Exam 1: Accounting in Business

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

Explain the accounting equation and define its terms.

The following schedule reflects shows the first month's transactions of the Green Construction Company, owned by Jennifer Green: Provide descriptions for each transaction.

External users include lenders, shareholders, customers, and regulators.

Which of the following accounts is not included in the asset section of the balance sheet?

The term ________ refers to a liability that promises a future outflow of resources.

Zippy had cash inflows from operations $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:

Liabilities are the owner's claim on assets.

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

The basic financial statements include all of the following except:

On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of May 31 of the current year?

Revenues are increases in equity (via net income) from a company's sales of products and services to customers.

Internal users include lenders, shareholders, brokers and nonexecutive employees.

Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

In a business decision where there are ethical concerns, the preferred course of action should be one that:

Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or withdrawals by the owner.

Match the following definitions with terms 1 through 8. Place the letter that identifies the best definition in the blank space next to the term. ____ 1. Generally accepted accounting principles ____ 2. Time period assumption ____ 3. Statement of owner's equity. ____ 4. Balance sheet ____ 5. Objectivity principle ____ 6. Measurement (Cost) principle ____ 7. Securities and Exchange Commission ____ 8. IASB ____ 9. Full disclosure principle ____ 10. Statement of cash flows a. Prescribes that assets and services to be recorded initially on a cash or equal-to-cash basis. b. A principle that requires the information in financial statements to be supported by independent unbiased evidence. c. An independent group consisting of individuals from many countries that identify preferred accounting practices. d. Presumes that the life of a company can be divided into periods for reporting purposes. e. The concepts and rules that govern financial accounting. $110$ $\text { Copyright@ McGraw-Hil Education.All rights re sened. No reproduction or distribution without the prior wrikten consent of McGraw-Hill Education. }$ f. A financial statement that reports the changes in equity over the reporting period; including increases such as owner investment and net income and for decreases such as owner withdrawals or net loss. g. A report that identifies cash receipts and cash payments over a period of time. h. Prescribes that a company report the details behind financial statements that would impact user decisions. i. The governmental agency that has the legal authority to establish accounting rules. j. A report that describes a company's financial position at a point in time.