Question 1

Net income is:

Accepted Answer

Net income is the amount of money a company earns after deducting all expenses from its revenue. It is calculated by subtracting expenses from revenues. Therefore, it is the excess of revenues over expenses.

Question 2

Increases in retained earnings from a company's earnings activities are:

Accepted Answer

The answer of Increases in retained earnings from a company's...

Question 3

Net income:

Accepted Answer

Net income is the amount by which revenues exceed expenses, resulting in an increase in equity. Therefore, it represents the excess of revenues over expenses.

Question 4

An example of an investing activity is:

Accepted Answer

Purchasing land is an example of investing activity as it involves acquiring a long-term asset with the goal of generating future income or appreciation in value. Paying wages of employees, paying dividends, selling inventory, and contribution from owner are not examples of investing activities.

Question 5

The owners of a partnership:

Accepted Answer

Partnerships have unlimited liability, which means that the owners are personally responsible for the debts and obligations of the partnership.

Question 6

If equity is $300,000 and liabilities are $192,000,then assets equal:

Accepted Answer

According to the accounting equation, Assets = Liabilities + Equity. Therefore, Assets = $192,000 + $300,000 = $492,000.

Question 7

An example of an operating activity is:

Accepted Answer

Operating activities are the day-to-day activities that are involved in running a business, such as paying wages to employees.

Question 8

Which of the following accounting principles would prescribe that all goods and services purchased are recorded at cost?

Accepted Answer

The cost principle requires that all purchases be recorded at their historical cost, which is the amount paid or the consideration given to acquire an asset or service. This principle ensures that the financial statements reflect the actual amount paid for the goods and a realistic picture of the company's financial position.

Question 9

Revenue is properly recognized:

Accepted Answer

Revenue should be recognized when the sale or service is completed and the business obtains the right to collect the sale price. This is known as the accrual basis of accounting and is required by Generally Accepted Accounting Principles (GAAP). Recognition of revenue should not be solely based on when cash is received, as this would be considered cash basis accounting and is not in line with GAAP.

Question 10

Marian Mosely is the owner of Mosely Accounting Services.Which accounting assumption requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services?

Accepted Answer

The business entity assumption requires that the financial records of the business be kept separate from the owner's personal financial records. This means that Marian must maintain separate records for Mosely Accounting Services and her personal finances.

Question 11

A limited partnership:

Accepted Answer

A limited partnership includes a general partner with unlimited liability, which means that this partner is personally liable for the debts and obligations of the partnership. The other partners, known as limited partners, have limited liability and are only liable up to the amount of their investment in the partnership.

Question 12

The difference between a company's assets and its liabilities is:

Accepted Answer

The difference between a company's assets and its liabilities is called equity. This represents the value of the company that belongs to the owners or shareholders. Net income, revenue, and net loss all involve income and expenses and are not directly related to the difference between assets and liabilities.

Question 13

Resources owned or controlled by a company that are expected to yield benefits are:

Accepted Answer

Assets are resources that are expected to yield benefits to a company, such as property, equipment, and inventory. Revenues are the income generated from the company's business activities, liabilities are the debts and obligations owed by the company, stockholder's equity is the residual interest in the assets of the company after deducting liabilities, and expenses are the costs incurred in the process of generating revenue.

Question 14

An example of a financing activity is:

Accepted Answer

Obtaining a long-term loan is a financing activity because it involves acquiring funds from a lender to support the business's operations or investments. This will increase the liability of the company as it has to repay the loan with interest. The other options listed are not financing activities, but rather operating or investing activities.

Question 15

Congress passed the Sarbanes-Oxley Act to

Accepted Answer

The Sarbanes-Oxley Act was passed to help curb financial abuses at companies that issue their stock to the public. It was enacted in response to several high-profile corporate scandals and aimed to improve corporate governance and financial reporting to provide better transparency and accountability to investors.

Question 16

On December 15,2013,Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2014.Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2014 and not 2013?

Accepted Answer

The revenue recognition principle dictates that revenue should be recorded when it is earned, regardless of when payment is received. In this case, Myers Legal Services has not yet provided any legal services in 2013 and the contract specifies that services will be provided in 2014. Therefore, revenue should only be recognized in 2014 when the legal services are actually provided.

Question 17

Operating activities:

Accepted Answer

Operating activities involve using resources to research, develop, purchase, produce, distribute, and market products and services. This is the day-to-day business operations of a company. Choice A refers to financing activities, Choice C refers to investing activities, and Choices D and E refer to different aspects of management that are not specifically related to operating activities.

Question 18

Planning activities:

Accepted Answer

Planning activities involve defining the ideas, goals, and actions of an organization, setting the direction for future activities.

Question 19

According to generally accepted accounting principles,a company's balance sheet should show the company's assets at:

Accepted Answer

According to generally accepted accounting principles (GAAP), assets are recorded at their historical cost, which is the cash equivalent value of what was given up to acquire them.

Question 20

The major activities of a business include:

Accepted Answer

The major activities of a business are generally categorized into three types: operating, investing, and financing activities. Operating activities include the day-to-day running of the business, such as producing and selling goods and services. Investing activities involve the acquisition and sale of long-term assets, such as property, plant, and equipment. Financing activities involve obtaining and repaying debt, as well as issuing and buying back equity. Therefore, option D, operating, investing, financing, includes all three major activities of a business.

Quiz 1: Introducing Financial Accounting