Question 1

Revenues are:
A) cash receipts.
B) increases in net assets from selling a product.
C) increases in net assets from occasional sales of equipment.
D)increases in net assets from selling common stock.

Accepted Answer

Revenues are recognized when a company sells a product or provides a service, resulting in an increase in net assets. It is not limited to only cash receipts, but also includes credit sales. The occasional sales of equipment and selling of common stock do not directly result in an increase in net assets from selling a product or providing a service and therefore are not revenues.

Question 2

The time frame associated with an income statement is:
A) a point in time in the past.
B) a past period of time.
C) a future period of time.
D)a function of the information included in it.

Accepted Answer

An income statement shows the financial performance of a company over a past period of time, usually a month, quarter or year. Therefore, the time frame associated with an income statement is a past period of time.

Question 3

The distinction between a current asset and other assets:
A) is based on how long the asset has been owned.
B) is based on amounts that will be paid to other entities within a year.
C) is based on the ability to determine the current fair value of the asset.
D)is based on when the asset is expected to be converted to cash, or used to benefit the entity.

Accepted Answer

The distinction between a current asset and other assets is based on when the asset is expected to be converted to cash, or used to benefit the entity. Current assets are those that are expected to be converted into cash, sold, or used up within the normal operating cycle of the business or within one year, whichever is longer. Other assets are classified as noncurrent assets, which are expected to have a useful life longer than one year or are not expected to be converted to cash within the next year. The distinction is not based on how long the asset has been owned, amounts paid to other entities, or the ability to determine the current fair value of the asset.

Question 4

The Statement of Changes in Stockholders' Equity shows:
A) the change in cash during a year.
B) revenues, expenses, and liabilities for the period.
C) net income and dividends for the period.
D)paid-in capital and long-term debt at the end of the period.

Accepted Answer

The Statement of Changes in Stockholders' Equity shows the changes in stockholders' equity during the period, including net income, dividends, and any other changes to equity accounts. It does not show cash changes, revenues, expenses, or liabilities.

Question 5

Stockholders' equity refers to which of the following?
A) A listing of the organization's assets and liabilities.
B) The ownership right of the stockholder(s) of the entity.
C) Probable future sacrifices of economic benefits.
D)All of the above.
E) None of the above.

Accepted Answer

Stockholders' equity refers to the ownership right of the stockholder(s) of the entity. It represents the residual interest in the assets of an organization after deducting liabilities. It is one of the three main components of a company's balance sheet, along with assets and liabilities. Therefore, option B is the correct choice. Options A and C are incorrect as they relate to assets and liabilities, which are separate components of a company's balance sheet. Option D is incorrect as it includes all three options, whereas only one option is the correct answer. Option E is also incorrect as stockholders' equity is a well-known concept in accounting and finance.

Question 6

The balance sheet equation can be represented by:
A) Assets = Liabilities + Stockholders' Equity
B) Assets - Liabilities = Stockholders' Equity
C) Net Assets = Stockholders' Equity
D)All of the above.

Accepted Answer

The answer of The balance sheet equation can be represented...

Question 7

The balance sheet might also be called:
A) Statement of Financial Position.
B) Statement of Assets.
C) Statement of Changes in Financial Position.
D)None of the above.

Accepted Answer

The balance sheet is often referred to as the Statement of Financial Position because it lists a company's assets, liabilities, and equity at a specific point in time.

Question 8

Retained Earnings represents:
A) the amount invested in the entity by the stockholders.
B) cash that is available for dividends.
C) cumulative net income that has not been distributed to stockholders as dividends.
D)par value of common stock outstanding.

Accepted Answer

Retained Earnings represents the cumulative net income that has not been distributed to stockholders as dividends.

Question 9

Current U.S. Generally Accepted Accounting Principles and auditing standards require the financial statements of an entity for the reporting period to include:
A) Earnings and gross receipts of cash for the period.
B) Projected earnings for the subsequent period.
C) Financial position at the end of the period.
D)Current fair values of all assets at the end of the period.

Accepted Answer

Current U.S. Generally Accepted Accounting Principles and auditing standards require the financial statements of an entity for the reporting period to include the financial position of the company at the end of the period. This includes the balance sheet which shows the entity's assets, liabilities, and equity as of the end of the period.

Question 10

Accumulated depreciation on a balance sheet:
A) is part of stockholders' equity.
B) represents the portion of the cost of an asset that is assumed to have been "used up" in the process of operating the business.
C) represents cash that will be used to replace worn out equipment.
D)recognizes the economic loss in value of an asset because of its age or use.

Accepted Answer

The answer of Accumulated depreciation on a balance sheet:
A) is...

Question 11

Transactions are summarized in:
A) The notes for the financial statements.
B) The independent auditor's opinion letter.
C) The entity's accounts.
D)None of the above.

Accepted Answer

Transactions are summarized in the entity's accounts, such as the general ledger or sub-ledgers. The notes for the financial statements provide additional information and details regarding the transactions and balances in the accounts, while the independent auditor's opinion letter provides the auditor's assessment of the fairness and accuracy of the financial statements as a whole. However, neither of these options directly summarize the transactions themselves.

Question 12

Which of the following is not a principal form of business organization?
A) Partnership.
B) Sole proprietorship.
C) Limited unregistered business.
D)Corporation.
E) None of the above.

Accepted Answer

Limited unregistered business is not a recognized principal form of business organization. The other choices (partnership, sole proprietorship, and corporation) are all commonly recognized and established forms of business organization.

Question 13

The income statement shows amounts for:
A) revenues, expenses, losses, and liabilities.
B) revenues, expenses, gains, and fair value per share.
C) revenues, assets, gains, and losses.
D)revenues, gains, expenses and losses.

Accepted Answer

The income statement shows revenues, which are the inflows of economic resources resulting from the sale of goods or services; gains, which are increases in equity from peripheral or incidental transactions; expenses, which are the outflows of economic resources resulting from operations; and losses, which are decreases in equity from peripheral or incidental transactions. The income statement does not typically include information about assets, liabilities, or fair value per share.

Question 14

A fiscal year:
A) is always the same as the calendar year.
B) is frequently selected based on the firm's operating cycle.
C) must always end on the same date each year.
D)must end on the last day of a month.

Accepted Answer

A fiscal year is not necessarily the same as the calendar year. It is often chosen based on the firm's operating cycle, which may not align with the calendar year. Fiscal years can end on any date chosen by the company, but typically end on the last day of a month for accounting convenience.

Question 15

Paid-in Capital represents:
A) earnings retained for use in the business.
B) the amount invested in the entity by the stockholders.
C) fair value of the entity's common stock.
D)net assets of the entity at the date of the statement.

Accepted Answer

Paid-in Capital represents the amount invested in the entity by the stockholders. It is the money that the company has received from issuing and selling its shares of stock to investors. Paid-in Capital is not the same as earnings retained for use in the business, fair value of the entity's common stock, or net assets of the entity at the date of the statement.

Question 16

Expenses are:
A) cash disbursements.
B) decreases in net assets from uninsured accidents.
C) decreases in net assets from dividends to stockholders.
D)decreases in net assets resulting from usual operating activities.

Accepted Answer

The answer of Expenses are:
A) cash disbursements.
B) decreases in net...

Question 17

Which of the following is not a transaction to be recorded in the accounting records of an entity?
A) Investment of cash by the owners.
B) Sale of product to customers.
C) Receipt of a plaque recognizing the firm's encouragement of employee participation in the United Way fund drive.
D)Receipt of services from a "quick-print" shop in exchange for the promise to provide advertising design services of equivalent value.

Accepted Answer

The receipt of a plaque is not an economic transaction that results in a change in resources or obligations of the entity. It is merely a recognition of the entity's contribution to a charitable cause. The other choices (investment of cash, sale of product, receipt of services) are all economic transactions that result in a change in the resources or obligations of the entity and should be recorded in the accounting records.

Question 18

The time frame associated with a balance sheet is:
A) a point in time in the past.
B) a one-year past period of time.
C) a single date in the future.
D)a function of the information included in it.

Accepted Answer

A balance sheet represents a snapshot of a company's financial position at a specific point in time (usually the end of a reporting period, such as a month or a year). It is not associated with a past period or a future date, nor is it a function of the information included in it.

Question 19

Additional paid-in-capital represents:
A) The difference between the total amounts invested by the stockholders and the par or stated value of the stock.
B) Distributions of earnings that have been made to the stockholders.
C) Distributions of earnings that have not been made to the stockholders.
D)The summation of the total amount invested by the stockholders and the par or stated value of the stock.

Accepted Answer

Additional paid-in-capital represents the difference between the total amounts invested by the stockholders and the par or stated value of the stock. This is the amount that investors have paid in excess of the par value of the stock, and it is reflected on the balance sheet as part of the stockholders' equity section.

Question 20

The purpose of the income statement is to show the:
A) change in the fair value of the assets from the prior income statement.
B) market value per share of stock at the date of the statement.
C) revenues collected during the period covered by the statement.
D)net income or net loss for the period covered by the statement.

Accepted Answer

The income statement is used to show the net income or net loss for the period covered by the statement. This is the primary purpose of the income statement, as it provides important information for investors and other stakeholders about the financial performance of the company. The other options listed do not accurately reflect the purpose of the income statement.

Quiz 2: Financial Statements and Accounting Conceptsprinciples

Revenues are:

The time frame associated with an income statement is:

The distinction between a current asset and other assets:

The Statement of Changes in Stockholders' Equity shows:

Stockholders' equity refers to which of the following?

The balance sheet equation can be represented by:

The balance sheet might also be called:

Retained Earnings represents:

Current U.S. Generally Accepted Accounting Principles and auditing standards require the financial statements of an entity for the reporting period to include:

Accumulated depreciation on a balance sheet:

Transactions are summarized in:

Which of the following is not a principal form of business organization?

The income statement shows amounts for:

A fiscal year:

Paid-in Capital represents:

Expenses are:

Which of the following is not a transaction to be recorded in the accounting records of an entity?

The time frame associated with a balance sheet is:

Additional paid-in-capital represents:

The purpose of the income statement is to show the: