Exam 1: Uses of Accounting Information and the Financial Statements

Which of the following is an example of a financing activity?

The purchase of equipment is an example of a financing activity.

Financial accounting information is used primarily by management.

A company's management information system is a subsystem of its accounting information system.

Match each definition with the correct term below. -Audit 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.

Knowledge of the exchange rate is necessary to apply the money measure concept in case of international transactions.

The topic of foreign exchange rates relates most closely to the concept of

Which of the following accounts is not considered an asset?

In general,any partner can obligate the partnership to another party.

The most important body for developing rules on accounting practice is currently the

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 Common Stock account were $59,000,what would be the balance of the Building account?

Fraudulent financial reporting can result from the misapplication of accounting principles.

Which of the following is a regulatory agency of the U.S.government?

One way of stating the accounting equation is: Assets + Stockholders' Equity = Liabilities.

Match each definition with the correct term below. -Business transactions 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.

Stockholder's equity is another term for retained earnings.

What is independence,and why is it important for a Certified Public Accountant (CPA)to maintain it when conducting an audit?

The best definition of assets is the

The Internal Revenue Service is an agency of the federal government that has the legal power to set and enforce accounting practices for companies.

If a corporation has suffered only net losses since its inception,the Retained Earnings account will have a positive balance.