Exam 1: Uses of Accounting Information and the Financial Statements

Companies listed on the stock exchanges are regulated by the

A partnership is not dissolved when any partner leaves the business or dies.

Creditors are those who lend money to others or deliver goods and services before being paid.

Generally accepted accounting principles (GAAP)encompass the conventions,rules,and procedures necessary to define accepted accounting practice at a particular time.

Palm Textile Corporation had the following balance sheet accounts and balances: Accounts Payable \ 12,000 Common Stock ? Accounts Receivable 2,000 Equipment \ 14,000 Building ? Land 14,000 Cash 6,000 Retained Earnings 4,000 If the balance of the Building account were $30,000 and if the equipment were sold for $14,000 cash,what would be the total of stockholders' equity?

Match each definition with the correct term below. -Retained earnings A.The group of people who are responsible for ensuring that a company meets its goals of profitability and liquidity. B.A unit of ownership in a corporation. C.The inflows and outflows of cash into and out of a business. D.An information system that measures,processes,and communicates financial information about an economic entity. E.A set of practices that has been developed to provide guidelines for financial accounting. F.The value of one currency in terms of another. G.The government body that regulates the issuing,buying,and selling of stocks in the United States. H.The ability to earn enough income to attract and hold investment capital. I.The oversight of a corporation's management and ethics by its board of directors. J.The accumulated earnings generated by a business's income-producing activities less amounts that have been paid out to the stockholder's. k.KEconomic events that affect a business's financial position. L.An examination of a company's financial statements and the accounting systems,controls,and records that produced them.

Exchange rates for currency change daily according to the supply and demand for each currency.

Which of the following is a regulatory agency?

A primary user of accounting information with a direct financial interest in the business is a(n)

Which of the following financial ratios has not been shown to be most predictive of company performance?

Profitability means having enough funds on hand to pay debts when they fall due.

Match each definition with the correct term below. -Exchange rate A.The group of people who are responsible for ensuring that a company meets its goals of profitability and liquidity. B.A unit of ownership in a corporation. C.The inflows and outflows of cash into and out of a business. D.An information system that measures,processes,and communicates financial information about an economic entity. E.A set of practices that has been developed to provide guidelines for financial accounting. F.The value of one currency in terms of another. G.The government body that regulates the issuing,buying,and selling of stocks in the United States. H.The ability to earn enough income to attract and hold investment capital. I.The oversight of a corporation's management and ethics by its board of directors. J.The accumulated earnings generated by a business's income-producing activities less amounts that have been paid out to the stockholder's. k.KEconomic events that affect a business's financial position. L.An examination of a company's financial statements and the accounting systems,controls,and records that produced them.

All public accountants but not management accountants are required to adhere to a code of professional conduct.

Which of the following assets could be described as nonphysical?

The statement of retained earnings relates the income statement to the balance sheet by showing how the Retained Earnings account changed during the accounting period.

Which of the following transactions involves an exchange of value?

At the beginning of the year,Catoosa Corporation's assets were $300,000 and its stockholders' equity was $200,000.During the year,assets decreased $60,000 and liabilities increased $30,000.What was the stockholders' equity at the end of the year?

Match each definition with the correct term below. -Share of stock A.The group of people who are responsible for ensuring that a company meets its goals of profitability and liquidity. B.A unit of ownership in a corporation. C.The inflows and outflows of cash into and out of a business. D.An information system that measures,processes,and communicates financial information about an economic entity. E.A set of practices that has been developed to provide guidelines for financial accounting. F.The value of one currency in terms of another. G.The government body that regulates the issuing,buying,and selling of stocks in the United States. H.The ability to earn enough income to attract and hold investment capital. I.The oversight of a corporation's management and ethics by its board of directors. J.The accumulated earnings generated by a business's income-producing activities less amounts that have been paid out to the stockholder's. k.KEconomic events that affect a business's financial position. L.An examination of a company's financial statements and the accounting systems,controls,and records that produced them.

Objectivity means carrying out one's professional responsibilities with competence and diligence.

The purpose of an audit is to