test 1

Question 0

relevance

Answer 0

pertinent to the decision making at hand

Question 1

predictive value

Answer 1

information is useful in predicting the future

Question 2

timeliness

Answer 2

information is available prior to the decision

Question 3

distribution to owners

Answer 3

decreases in equity resulting from transfers to owners

Question 4

confirmatory value

Answer 4

information confirms expectations

Question 5

understandability

Answer 5

users understand the information in the context of the decision being made

Question 6

gain

Answer 6

results if an asset is sold for more than its book value

Question 7

faithful representation

Answer 7

agreement between a measure and the phenomenon it purports to represent

Question 8

comprehensive income

Answer 8

the change in equity from non owner transactions

Question 9

materiatlity

Answer 9

concerns the relative size of an item and its effect on decisions

Question 10

comparability

Answer 10

important for making inter firm comparisons

Question 11

neutrality

Answer 11

the absence of bias

Question 12

recognition

Answer 12

the process of admitting information into financial statements

Question 13

consistency

Answer 13

applying the same accounting practices over time

Question 14

cost effectiveness

Answer 14

requires consideration of the cost and value of information

Question 15

verifiablility

Answer 15

implies consensus among different measures

Question 16

economic entity assumption

Answer 16

all economic events can be identified with a particular entity

Question 17

going concern assumption

Answer 17

assumes the entity will continue indefinitely

Question 18

periodicity assumption

Answer 18

relates to the qualitative characteristic of timeliness

Question 19

monetary unit assumption

Answer 19

inflation causes a violation of this assumption

Question 20

historical cost principle

Answer 20

the basis for measurement of many assets and liabilities

Question 21

realization principle

Answer 21

revenue is recognized only after certain criteria are satisfied

Question 22

matching principle

Answer 22

cause-and-effect relationship between revenues and expenses

Question 23

full-disclosure principle

Answer 23

information that could affect decision making should be reported

Question 24

cost effectiveness

Answer 24

the benefit of providing accounting information should exceed the cost of doing so

Question 25

materiality

Answer 25

a consequence is that gaap need not be followed in all situations

Question 26

conservatism

Answer 26

not a qualitative characteristic, but a practical justification for some accounting choices

Question 27

rate of return

Answer 27

dividends + share price appreciation / initial investment = %

Question 28

cash basis accounting

Answer 28

reflects net operating cash flow = difference in cash receipts and cash pymnts

Question 29

accrual accounting

Answer 29

net income = revenue - expenses

Question 30

SEC

Answer 30

securities and exchange commission authority to set accounting and reporting standards

Question 31

FASB

Answer 31

finaincail accounting standards board

Question 32

the primary objective of financial reporting is to provide information

Answer 32

useful to capital providers

Question 33

statements of financial accounting concepts issued by the FASB

Answer 33

identify the conceptual framework within which accounting standards are developed

Question 34

in general, revenue is recognized as earned when the earning process is virtually complete and

Answer 34

there is reasonable certainty as to the collectibility of the asset to be received

Question 35

in depreciating the cost of an asset, accountants are most concerned with

Answer 35

the matching principle

Question 36

the primary objective of the matching principle is to

Answer 36

record expenses in the period that related revenue are recognized

Question 37

true or false the separate entity assumption states that, in the absence of contrarry eevidence, all entities will survive indefinitely

Answer 37

false going concern

Question 38

order of the income statement

Answer 38

sales revenue cogs gross profit ``` ops expense: salaries supplies rent depreciation total ops expense operating income other income (expense): rent revenue interest expense net income ```

Question 39

order of the balance sheet

Answer 39

``` current assets: cash short-term investments ar supplies inventory prepaid rent total ca ``` Investments: Marketable securities Land held for sale Total investments ``` PP&E: land Bldgs Equipment Less: accum deprec'n Total PP&E ``` Intangible assets: Patents Total intangible assets total assets ``` current liab: ap salaries payable unearned rent revenue interest payable note payable total cl long-term liab: note payable shareholder equity: common stock, 6,000 shares issued & outstanding retained earnings total shareholder equity total liab & equity ```

Question 40

retained earnings consist of

Answer 40

beginning retained earnings + net income - dividends

Question 41

Cash & cash equivalents

Answer 41

Cash on hand and in bank Checks and money orders Negotiable items- commercial paper, money market, us treasury bills Investments maturity less than 3 mo. Credit card receivables, due from banks 3 mo or less

Question 42

Short- term investments

Answer 42

Temp or short term marketable securities | Stock or debt securities intended to sale within 12 mo

Question 43

Long-term investments Also just investment section

Answer 43

Stock over 1 yr intent Cash accumulated to pay debt in five yrs Non current receivables 61 days or older

Question 44

Accounts receivable

Answer 44

Sale of goods or services on credit Due in 30 to 60 days Net allowance for uncollectible amts

Question 45

Inventories

Answer 45

Finished goods, wip, raw materials

Question 46

Prepaid expense

Answer 46

Current asset under 1 yr | Non current asset over 1 yr

Question 47

PP&E

Answer 47

Tangible, long lived, used in business

Question 48

Intangible assets

Answer 48

No physical substance

Question 49

Other assets

Answer 49

Long term prepaids aka Deferred charges | Non current assets not in other cats

Question 50

Current liabilities

Answer 50

Ap, notes payable (shortterm borrowings), unearned revenues, accrued, current maturity of debt 30-60 day payment due Notes payable is 1 yr Reclass portions of long term notes, loans, mtgs,bonds payable when pymnts due in current year as current liab

Question 51

Noncurrent liabilities

Answer 51

Payables over 1 yr

Question 52

Paid in capital

Answer 52

Common stock Preferred stock Treasury stock

Question 53

Retained earnings

Answer 53

= Beginning RE + rev - expense

Question 54

Calculate cost of goods sold

Answer 54

Beg. Inv + purchases - end inv.

Question 55

Liquidity ratios

Answer 55

Quick ratio & current ratio

Question 56

Current ratio

Answer 56

Current assets/current liabilities

Question 57

Quick or acid ratio

Answer 57

Quick assets (exclude prepaid & inventories)/ current liabilities

Question 58

Debt to equity ratio

Answer 58

Total liabilities / total equity