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120 True/False questions

  1. ComparabilityThe quality of information that gives assurance that it is free of error, is factual, and is neutral.

          

  2. CreditAn expression of the mathematical relationship between one quantity and another; may be expressed as a percentage, a rate, or a proportion.

          

  3. Auditor's reportThe owners' claim on total assets.

          

  4. Liquidity ratiosMeasures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

          

  5. Property, plant, and equipmentAssets with relatively long useful lives that companies use in operating the business and are not intended for resale.

          

  6. ReliabilityThe quality of information that gives assurance that it is free of error, is factual, and is neutral.

          

  7. PartnershipResources owned by a business

          

  8. constraints in financial reporting• Materiality
    • Conservatism

          

  9. Cost principleAn accounting principle that states that companies should record assets at their cost.

          

  10. Operating activitiesPurchase of resources a company needs to operate the business

          

  11. Management discussion and analysis (MD&A)Expresses the relationship among selected items of financial statement data.

    Expresssed in terms of either percentage, a rate or a simple proportion

          

  12. Advantages of Sole proprietorship•simple to establish
    •owner controlled
    •tax advantages that are more favorable than a corporation

          

  13. Accounting transactionsEvents that require recording in the financial statements because they affect assets, liabilities, or stockholders' equity.

          

  14. Free cash flow computed asThe amount by which revenues exceed expenses.

    Net Income = Revenues > Expenses

          

  15. Basic accounting equationAn individual accounting record of increases and decreases in specific asset, liability, stockholders' equity, revenue or expense items.

          

  16. T accountThe proces of transferring journal entries to the ledger accounts.

          

  17. PostingThe left side of an account.

          

  18. basic steps in the accounting processAssets = Liabilities + Stockholders' Equity.

          

  19. Advantages of corporation•simple to establish
    •owner controlled
    •tax advantages that are more favorable than a corporation

          

  20. Double-entry systemMeasures of the ability of the company to survive over a long period of time.

          

  21. Going concern assumptionThe assumption that the company will continue in operation for the foreseeable future.

          

  22. CorporationA business organized as a separate legal entity having ownership divided into transferable shares of stock.

          

  23. retained earnings entry effectsA financial statement that summarizes the amounts and causes of changes in retained earnings for a specific period of time.

          

  24. Current assetsResources owned by a business

          

  25. Current ratio computed ascurrent assets divided by current liabilities.

    expressed in Proportion 1.44:1

          

  26. International Accounting Standards Board (IASB)An accounting standard-setting body that issues standards adopted by many countries outside of the United States.

          

  27. Certified Public Accountant (CPA)An individual who has met certain criteria and is thus allowed to perform audits of corporations.

          

  28. Investing activitiesPurchase of resources a company needs to operate the business

          

  29. Generally accepted accounting principles (GAAP)The group charged with determining auditing standards and reviewing the performance of auditing firms.

          

  30. Trial balanceA list of accounts and their balances at a given time.

          

  31. Debt to total assets ratio computed asMeasures the percentage of assets financed by creditors.

    higher percentage of dept financing , the riskier the business

          

  32. Long-term liabilities (Long-term debt)(1) investments in stocks and bonds of other corporations that companies hold for more than one year, and
    (2) long-term assets, such as land and buildings, not currently being used in the company's operations.

          

  33. Earnings per share (EPS) computed asnet income
    minus preferred stock dividends
    divided by the average number of common shares outstanding during the year.

    expressed in dolar value

          

  34. Income statementA business organized as a separate legal entity having ownership divided into transferable shares of stock.

          

  35. RevenueThe increase in assets that result from the sale of a product or service in the normal course of business.

          

  36. Expense entry effectsdebit - decrease
    credit - increase
    normal balance - credit

          

  37. Common stockUse of the same accounting principles and methods from year to year within a company.

          

  38. Stockholders' equityA financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change.

          

  39. LiquidityPayments of cash from a corporation to its stockholders.

          

  40. JournalizingThe procedure of entering transaction data in the journal.

          

  41. Free cash flow measuresprovides insight into a company's cash gnerating ability

          

  42. Net lossThe increase in assets that result from the sale of a product or service in the normal course of business.

          

  43. Assumptions in Financial Accounting are• Monetary unit assumption
    • Economic entity assumption
    • Time period assumption
    • Going concern assumption
    • Cost principle
    • Full disclosure principle

          

  44. for financial information to be useful, it should possess:• relevance
    • reliability
    • comparability
    • consistency

          

  45. external users of financial statements(1) investments in stocks and bonds of other corporations that companies hold for more than one year, and
    (2) long-term assets, such as land and buildings, not currently being used in the company's operations.

          

  46. Accounting information systemThe system of collecting and processing transaction data and communicating financial information to interested parties.

          

  47. AssetsThe proces of transferring journal entries to the ledger accounts.

          

  48. annual reportA ledger that contains all asset, liability, stockholders' equity, revenue, and expense accounts.

          

  49. Net incomeThe increase in assets that result from the sale of a product or service in the normal course of business.

          

  50. Balance sheetA financial statement that reports the assets and claims to those assets at a specific point in time.

          

  51. Asset entry effectsResources owned by a business

          

  52. SolvencyThe ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity.

          

  53. Classified balance sheetdebit- increase
    credit - decrease
    normal balance - debit

          

  54. Time period assumptionAn assumption that requires that only those things that can be expressed in money are included in the accounting records.

          

  55. all businesses are involved in the following types of activityOperating
    Investing
    Financing

          

  56. accounts types with credit normal balanceThe system of collecting and processing transaction data and communicating financial information to interested parties.

          

  57. Public Company Accounting Oversight Board (PCAOB)An accounting standard-setting body that issues standards adopted by many countries outside of the United States.

          

  58. Statement of cash flowspresents information about cash inflows and outflows from
    1. Operating activities
    2. Investing activities
    3. Financing activities

          

  59. Long-term investmentsThe amount by which revenues exceed expenses.

    Net Income = Revenues > Expenses

          

  60. Ratio analysisAn expression of the mathematical relationship between one quantity and another; may be expressed as a percentage, a rate, or a proportion.

          

  61. ExpensesThe amount by which expenses exceed revenues.

    Net Loss = Expenses > Revenue

          

  62. Comparative statementsA presentation of the financial statements of a company for more than one year.

          

  63. ConservatismResources owned by a business

          

  64. journal contributes to the recording process byNotes that clarify information presented in the financial statements, as well as expand upon it where additional detail is needed.

          

  65. DividendsThe left side of an account.

          

  66. Solvency ratiosMeasures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

          

  67. LiabilitiesThe debts and obligations of a business. Liabilities represent the amounts owed to creditors.

          

  68. Debt to total assets ratio measurestotal liabilities divided by total assets

    expressed as a percentage

          

  69. Profitability ratiosMeasures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

          

  70. Sole proprietorshipA business owned by one person.

          

  71. order to complete financial statementsprovide inputs for decision making

          

  72. Accounting Information is communicated through which documentsIncome Statement
    Retained Earnings Statement
    Balance Sheet
    Statement of Cash Flows

          

  73. Financial Accounting Standards Board (FASB)An accounting standard-setting body that issues standards adopted by many countries outside of the United States.

          

  74. RelevanceThe ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity.

          

  75. Earnings per share (EPS) measuresthe net income earned on each share of common stock.

          

  76. AccountAn individual accounting record of increases and decreases in specific asset, liability, stockholders' equity, revenue or expense items.

          

  77. common stock entry effectsdebit - decrease
    credit - increase
    normal balance - credit

          

  78. Disadvantages of corporation•owners personally liable for all business debts
    • transfer of ownership may be difficult

          

  79. Retained earningsThe amount of net income retained in the corporation.

          

  80. primary sources of financing activitiesbegin once business has assets it needs from the other two activities.

          

  81. MaterialityThe constraint of determining whether an item is large enough to likely influence the decision of an investor or creditor.

          

  82. Retained earnings statementA financial statement that summarizes the amounts and causes of changes in retained earnings for a specific period of time.

          

  83. General ledgerA ledger that contains all asset, liability, stockholders' equity, revenue, and expense accounts.

          

  84. General journalAn accounting record in which transactions are initially recorded in chronological order.

          

  85. Operating cycleThe average time required to go from cash to cash in producing revenues.

          

  86. Sarbanes-Oxley Act (SOX)Regulations passed by Congress in 2002 to try to reduce unethical corporate behavior.

          

  87. JournalThe procedure of entering transaction data in the journal.

          

  88. accountingThe proces of transferring journal entries to the ledger accounts.

          

  89. Economic entity assumptionAn assumption that every economic entity can be separately identified and accounted for.

          

  90. Securities and Exchange Commission (SEC)The system of collecting and processing transaction data and communicating financial information to interested parties.

          

  91. Intangible assetsExpresses the relationship among selected items of financial statement data.

    Expresssed in terms of either percentage, a rate or a simple proportion

          

  92. Statement of stockholders' equityA report prepared by an independent outside auditor stating the auditor's opinion as to the fairness of the presentation of the financial position and results of operations and their conformance with generally accepted accounting standards.

          

  93. Financing activitiesPurchase of resources a company needs to operate the business

          

  94. Monetary unit assumptionAn assumption that requires that only those things that can be expressed in money are included in the accounting records.

          

  95. ConsistencyUse of the same accounting principles and methods from year to year within a company.

          

  96. Balance Sheet ClassificationsA financial statement that reports the assets and claims to those assets at a specific point in time.

          

  97. Notes to the financial statementsNotes that clarify information presented in the financial statements, as well as expand upon it where additional detail is needed.

          

  98. Disadvantages of partnership•owners personally liable for all business debts
    • transfer of ownership may be difficult

          

  99. primary forms of business organization•unfavorable tax treatment resulting in higher taxes paid by stockholders

          

  100. Current liabilitiesThe debts and obligations of a business. Liabilities represent the amounts owed to creditors.

          

  101. normal balanceon the side where the increase in account is recorded

          

  102. Components of Annual Report• Materiality
    • Conservatism

          

  103. internal users of financial statements1. Income Statement
    2. Retained Earnings Statement
    3. Balance Sheet
    4. Statement of Cash Flows

          

  104. dividends entry effectsdebit- increase
    credit - decrease
    normal balance - debit

          

  105. purpose of financial statementsprovide inputs for decision making

          

  106. RatioAn expression of the mathematical relationship between one quantity and another; may be expressed as a percentage, a rate, or a proportion.

          

  107. accounts types with debit normal balanceasset
    dividends
    expense

          

  108. Current ratio measuresability of company to pay short-term debt-paying

          

  109. Full disclosure principleAccounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users.

          

  110. liabilities entry effectsThe debts and obligations of a business. Liabilities represent the amounts owed to creditors.

          

  111. Disadvantages of Sole proprietorship•simple to establish
    •owner controlled
    •tax advantages that are more favorable than a corporation

          

  112. Advantages of partnership•owner personally liable for all business debts
    •financing may be difficult
    •transfer of ownership may be difficult

          

  113. LedgerThe group of accounts maintained by a company.

          

  114. DebitThe right side of an account.

          

  115. Revenue entry effectsdebit - decrease
    credit - increase
    normal balance - credit

          

  116. Chart of accountsAn accounting principle that states that companies should record assets at their cost.

          

  117. Working Capital computed asbegin once business has assets it needs from the other two activities.

          

  118. Statement of cash flowsA financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

          

  119. Working capital measuresability of company to pay short-term debt-paying

          

  120. two types of users of financial statements areoutside organization... investors, creditors, IRS, SEC, customers, labor unions