company. Before investing, she wants to analyze the company’s operating expense to revenue ratio. Which of the following financial statements should be used for the necessary information? a. Statement of Cashflows b. Income Statement c. Statement of Shareholders’ Equity d. Balance Sheet

Answer 30

b. Income Statement

Question 31

_________________ and _________________ are the two fundamental qualities that make accounting information useful for decision making

Answer 31

Relevance and Faithful Representation

Question 32

Information that helps users confirm or correct prior expectations has _________ ____________

Answer 32

confirmatory Value

Question 33

______________ enables users to identify the real similarities and differences in economic events between companies

Answer 33

Comparability

Question 34

Information is _________________ if omitting it or misstating it could influence decisions that users make on the basis of the reported financial infomratino.

Answer 34

material

Question 35

______________ means that a company cannot select information to favor one set of interested parties over another

Answer 35

Neutrality

Question 36

Corporations must prepare accounting reports at least yearly due to the ____________________ assumption

Answer 36

periodicity

Question 37

Financial Statement that reports the company's revenues and expenses over an interval of time. Shows whether the company was able to generate enough revenue to cover the expenses of running the business

Answer 37

Income Statement

Question 38

If Revenues>Expenses then

Answer 38

Net Income

Question 39

If Revenues

Answer 39

Net Loss

Question 40

Financial Statement that summarizes the change of stockholder's equity over an interval of time

Answer 40

Statement of Stockholder's Equity

Question 41

Two components of Stockholder's Equity

Answer 41

Common Stock + Retained Earnings

Question 42

Give me retained earnings broke out

Answer 42

Retained Earnings = Revenue - Expenses = Net Income. Net Income - Dividends = Retained Earnings

Question 43

Financial statement that presents the financial position of the company on a particular date

Answer 43

Balance Sheet

Question 44

What is the Balance Sheet summarized by?

Answer 44

The basic Accounting Equation. Assets = Liabilities + Stockholders Equity

Question 45

What is the order you should prepare these statements because the information from the previous one feeds the other?

Answer 45

Income Statement, Statement of Stockholder's Equity, Balance Sheet, Statement of Cash Flows.

Question 46

What information feeds into the next in the order previously discussed?

Answer 46

Net income from the income statement feeds into the Statement of Stockholder's Equity. You use that to calculate retained earnings. Retained Earnings feeds into the balance sheet and helps calculate total liabilities and equity.... Your assets from the balance sheet also feeds into the statement of cash flows.

Question 47

an information system that identified, records, and communicates the economic events (transactions) of an organization to interested users. The Language of business.

Answer 47

Accounting

Question 48

Two accounting categories applicable to this course:

Answer 48

Financial Accounting and Managerial Accounting

Question 49

Type of accounting Category that measures business activities of a company and communicates those measurements to external parties for decision-making purposes.

Answer 49

Financial Accounting

Question 50

Type of accounting category that deals with the methods accountants use to provide information to an organization's internal users; that is, its own managers

Answer 50

Managerial Accounting

Question 51

What do external users use accounting information for?

Answer 51

Investors decide whether to invest in stock and creditors decide whether to lend money

Question 52

SEC

Answer 52

Securities and Exchange Commission

Question 53

FASB

Answer 53

Financial Accounting Standards Board

Question 54

GAAPS

Answer 54

US Generally Accepted Accounting Principles

Question 55

A government agency which governs the FASB

Answer 55

SEC

Question 56

A private organization that makes the GAAP

Answer 56

FASB

Question 57

What is the main purpose of accounting. Which information should it provide?

Answer 57

It should provide information that is useful to investors and creditors in making investment and lending decisions

Question 58

Two Fundamental Qualitative Characteristiscs

Answer 58

Relevance and Faithful Representation

Question 59

Two constraints of the Financial Framework

Answer 59

Materiality and Cost

Question 60

Basic Accounting Equation

Answer 60

Assets = Liabilities + Stockholder's Equity

Question 61

A company's resources

Answer 61

Assets

Question 62

A company's claim to those resources

Answer 62

Liabilities and Stockholders Equity

Question 63

a resource with economic value that an economic entity owns or controls with the expectation that it will provide a future benefit

Answer 63

Asset

Question 64

Quantity of value that an economic entity owes. More technically, it is value that an entity is expected to deliver in the future to satisfy a present obligation arising from past events

Answer 64

Liabilities

Question 65

The remaining assets available to shareholders after all liablities are paid

Answer 65

Stockolder's equity

Question 66

Money due to us by other people

Answer 66

Accounts Receivable (A)

Question 67

Money loaned out to other people and they need to pay us back

Answer 67

Notes Receivable (A)

Question 68

What we intend to sell to others

Answer 68

Inventory (A)

Question 69

Prepaid future insurance

Answer 69

Prepaid Insurance (A)

Question 70

Prepaid Future Rent

Answer 70

Prepaid Rent (A)

Question 71

Something that its useful lifespan tends to last more than a year

Answer 71

Equipment (A)

Question 72

Economic Resources that we own (buildings)

Answer 72

Buildings (A)

Question 73

Economic Resources that we own (Land)

Answer 73

Land (A)

Question 74

We have received prodcuts or services from other people and we need to pay them

Answer 74

Accounts Payable (L)

Question 75

We have received money from other people and we need to pay them

Answer 75

Notes Payable (L)

Question 76

Stockholder's initial investment into the company. What they paid to invest into our company

Answer 76

Paid in Capital (SE)

Question 77

Profits not paid out to shareholders that the company keeps

Answer 77

Retained Earnings (SE)

Question 78

the amounts earned from selling products or services

Answer 78

Revenue

Question 79

Costs of manufacturing products or providing services

Answer 79

Expenses

Question 80

Who claims the profits of the company?

Answer 80

Stockholders claim all profits because they are owners of the company, so the profits are rightfully theirs.

Question 81

Money Paid out to shareholders

Answer 81

Dividends

Question 82

Profit after all expenses and dividends are paid out

Answer 82

Retained Earnings

Question 83

Debit is on the ______ and credit is on the _____ of the t-chart account

Answer 83

Left, Right

Question 84

Assets are on the _____ and Liabilities and Stockholders Equity are on the ______-

Answer 84

left, right

Question 85

What is an increase in an asset?

Answer 85

Debit

Question 86

What is an increase in a liability or stockholders equity?

Answer 86

Credit

Question 87

What is a decrease in an asset?

Answer 87

credit

Question 88

What is a decrease in a liability or stockholder's equity?

Answer 88

debit

Question 89

What are the exceptions to stockholder's equity in the t-chart accounts?

Answer 89

Expenses and dividends are subtracted from stockholder's equity, so they are opposites of the way SE acts in a T-chart. These items act as assets in this regard.

Question 90

In which order do financial activities take place in order to start up a company?

Answer 90

Financing, Investing, Operating

Question 91

The process of transferring the debit and credit information from the journal to individual accounts in the general ledger

Answer 91

posting

Question 92

A group of all the T-accounts

Answer 92

General Ledger

Question 93

Periodic reports published by the company for the purpose of providing information to external users

Answer 93

Financial Statements

Question 94

An external source of stockholder's equity that is provided by investors and not by the business generating any money

Answer 94

Common Stock