Question 1

The main sections of the balance sheet include ________.

Accepted Answer

The balance sheet has three main sections: assets, liabilities, and stockholders' equity. Revenues and expenses are found on the income statement, not the balance sheet.

Question 2

A transaction is any event that affects the financial position of an organization and requires recording.

Accepted Answer

This is a correct definition of a transaction in accounting. It must be recorded in order to accurately reflect the organization's financial position.

Question 3

The ownership claim arising from the reinvestment of previous profits is called ________.

Accepted Answer

Retained earnings are the portion of a company's net income that are reinvested back into the business instead of paid out as dividends to shareholders. This reinvestment increases the company's stockholders' equity, which represents the ownership claim on the company's assets. Therefore, the ownership claim arising from the reinvestment of previous profits is called retained earnings.

Question 4

Owners' equity represents the excess cash a company has made.

Accepted Answer

Owners' equity represents the residual interest in the assets of a company after deducting liabilities. It is not necessarily the same as cash and does not necessarily represent excess cash.

Question 5

This financial statement discloses the economic resources of the organization and the claims against those resources.

Accepted Answer

The balance sheet provides a snapshot of an organization's financial position at a specific point in time, showing the resources (assets) the organization owns, the liabilities it owes, and the equity or ownership interest in the organization. It provides a summary of the economic resources of the organization and the claims against those resources, which is exactly what the question is asking for. The other options, such as the income statement, statement of cash flows, and statement of retained earnings, provide different types of financial information and do not provide a complete picture of economic resources and claims.

Question 6

The balance sheet shows a company's financial status at only one point in time.

Accepted Answer

The balance sheet is a snapshot of the company's financial position at a particular date, typically at the end of an accounting period, and does not reflect its financial status over a period of time.

Question 7

The ownership claim arising from funds contributed by the owners of the business is called ________.

Accepted Answer

The ownership claim arising from funds contributed by the owners of the business is called paid-in capital. This represents the funds that the owners have invested into the business and is reported on the balance sheet in the equity section. It is different from retained earnings, which are profits earned by the business that are reinvested or retained in the company rather than distributed to shareholders. Liabilities and notes payable represent debts owed by the business to creditors.

Question 8

Liabilities are economic resources.

Accepted Answer

Liabilities are not economic resources, they represent obligations or debts owed by a company.

Question 9

Any event that affects the financial position of an organization and requires recording is called a(n)________.

Accepted Answer

A transaction is an event that affects the financial position of an organization and requires recording. It is the basic unit of accounting and can include things like the purchase of a new asset, the sale of a product or service, or the payment of an expense. An account is a record of transactions for a specific asset, liability, equity, revenue, or expense, and posting is the process of transferring information from a journal to a ledger. The recognition principle states that revenue should be recognized when it is earned, and expenses should be recognized when they are incurred.

Question 10

Economic resources that a company owns and expects to provide future benefits are called ________.

Accepted Answer

Assets are resources owned by a company that are expected to provide future benefits, such as cash, inventory, and property. Stockholders' equity represents the value of a company's assets after subtracting its liabilities, while retained earnings represent the portion of a company's profits that are kept for future use. Liabilities are obligations that a company owes to others, such as loans or accounts payable.

Question 11

An entity's economic obligations to nonowners are called ________.

Accepted Answer

Liabilities are an entity's economic obligations to nonowners, such as debts and payables. Owners' equity represents the residual interest in the assets of an entity after deducting liabilities while assets are economic resources that an entity controls or owns. Retained earnings are the portion of the entity's net income that is not distributed as dividends to owners.

Question 12

Accounting information only helps assess past financial performance.

Accepted Answer

Accounting information can also be used to make predictions and projections about future financial performance, provide insights into the financial health and stability of a company, and assist in making strategic business decisions.

Question 13

For a corporation,the excess of assets over liabilities are called ________.

Accepted Answer

The excess of assets over liabilities in a corporation is called stockholders' equity, which represents the net worth of the company. This includes retained earnings, paid-in capital, and common stock, but the best choice to name this concept as a whole is stockholders' equity.

Question 14

The statement of financial position is also called the ________.

Accepted Answer

The statement of financial position is also commonly referred to as the balance sheet, which shows the company's assets, liabilities, and equity at a specific point in time. The income statement shows the company's revenues and expenses over a period of time, the statement of cash flows shows the cash inflows and outflows during a period, and the statement of retained earnings shows the changes in the company's retained earnings balance over a period.

Question 15

The income statement summarizes a company's financial performance ________ and the balance sheet shows a company's financial position ________.

Accepted Answer

The income statement summarizes a company's financial performance over a period of time, usually a month, quarter, or year. On the other hand, the balance sheet shows a company's financial position at a specific point in time, usually at the end of each reporting period. Thus, the best choice is D, which correctly identifies the time frame of each financial statement.

Question 16

A corporation is not a separate legal entity from its owners.

Accepted Answer

A corporation is a separate legal entity from its owners. This means that it can enter into contracts, sue and be sued, and own property apart from the individuals who own it.

Question 17

Which of the following statements is FALSE?

Accepted Answer

Owners' equity does not equal the sum of assets and liabilities, rather it represents the residual interest in the assets of an organization after deducting its liabilities.

Question 18

In a corporation,stockholders' equity has two parts called ________ and ________.

Accepted Answer

Stockholders' equity has two parts: paid-in capital, which represents the amount of capital contributed by the shareholders, and retained earnings, which represents the portion of the company's net income that has been retained for future use. Dividends and net profit are not the two parts of stockholders' equity.

Question 19

Each item in a financial statement is an account.

Accepted Answer

Each item in a financial statement represents a specific account such as cash, accounts payable, and revenue. These accounts are used to categorize and report the financial data accurately.

Question 20

Amounts owed to vendors for purchases on credit are called ________.Amounts due from customers for credit sales are called ________.

Accepted Answer

The term used for the amounts owed to vendors for purchases on credit is "accounts payable" and the term used for the amounts due from customers for credit sales is "accounts receivable". Therefore, option C is the correct choice. Options A and B are incorrect because "notes receivable" and "notes payable" are not the correct terms to describe these transactions, and option D is also incorrect because "debt payable" and "debt receivable" are not commonly used accounting terms.

Quiz 15: Basic Accounting: Concepts, techniques, and Conventions