Chapter 1 Study Guide
ch1
Student: ___________________________________________________________________________
1.
A business entity's accounting system creates financial accounting reports which are provided to external decision makers. True False
2.
Business managers utilize managerial accounting reports to plan and manage the daily operations. True False
3.
The balance sheet includes assets, liabilities and stockholders' equity as of a point in time. True False
4.
Revenue is recognized within the income statement during the period in which cash is collected. True False
5.
Total assets are $37,500, total liabilities are $20,000 and contributed capital is $10,000; therefore, retained earnings are $7,500. True False
6.
The income statement is a measure of an entity's economic performance for a period of time. True False
7.
The accounting equation states that Assets = Liabilities + Stockholders' Equity. True False
8.
A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because the notes provide useful supplemental information. True False
9.
The financial statement that shows an entity's economic resources and claims against those resources is the balance sheet. True False
10. Assets are initially recorded on the balance sheet at the total cost paid to acquire the asset. True False
11. Stockholders' equity on the balance sheet consists of contributed capital and retained earnings. True False
12. The amount of cash paid by a business for dividends would be reported on the statement of cash flows as an operating activity. True False
13. A company's retained earnings balance increased $50,000 last year; therefore, net income last year must have been $50,000. True False
14. The statement of retained earnings explains the change in the retained earnings balance caused by stockholder investments and dividend declarations. True False
15. The
Student: ___________________________________________________________________________
1.
A business entity's accounting system creates financial accounting reports which are provided to external decision makers. True False
2.
Business managers utilize managerial accounting reports to plan and manage the daily operations. True False
3.
The balance sheet includes assets, liabilities and stockholders' equity as of a point in time. True False
4.
Revenue is recognized within the income statement during the period in which cash is collected. True False
5.
Total assets are $37,500, total liabilities are $20,000 and contributed capital is $10,000; therefore, retained earnings are $7,500. True False
6.
The income statement is a measure of an entity's economic performance for a period of time. True False
7.
The accounting equation states that Assets = Liabilities + Stockholders' Equity. True False
8.
A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because the notes provide useful supplemental information. True False
9.
The financial statement that shows an entity's economic resources and claims against those resources is the balance sheet. True False
10. Assets are initially recorded on the balance sheet at the total cost paid to acquire the asset. True False
11. Stockholders' equity on the balance sheet consists of contributed capital and retained earnings. True False
12. The amount of cash paid by a business for dividends would be reported on the statement of cash flows as an operating activity. True False
13. A company's retained earnings balance increased $50,000 last year; therefore, net income last year must have been $50,000. True False
14. The statement of retained earnings explains the change in the retained earnings balance caused by stockholder investments and dividend declarations. True False
15. The