Exam 1: Introduction to Accounting and Business

An account receivable is a claim against a customer resulting from a sale on account.

The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles.

About 90% of the businesses in the United States are organized as corporations.

The balance sheet represents the accounting equation.

Purchasing supplies on account increases liabilities and decreases equity.

Which of the following best describes accounting?

(a) A vacant lot acquired for $83,000 cash is sold for $127,000 in cash. What is the effect of the sale on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity? (b) Assume that the seller owes $52,000 on a loan for the land. After receiving the $127,000 cash in (a), the seller pays the $52,000 owed. What is the effect of the payment on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity?

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Payment of dividends A)Increase assets, increase liabilities B)Increase liabilities, decrease stockholders' equity C)Increase assets, increase stockholders' equity D)No effect E)Decrease assets, decrease liabilities F)Decrease assets, decrease stockholders' equity

Prepare an income statement for the current year ended March 31.

Match each of the following characteristics with the financial statement it describes. Each financial statement may be used more than once. -Reports as of a specific date A)Income statement B)Balance sheet C)Statement of stockholder's equity D)Statement of cash flows

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Used up supplies that were already on hand A)Increase assets, increase liabilities B)Increase liabilities, decrease stockholders' equity C)Increase assets, increase stockholders' equity D)No effect E)Decrease assets, decrease liabilities F)Decrease assets, decrease stockholders' equity

The main objective for all businesses is to maximize unrealized profits.

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Contribution of land by stockholder A)Increase assets, increase liabilities B)Increase liabilities, decrease stockholders' equity C)Increase assets, increase stockholders' equity D)No effect E)Decrease assets, decrease liabilities F)Decrease assets, decrease stockholders' equity

Match the following items to the financial statement where they can be found. (Hint: Some of the items can be found on more than one financial statement.)A. Balance sheet B. Income statement C. Statement of cash flows D. Statement of stockholder's equity

The debt created by a business when it makes a purchase on account is referred to as an

The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of stockholders.

The assets and stockholder's equity of a company are $159,000 and $95,000, respectively. Liabilities should equal

The asset created by a business when it makes a sale on account is termed

Using the following accounts and their amounts, prepare in good format a statement of stockholders' equity for Bright Futures Company for the month ended August 31. No common stock was issued during the year.