Financial Accounting Midterm 1

Front 1

Net income=

Back 1

Total revenues- total expenses

Front 2

What section of a statement of cash flows indicates the cash spent on new equipment during the past accounting period?

Back 2

The investing activities section

Front 3

Which financial statement reports assists, liabilities, and stockholders equity?

Back 3

Balance sheet

Front 4

In a classified balance balance sheet, assets are usually classified as:

Back 4

current assets; long-term investments, property, plant and equipment; and intangible assets.

Front 5

Which is an indicator of profitability?

Back 5

Earnings per share

Front 6

Earnings per share (EPS)=

Back 6

Net income- preferred dividends

__________________________________________

average shares outstanding

Front 7

The balance in retained earnings is not affected by:

Back 7

Issuance of common stock

Front 8

Which of these measures is an evaluation of a company's ability to pay current liabilities?

Back 8

Current ratio

Front 9

Solvency

Back 9

Debt to assets ratio

Total liabilities

_____________________

total assets

Front 10

Liquidity

Back 10

Current ratio

current assets

_____________________

current liabilities

Front 11

Profitability can't be compared based on

Back 11

current ratio, debt to assets ratio, earnings per share

Front 12

What is the primary criterion by which accounting information can be judged?

Back 12

Usefulness for decision-making

Front 13

Neutrality is an ingredient of:

Back 13

Faithful representation: yes

Relevance: No

Front 14

The characteristic of information that evaluates whether it is large enough to impact a decision

Back 14

Materiality

Front 15

The effects on the basic accounting equation of performing services for cash are to:

Back 15

increase assets and increase stockholders' equity

Front 16

Genesis Company buys a $900 machine on credit. This transaction will affect the:

Back 16

balance sheet only

Front 17

An account is an...

Back 17

Individual accounting record of increases and decreases in specific asset, liability and stockholders' equity items

Front 18

Debits:

Back 18

Increase assets and decrease liabilities

ALWAYS INCREASE MONEY AMOUNT

Front 19

A revenue account:

Back 19

Is increase by credits

Front 20

Parts of the recording process:

Back 20

Analyzing transactions, entering transactions in a journal, posting transactions

Front 21

A trial balance:

Back 21

Is a list of accounts with their balances at a given time

Front 22

What is the periodicity assumption?

Back 22

The economic life of a business can be divided into artificial time periods

Front 23

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Back 23

Expense recognition principle

Front 24

Accrual- Basis accounts

Back 24

Transactions recorded in the periods in which the events occur

Revenues are recognized when services performed, even if cash wasn't received

Expenses are recognized when incurred, even if cash wasn't paid

Front 25

Major types of adjusting entry:

Back 25

Prepaid expenses, accrued revenues, accrued expenses

Front 26

Adjustments for unearned revenues:

Back 26

decrease liabilities and increase revenues

Front 27

If an employee works the last week of september and is paid october 1. The adjusting entry for the employer on september 30 would be shown as

Back 27

Salaries and wages expense

Salaries and wages payable

Front 28

The adjusted trial balance does..

Back 28

list temporary accounts

Front 29

Short-term liabilities=

Back 29

Operating

Front 30

Long-term liabilities=

Back 30

Financing

Front 31

Equity-

Back 31

the net value of the firm

Front 32

Which of the financial statements is prepared on a specific date?

Back 32

Balance sheet

Front 33

Assets=

Back 33

Liabilities+equity

Front 34

Free cash flow=

Back 34

cash provided _ capital _ cash

by operations expenditures dividends

Front 35

The ledger is..

Back 35

Comprised of the entire group of accounts maintained by a company

Front 36

Posting-

Back 36

The process of transferring journal entry amounts to ledger accounts (T-account)

Front 37

Revenue Recognition Principle

Back 37

Companies recognize revenue in the accounting period in which the performance obligation is satisfied

Front 38

Expenses Recognition Principle

Back 38

Matches expenses with revenues in the period when the company makes efforts to generate those revenues

Front 39

Cash Basis Accounting

Back 39

Revenues are recognized only when cash is received

Expenses are recognized only when cash is paid

Front 40

Book value=

Back 40

Cost - accumulated depreciation

Front 41

Retain earnings is the only account that..

Back 41

Shows the original amount in the Adjusted Trial Balance

Front 42

The adjusted Trial Balance purpose is..

Back 42

To prove the equality of debit & credit balances in the ledger

Front 43

Accounting Cycle

Back 43

1. Analyze business transactions

2. Journalize the transactions

3. Post to Ledger accounts

4. Prepare a trial balance

5. Journalize&post adjusting entries

6. Prepare an adjusted trial balance

7. Prepare financial statements

8. Journalize &post closing entries

9. Prepare a post-closing trial balance

Front 44

Temporary accounts

Back 44

ALL GO TO $0

Revenue, expenses, income summary, dividends

Front 45

Permanent Accounts:

Back 45

DONT GO TO $0

Assets, liabilities, stockholders equity

Front 46

Faithful representation-

Back 46

Information accurately depicts what really happened. Must be complete, neutral and free from error

Front 47

Going concern-

Back 47

The business will remain in operation for the foreseeable future (longer than a year)

Front 48

Cost constraint-

Back 48

Weighs the cost of providing info. against the benefit that users will gain from the info.

Front 49

Monetary unit-

Back 49

Requires that only those things that can be expressed in money are included in the accounting records

Front 50

Generally Accepted Accounting Principles (GAAP):

Back 50

A set of rules & practices, having been recognized as a general guide for financial reporting purpose

Front 51

Credits:

Back 51

ALWAYS DECREASE MONEY AMOUNT

Front 52

Journalizing-

Back 52

Entering transaction data in the journal

Front 53

Deferrals: Prepaid expenses-

Back 53

Expenses paid in cash & recorded as assets before they are used

Front 54

Deferrals: Unearned revenues-

Back 54

Cash received before services are performed

Front 55

Accruals: Accrued revenues-

Back 55

Revenues for services performed but not yet received in cash or recorded

Front 56

Accruals: Accrued expense-

Back 56

Expenses incurred but not yet paid in cash or recorded

Front 57

When closing the book:

Revenues and expenses are closed to..

Back 57

The Income Summary Account

Front 58

When closing the book:

Income summary account is closed to...

Back 58

Owners Equity Account

Front 59

Cost Principle

Back 59

Requires that assets be recorded at the cash amount