Exam 1: Introduction to Accounting and Business

Four financial statements are usually prepared for a business.The statement of cash flows is usually prepared last.The retained earnings statement (RES),the balance sheet (B),and the income statement (I)are prepared in a certain order to obtain information needed for the next statement.In what order are these three statements prepared?

An account receivable is typically classified as a revenue.

A summary of cash flows for Linda's Design Services for the year ended December 31 is shown below. ​ ​ Prepare a statement of cash flows for Linda's Design Services for the year ended December 31.

Using the following accounts and their amounts,prepare in good format a statement of retained earnings for Bright Futures Company for the month ended August 31.

Which of the following is not a role of accounting in business?

Proprietorships are owned by one owner and provide only services to their customers.

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2,respectively.In contrast,Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period. ​ REQUIRED: Based on this information,which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

At the end of its accounting period,December 31,of Year 1,Hsu's Financial Services has assets of $575,000 and stockholders' equity of $335,000.Using the accounting equation and considering each case independently,determine the following amounts. ​ (a)Hsu's liabilities as of December 31,of Year 1. (b)Hsu's liabilities as of December 31,of Year 2,assuming that assets increased by $56,000 and shareholders' equity decreased by $32,000. (c)Net income or net loss during Year 2,assuming that as of December 31,Year 2,assets were $592,000, liabilities were $450,000,and there were no additional investments or dividends.

A business paid $7,000 to a creditor in payment of an amount owed.The effect of the transaction on the accounting equation was to

The measurement principle requires that

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time,such as a month or year,is called a(n)

Which of the following would not normally operate as a service business?

Liabilities are reported on the

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.

Cash dividends

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

The business entity assumption means that

Proper ethical conduct implies that you only consider what's in your best interest.

The role of accounting is to provide many different users with financial information to make economic decisions.

Which of the following is a manufacturing business?