Question 1

The financial statement that summarizes the assets, liabilities, and stockholders' equity of an entity at a specific point in time is the
A) Balance Sheet.
B) Income Statement.
C) Statement of Stockholders' Equity.
D) Statement of Cash Flows.
E) Statement of Fund Balance.

Accepted Answer

The Balance Sheet is the financial statement that summarizes an entity's assets, liabilities, and stockholders' equity at a specific point in time, providing a snapshot of its financial position.

Question 2

The balance sheet is also called the statement of
A) stockholders' equity.
B) resources and debts.
C) profitability.
D) owners' capital.
E) financial position.

Accepted Answer

The balance sheet is also known as the statement of financial position because it provides a snapshot of what a company owns (assets) and owes (liabilities), as well as the amount invested by shareholders (equity) at a specific point in time.

Question 3

Respectively, ___ are resources that an organization owns; ___ is/are debts that an organization owes; and ___ is/are amounts that owners have contributed and what the entity has earned for them.
A) assets; liabilities; revenues
B) assets; liabilities; stockholders' equity
C) assets; stockholders' equity; liabilities
D) revenues; liabilities; expenses
E) revenues; liabilities; stockholders' equity

Accepted Answer

Assets are resources owned by a company, liabilities are debts owed, and stockholders' equity represents the owners' claims on the business, including what they've contributed and the earnings retained in the business.

Question 4

At December 31, 2009, Rob's Home Store has $100,000 of assets and $40,000 of liabilities, and $60,000 of stockholders' equity. On January 15, 2010, Rob's purchased $30,000 of assets by incurring a liability. Rob's total assets, liabilities, and stockholders' equity after the purchase are, respectively,
A) $100,000; $40,000; $60,000.
B) $100,000; $60,000; $40,000.
C) $130,000; $40,000; $70,000.
D) $130,000; $60,000; $70,000.
E) $130,000; $70,000; $60,000.

Accepted Answer

The answer of At December 31, 2009, Rob's Home Store...

Question 5

At December 31, 2009, Itah Inc. has $80,000 of assets and $45,000 of stockholders' equity. On January 5, 2010, the company bought $25,000 of assets by incurring a liability. Itah's liabilities and stockholders' equity after the purchase are, respectively,
A) $0 and $15,000.
B) $0 and $70,000.
C) $60,000 and $20,000.
D) $60,000 and $45,000.
E) $105,000 and $20,000.

Accepted Answer

The liabilities increase by $25,000 (from $35,000 to $60,000) due to the purchase, while stockholders' equity remains unchanged at $45,000.

Question 6

At March 31, 2010, Gaffer's Department Store, had $1,000,000 of assets and $325,000 of liabilities. On April 10, 2010, Gaffer's paid off $125,000 of its liabilities. Total stockholders' equity at April 10, 2010, after the payment, is
A) $ 550,000.
B) $ 600,000.
C) $ 675,000.
D) $1,000,000.
E) $1,125,000.

Accepted Answer

Stockholders' equity is calculated as assets minus liabilities. Initially, Gaffer's had $1,000,000 in assets and $325,000 in liabilities, resulting in $675,000 ($1,000,000 - $325,000) in stockholders' equity. After paying off $125,000 of its liabilities, the liabilities decrease to $200,000 ($325,000 - $125,000), but this payment does not affect the total assets or the calculation of stockholders' equity directly. Therefore, the stockholders' equity remains at $675,000.

Question 7

The financial statement that summarizes a business's revenues and expenses for a specific time period is the
A) Balance Sheet.
B) Income Statement.
C) Statement of Stockholders' Equity.
D) Statement of Cash Flows.
E) Statement of Fund Balance.

Accepted Answer

The Income Statement summarizes a business's revenues and expenses for a specific period, showing the net profit or loss.

Question 8

Respectively, ___ generally result from selling merchandise or providing services that a company has chosen for its primary activity and ___ are legitimate costs of doing business.
A) revenues; expenses
B) expenses; revenues
C) assets; expenses
D) revenues; liabilities
E) revenues; dividends

Accepted Answer

Revenues are the income a company earns from its primary activities like selling goods or services, while expenses are the costs incurred in the process of earning those revenues.

Question 9

Gadsden Lawn Service began operations on January 1, 2010, when Doug Gadsden contributed $100,000 of cash and equipment. During the year, the company earned $200,000 of revenue, incurred $120,000 of expenses, and paid $10,000 of dividends. Total owner's equity at December 31, 2010 is
A) $ 0.
B) $100,000.
C) $170,000.
D) $180,000.
E) $190,000.

Accepted Answer

Total owner's equity is equal to the initial investment plus net income minus dividends. Net income is equal to revenue minus expenses. Therefore, total owner's equity at December 31, 2010 is $100,000 + $200,000 - $120,000 - $10,000 = $170,000.

Question 10

Which of the following indicates the dating of the specified financial statement?

Accepted Answer

The answer of Which of the following indicates the dating...

Question 11

Which of the following statements reveals how a business generated and spent cash during a given accounting period?
A) Balance Sheet
B) Income Statement
C) Statement of Stockholders' Equity
D) Statement of Cash Flows
E) Statement of Fund Balance

Accepted Answer

The Statement of Cash Flows provides detailed information on how a business generated and spent cash during a given accounting period, categorizing cash flows into operating, investing, and financing activities.

Question 12

Respectively, ___ activities are cash flows earned by providing a product or service; ___ activities are cash flows related to the buying and selling of long-term assets; and ___ activities are cash flows related to obtaining and repaying additional funds from creditors and investors.
A) operating; investing; financing
B) operating; financing; investing
C) investing; operating; financing
D) financing; operating; investing
E) financing; investing; operating

Accepted Answer

Operating activities involve cash flows from primary business operations, investing activities relate to transactions involving long-term assets, and financing activities concern cash flows from dealing with creditors and investors.

Question 13

Successful companies should generally produce the majority of their cash flow from
A) investing activities.
B) financing activities.
C) operating activities.
D) stock activities.
E) production activities.

Accepted Answer

Successful companies typically generate the majority of their cash flow from operating activities, which include the core business operations such as selling goods or services. This indicates a healthy, sustainable business model.

Question 14

The statement that reconciles the dollar amounts of a corporation's ownership equity components from the beginning to the end of the accounting period is the
A) Statement of Revenues and Expenses.
B) Statement of Retained Earnings.
C) Statement of Stockholders' Equity.
D) Statement of Cash Flows.
E) Statement of Fund Balance.

Accepted Answer

The Statement of Stockholders' Equity reconciles the dollar amounts of a corporation's ownership equity components from the beginning to the end of the accounting period, including changes due to earnings, dividends, and any stock issuances or buybacks.

Question 15

The ending balance of cash appears on the
A) income statement for the year, the year-end balance sheet, and the statement of cash flows.
B) beginning-of-the-year balance sheet, the statement of cash flows, and the year-end balance sheet.
C) statement of stockholders' equity, the statement of cash flows, and the year-end balance sheet.
D) income statement and the year-end balance sheet.
E) statement of cash flows and the year-end balance sheet.

Accepted Answer

The ending balance of cash is reported on the statement of cash flows, which shows how cash has changed during the period, and the year-end balance sheet, which presents a snapshot of a company's financial position at the end of the fiscal year, including its cash balance.

Question 16

Which of the following might not typically be located in the financial statement footnotes?
A) Specific accounting methods used
B) Significant accounting policies
C) Key assumptions about estimates
D) Specific internal business strategies
E) Descriptions of pending lawsuits

Accepted Answer

Financial statement footnotes usually include details about the accounting methods, policies, key assumptions, and pending lawsuits, but not specific internal business strategies, as these are considered proprietary and strategic information not typically disclosed in financial statements.

Question 17

An accountant employed in public accounting is often a(an)
A) controller.
B) cost analyst.
C) external auditor.
D) financial analyst.
E) internal auditor.

Accepted Answer

An accountant employed in public accounting often serves as an external auditor, performing audits and reviews of financial statements for companies and organizations to ensure the accuracy and compliance with applicable standards and regulations. Controllers, cost analysts, financial analysts, and internal auditors are typically positions found within organizations rather than in public accounting firms.

Question 18

The most important professional service provided by large public accounting firms is
A) auditing organizational financial statements.
B) preparation of organizational financial statements.
C) developing tax regulations for business enterprises.
D) projecting future prices of an organization's stock.
E) all of the above.

Accepted Answer

Auditing organizational financial statements is considered the most important professional service provided by large public accounting firms. This involves examining an organization's financial records to ensure accuracy and compliance with accounting standards and regulations.

Question 19

Which of the following statements is false?
A) Controllers are responsible for preparing financial statements, while external auditors are responsible for issuing opinions about financial statements.
B) A principal objective of an independent audit is to determine whether an entity's financial statements have been prepared in accordance with generally accepted accounting principles (GAAP).
C) Both internal and external auditors share the same audit objectives and degree of independence.
D) If a company's financial statements have been prepared in accordance with GAAP, those financial statements are presumed to fairly reflect company's financial affairs.
E) Independent examination of a set of financial statements increases third-party confidence in those financial statements.

Accepted Answer

Statement C is false because internal and external auditors have different objectives and degrees of independence. Internal auditors are employed by the company they audit and focus on internal control and operational efficiency, while external auditors are independent of the company and focus on the accuracy of financial statements and compliance with GAAP.

Question 20

The authenticity of the information contained in the financial statements is the responsibility of the
A) external auditor.
B) organization's management.
C) Securities and Exchange Commission.
D) Internal Revenue Service.
E) company's cost analyst(s).

Accepted Answer

The organization's management is responsible for the accuracy and authenticity of the information contained in the financial statements. They are tasked with ensuring that the financial records accurately reflect the company's financial position.

Quiz 1: An Introduction to the Role of Accounting in the Business World

The financial statement that summarizes the assets, liabilities, and stockholders' equity of an entity at a specific point in time is the

The balance sheet is also called the statement of

Respectively, _ are resources that an organization owns; _ is/are debts that an organization owes; and ___ is/are amounts that owners have contributed and what the entity has earned for them.

At December 31, 2009, Itah Inc. has $80,000 of assets and $45,000 of stockholders' equity. On January 5, 2010, the company bought $25,000 of assets by incurring a liability. Itah's liabilities and stockholders' equity after the purchase are, respectively,

At March 31, 2010, Gaffer's Department Store, had $1,000,000 of assets and $325,000 of liabilities. On April 10, 2010, Gaffer's paid off $125,000 of its liabilities. Total stockholders' equity at April 10, 2010, after the payment, is

The financial statement that summarizes a business's revenues and expenses for a specific time period is the

Respectively, _ generally result from selling merchandise or providing services that a company has chosen for its primary activity and _ are legitimate costs of doing business.

Gadsden Lawn Service began operations on January 1, 2010, when Doug Gadsden contributed $100,000 of cash and equipment. During the year, the company earned $200,000 of revenue, incurred $120,000 of expenses, and paid $10,000 of dividends. Total owner's equity at December 31, 2010 is

Which of the following indicates the dating of the specified financial statement?

Which of the following statements reveals how a business generated and spent cash during a given accounting period?

Respectively, _ activities are cash flows earned by providing a product or service; _ activities are cash flows related to the buying and selling of long-term assets; and ___ activities are cash flows related to obtaining and repaying additional funds from creditors and investors.

Successful companies should generally produce the majority of their cash flow from

The statement that reconciles the dollar amounts of a corporation's ownership equity components from the beginning to the end of the accounting period is the

The ending balance of cash appears on the

Which of the following might not typically be located in the financial statement footnotes?

An accountant employed in public accounting is often a(an)

The most important professional service provided by large public accounting firms is

Which of the following statements is false?

The authenticity of the information contained in the financial statements is the responsibility of the