Deck 1: An Introduction to Accounting

Question 1

An asset source transaction increases a business's assets and the claims to assets.

Answer 1

True
Explanation: An asset source transaction increases a business's assets and either liabilities or equity, which make up claims to assets.

Question 2

The value created by a business may be called income or earnings.

Answer 2

True
Explanation: This is true. A business creates value by earning income.

Question 3

A business and the person who owns the business are separate reporting entities.

Answer 3

True
Explanation: This is true. A business must report its income, assets, liabilities and equity separate from the owner of that business.

Question 4

An asset exchange transaction does not affect the total amount of claims to a company's assets.

Question 5

In a market, consumers are resource providers.

Question 6

Borrowing money from the bank is an example of an asset source transaction.

Question 7

Accounts are subclassifications of the various elements of the financial statements.

Question 8

The four financial statements prepared by a business bear no relationship to each other.

Question 9

In a market, a company that manufactures cars would be referred to as a conversion agent.

Question 10

Financial accounting information is usually more detailed than managerial accounting information.

Question 11

A business's creditors have a priority claim to its assets in the event of liquidation.

Question 12

Equity represents the future obligations of a business entity.

Question 13

The types of resources needed by a business are financial, physical, and capital resources.

Question 14

The Financial Accounting Standards Board is an agency of the US government with authority for establishing accounting standards for businesses in the US.

Question 15

A business's temporary accounts include revenues, expenses, and retained earnings.

Question 16

The accounting term "reliability" refers to information that is consistent from one accounting period to the next.

Question 17

Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States?

A)Internal Revenue Service.
B)U.S. Congress.
C)Financial Accounting Standards Board.
D)International Accounting Standards BoarD.The Financial Accounting Standards Board is a privately funded group charged with establishing accounting standards for the U.S. It is not a branch of the U.S. government.

Question 18

Both liabilities and equity are sources of a business's assets.

Question 19

Retained earnings reduces a company's commitment to use its assets for the benefit of its stockholders.

Question 20

The Jefferson Company is a manufacturer of antique reproduction furniture. Which term best describes Jefferson's role in society?

A)Consumer
B)Regulatory Agency
C)Conversion Agent
D)Resource Owner

Question 21

Which of the following is not an element of the financial statements?

A)Cash
B)Revenue
C)Assets
D)Distributions

Question 22

"GAAP" stands for

A)Government Authorized Accounting Procedures
B)Generally Applied Accounting Procedures
C)Generally Accepted Accounting Principles
D)Generally Authorized Auditing Principles

Question 23

As of December 31, 2013, Bloch Company had $3,800 of assets, $1,600 of liabilities and $700 of retained earnings. The balance in the common stock account on the December 31, 2013 balance sheet was

A)$2,900
B)$3,800
C)$1,500
D)none of the above

Question 24

Which type of accounting information is intended to satisfy the needs of external users of accounting information?

A)Cost accounting
B)Financial accounting
C)Tax accounting
D)Managerial accounting

Question 25

During 2013, Bledsoe Company earned $6,700 of cash revenue, paid cash dividends of $950 to owners and paid $5,000 for cash expenses. Liabilities were unchanged. Which of the following accurately describes the effect of these events on the elements of the company's financial statements?

A)Assets increased by $7,700.
B)Assets increased by $750.
C)Equity increased by $2,700.
D)Both B and C

Question 26

Which resource provider typically receives first priority when resources are divided as part of a business's liquidation?

A)The company's managers
B)Stockholders
C)Creditors
D)Owners

Question 27

Varghese Company paid cash to purchase land. As a result of this accounting event

A)total assets decreased.
B)total assets were unaffected.
C)total equity decreased.
D)none of these.

Question 28

On January 1, 2013, Baird Company had beginning balances as follows: Assets = $2,250
Liabilities = $620
Common Stock = $800
During 2013, Baird paid dividends to its stockholders of $900. Given that ending retained earnings was $600, what was Baird's net income for the 2013 accounting period?

A)$770
B)$830
C)$1,250
D)$500

Question 29

Which of the following items is an example of revenue?

A)Cash received from a bank loan
B)Cash received from customers at the time services were provided
C)Cash investments made by owners
D)All of these

Question 30

The balance sheet of the Chesapeake Company contained the following accounts and balances: Based on the above information only, the amount or balance for Land must be

A)$450
B)$750
C)$150
D)$1,350

Question 31

Managerial accounting provides information primarily to which of the following groups or individuals?

A)Internal users
B)Shareholders
C)External users
D)Both A and B

Question 32

If Boyd Company reported assets of $500 and liabilities of $200, Boyd's total claims totaled

A)$300.
B)$500.
C)$700.
D)none of the above.

Question 33

The total equity of Timberlake Company at the beginning of 2013 amounted to $5,500. During 2013 the company reported net income of $1,800 and paid a $500 dividend. If retained earnings at the end of 2013 is $2,200, what was beginning common stock?

A)$3,300
B)$2,800
C)$1,300
D)$4,600

Question 34

The transaction, "earned cash revenue," affects which two accounts?

A)Revenue and Salaries Expense
B)Cash and Notes Payable
C)Cash and Revenue
D)Cash and Dividends

Question 35

Which of the following is NOT an asset use transaction?

A)Paying cash to purchase land
B)Paying cash expenses
C)Paying off the principal of a loan
D)All of the above are asset use transactions

Question 36

A company mistakenly recorded a cash purchase of land as an expense. As a result of this error

A)Assets were understated and equity was overstated.
B)Assets and equity were understated.
C)Assets and equity were overstated.
D)Assets were overstated and equity was understateD.If the transaction had been recorded correctly, one asset (land) would have increased and another asset (cash) would have decreased, causing no net change in total assets. As the transaction was recorded, the asset cash decreased and the expense caused equity to decrease as well. Therefore, assets and equity were understated.

Question 37

If a company's total assets decreased while liabilities and common stock were unchanged, and no dividends were paid, then

A)cash flow from operating activities was greater than cash flow from investing activities.
B)retained earnings were less than net income during the period.
C)revenues were less than expenses.
D)the company must have purchased assets with cash.

Question 38

"IASB" stands for

A)Internal Accounting Standards Board
B)Internationally Authorized Statements Board
C)International Accounting Standards Board
D)Initial Accounting Statements Bureau

Question 39

At the end of 2013, retained earnings for the Bisk Company was $1,750. Revenue earned by the company in 2013 was $2,000, expenses paid during the period were $1,100, and dividends paid during the period were $500. Based on this information alone, retained earnings at the beginning of 2013 was

A)$850.
B)$2,150.
C)$1,350.
D)$4,000.

Question 40

Vandever Company's balance sheet reported assets of $42,000, liabilities of $15,000 and common stock of $12,000 as of December 31, 2012. If Retained Earnings on the December 31, 2013 balance sheet is $18,000 and Vandever paid a $14,000 dividend during 2013, then the amount of net income for 2013 was which of the following?

A)$17,000
B)$15,000
C)$3,000
D)None of these

Question 41

Grant Company purchased a delivery van for cash. The cash flow from this event should be shown on the statement of cash flows as

A)an operating activity that increases cash.
B)a financing activity that decreases cash.
C)an investing activity that decreases cash.
D)an operating activity that decreases cash.

Question 42

Petras Company's net cash inflow from operating activities for 2012 is

A)$600.
B)$550.
C)$350.
D)$300.

Question 43

Which financial statement matches asset increases from operating a business with asset decreases from operating the business?

A)Balance sheet.
B)Statement of changes in equity.
C)Statement of cash flows.
D)Income statement.

Question 44

Young Company provided services to a customer for $6,500 cash. As a result of this event,

A)total assets decreased.
B)total liabilities increased.
C)net income increased.
D)cash flow from financing activities increaseD.Providing services to a customer for cash increases assets and equity on the balance sheet. It also increases revenue, and therefore, net income on the income statement, and increases cash from operating activities on the statement of cash flows.

Question 45

What is Yi's net cash flow from investing activities?

A)Inflow of $40,000
B)Outflow of $37,000
C)Inflow of $28,000
D)Outflow of $12,000

Question 46

Which of the following statements is true?

A)Balance sheet accounts are referred to as nominal accounts.
B)Balance sheet accounts are referred to as permanent accounts.
C)Dividends are permanent accounts.
D)All of these statements are true.

Question 47

Which of the following describes the effects of an asset use transaction on a company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 48

Which of the following items appears in the investing activities section of the statement of cash flows?

A)Cash outflow for the purchase of a computer.
B)Cash inflow from the issuance of common stock.
C)Cash outflow for the payment of dividends.
D)Cash inflow from interest revenue.

Question 49

What is Yi's cash flow from financing activities?

A)Inflow of $37,000
B)Outflow of $15,000
C)Inflow of $47,000
D)Outflow of $3,000

Question 50

Borrowing cash from the bank is an example of which type of transaction?

A)Asset exchange
B)Claims use
C)Asset use
D)Asset source

Question 51

Which of the following financial statements provides information about a company as of a specific point in time?

A)Income statement
B)Statement of changes in equity
C)Statement of cash flows
D)Balance sheet

Question 52

Based on this information, the amount of expenses on Greenway's income statement was

A)$7,000.
B)$7,750.
C)$14,000.
D)$3,250.

Question 53

Jacks Company had a net increase in cash from operating activities of $8,000 and a net decrease in cash from financing activities of $1,000. If the beginning and ending cash balances for the company were $3,000 and $11,000, then net cash change from investing activities was:

A)an outflow or decrease of $1,000.
B)an inflow or increase of $2,000.
C)an inflow or increase of $1,000.
D)zero.

Question 54

In which section of a statement of cash flows would the payment of cash dividends be reported?

A)Financing activities.
B)Operating activities.
C)Purchasing activities.
D)Investing activities.

Question 55

Which of the following could describe the effects of an asset exchange transaction on a company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 56

The amount of liabilities reported on the end-of-period balance sheet was

A)$10,750.
B)$11,250.
C)$8,000.
D)$8,750.

Question 57

Callahan Company earned $1,500 of cash revenue, paid $1,000 for cash expenses, and paid a $200 cash dividend to its owners. Which of the following statements is true?

A)The net cash flow from operating activities was $500.
B)The net cash flow from investing activities was an outflow or decrease of $200.
C)The net cash flow from operating activities was $300.
D)Cash flows from financing activities were unchangeD.Cash revenue and cash expenses are operating activities. Paying dividends is a financing activity. $1,500 revenue - $1,000 expense = $500 cash inflow from operating activities.

Question 58

During 2013, Chi Company earned $950 of cash revenue, paid $600 of cash expenses, and paid a $100 cash dividend to its owners. Based on this information alone,

A)net income amounted to $350.
B)total assets increased by $250.
C)cash inflow from operating activities was $350.
D)all of these are correct.

Question 59

What is Yi's net cash flow from operating activities?

A)Inflow of $5,000
B)Inflow of $8,000
C)Inflow of $17,000
D)Inflow of $33,000

Question 60

Retained Earnings at the beginning and ending of the accounting period was $300 and $700, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, expenses for the period must have been

A)$500.
B)$400.
C)$900.
D)$700.

Question 61

Falcon Company earned $15,000 of cash revenue. Which of the following choices accurately reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 62

The total in Petras' retained earnings account BEFORE closing in 2012 is

A)$0.
B)$300.
C)$350.
D)none of the above

Question 63

Richardson Company paid $850 cash for rent expense. As a result of this business event,

A)Total assets decreased.
B)Liabilities decreased.
C)The net cash flow from operating activities decreased.
D)Both A and C are correct.

Question 64

Mineola Company paid $30,000 cash to purchase land. As a result of this business event,

A)Total equity was not affected.
B)The net cash flow from investing activities decreased.
C)Total assets were not affected.
D)All of the above are correct.

Question 65

The amount of total equity on Petras' 2012 balance sheet is

A)$1,250.
B)$900.
C)$300.
D)$1,300.

Question 66

The amount of retained earnings on La Paz's 2012 balance sheet was

A)$3,100.
B)$2,700.
C)$300.
D)$700.

Question 67

Dividends paid by a company are shown on the

A)income statement.
B)statement of changes in stockholders' equity.
C)statement of cash flows.
D)both b and C.Although the dividends account is a temporary account, dividends are not included on the income statement. They are, however, reported as a deduction from retained earnings on the statement of changes in stockholders' equity and as a cash outflow for financing activities on the statement of cash flows.

Question 68

George Company was started on January 1, 2013, when it acquired $8,000 cash by issuing common stock. During 2013, the company earned cash revenues of $3,500, paid cash expenses of $2,750, and paid a cash dividend of $300. Based on this information,

A)The December 31, 2013 balance sheet would show total equity of $11,500.
B)The 2013 income statement would show net income of $450.
C)The 2013 statement of cash flows would show net cash inflow from operating activities of $750.
D)The 2013 statement of cash flows would show a net cash flow from financing activities of $8,000.

Question 69

The net cash flow from financing activities on La Paz's 2013 statement of cash flows was

A)$1,440 inflow
B)$1,440 outflow
C)$500 inflow
D)$140 outflow

Question 70

Liabilities are shown on the

A)income statement.
B)balance sheet.
C)statement of cash flows.
D)statement of changes in stockholders' equity.

Question 71

Freed Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 72

The amount of retained earnings on Petras's 2013 balance sheet is

A)$915.
B)$890.
C)$590.
D)$690.

Question 73

Expenses are shown on the

A)balance sheet.
B)income statement.
C)statement of changes in stockholders' equity.
D)both b and C.Expenses and revenues are reported on the income statement. Only permanent accounts are shown on the balance sheet. Net income is shown on the statement of stockholders' equity, but expenses are not.

Question 74

As of December 31, 2012, Montross Company had $400 cash. During 2013, Montross earned $1,200 of cash revenue and paid $800 of cash expenses. The amount of cash shown on the 2013 balance sheet would be

A)$300.
B)$800.
C)$1,100.
D)$2,400.

Question 75

Jiminez Company paid a $300 cash dividend. Which of the following choices accurately reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 76

The amount of assets on Petras's 2013 balance sheet is

A)$2,165.
B)$390.
C)$2,065.
D)$395.

Question 77

Which of the following items would appear in the cash flow from the financing activities section of a statement of cash flows?

A)Paid cash for expenses.
B)Loaned cash to another company.
C)Sold land for cash.
D)Paid cash for dividends.

Question 78

The net cash inflow from financing activities on Petras's 2013 statement of cash flows is

A)$5.
B)$325.
C)$225.
D)$955.

Question 79

The amount of liabilities on La Paz's 2013 balance sheet was

A)$900.
B)$500.
C)($1,300).
D)$240.

Question 80

The amount of total assets on La Paz's 2012 balance sheet was

A)$6,000.
B)$5,500.
C)$800.
D)$3,800.