Exam 1: Accounting in Business

A parcel of land is offered for sale at $600,000, is assessed for tax purposes at $500,000, is recognized by its purchasers as easily being worth $575,000, and is sold for $570,000. At what amount should the land be recorded in the purchaser's books? What accounting principle supports your answer?

Generally the lower the risk, the lower the return that can be expected.

The balance sheet is based on the accounting equation.

The ______________ assumption assumes business will continue operating indefinitely instead of being closed or sold.

Net income occurs when revenues exceed expenses.

Ending capital reported on the statement of changes in equity is calculated by adding owner investments and net losses and subtracting net incomes and withdrawals.

In the U.S., the Securities and Exchange Commission (SEC) is a government agency that has legal authority to establish GAAP.

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called:

A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of owner's equity?

Liabilities are the owner's claim on assets.

If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000 during the same period, did the assets of the company increase or decrease? By what amount?

Use the following information as of December 31 to determine equity.

Identifying the proper ethical path is easy.

The income statement displays revenues earned and expenses incurred over a specified period of time due to earnings activities.

As a general rule, revenues should not be recognized in the accounting records until it is received in cash.

Match the following terms with the appropriate definition.

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

Creditors' claims on the assets of a company are called:

An example of a financing activity is:

Identify the users and uses of accounting information.