Terms in this set (35)
Dual effect of transactions
For every transaction recorded, the total dollar amount of the changes on the left side of the equation must equal the total dollar amount of the changes on the right side of the equation.
Historical Cost concept
Transactions are recorded based on the amount of money exchanged (the cost) at the time the transaction occurred
An exchange of property or service by a company with another entity
revenue recording (accrual accoutning)
A company records revenues when it makes a sale or performs a service rather than when it receives the cash payment from its customer
A company records the expenses incurred to earn revenue in the same time period in which it earns and records the related revenue
Monetary unit concept
All transactions are recorded in terms of money - in the U.S., the dollar
The time span for which a company reports its revenues and expenses.
1. The overall purpose of the Securities and Exchange Commission is to oversee the
external financial reporting of all publicly-owned corporations
2. As a result of the Sarbanes-Oxley Act, each company that is overseen by the SEC must have a code of ethics that
4. specifically outlines ethical and unethical conduct for its financial officers.
3. Revenues represent
3. the sum of the selling prices of all the goods sold to the customers during the year of the income statement
Assets listed on a company's balance sheet are
resources that the company has on hand on the date of the balance sheet that are available to use after that date
5. Which of the following statements is true regarding sole proprietorships, partnerships, and corporations?
4. Corporations get more press from the business media than sole proprietorships and partnerships because their sales revenues are much higher and because they control a lot more of the world's resources.
6. Factors that distinguish members of a profession, such as accounting, from people who hold other jobs or careers include all of the following except
2. high level of training or skill required of members
7. The purpose of an audit of a company's financial statements by an independent Certified Public Accountant is to
4. provide an opinion to the public about whether the company's financial statements fairly represent the results of the company's activities during the time period of the financial statements
8. An audit of a company's financial statements requires that the auditor
4. use inductive logic because the auditor must make a judgment about the company's financial statements after sampling the company's transactions for the time period represented on the company's financial statements
9. The following comments were heard in Cornell Hall the other day. Which comment probably describes the least creative person?
When I asked why we have to use pencils on all his exams, he said it's because that's the way it's always been done.
Fixed costs behave in all of the following ways except
increase in total as a company's sales volume increases
11. A company breaks even in all of the following cases except
Its total revenues exactly equal its fixed costs
12. If a company's fixed cost increases and nothing else changes, which of the following will happen?
4. The company will have to sell more products in order to achieve its target profit
13. Which of the following is the best response to this pricing model: "It's OK to sell products for less than what you paid for them because that will bring you more customers."
4. Disagree - the more the company sells, the bigger its loss will be.
14. The operating cycle of a company is the
2. time it takes to use cash to develop a product or service, sell it, and collect from the customers
15. Which of the following would you expect to find in a cash (CFS) budget?
4. how much cash related to sales that the company expects to collect in the budget period
16. Aaron's Skiwear uses a calendar year. The company's third quarter consists of which months?
3. July, August, September
Which of the following statements is true about companies in the United States?
Corporations earn more combined revenue than companies with any other form of business organization
Toy Emporium has a fiscal year that begins May 1. The company's third quarter consists of which months?
November, December, January
Generally accepted accounting principles
Are agreed-upon principles that help external users understand the meaning of public companies' accounting information
The governmental organization responsible for overseeing the financial statements of publicly-owned companies and which also has the legal authority to establish accounting regulations for those companies is the
Securities Exchange Commission (SEC)
Which of the following statements about audited financial statements is NOT true?
The financial statements are the responsibility of the company's auditors
When the variable cost per unit decreases, the number of units that must be sold to break-even:
The breakeven-point is the sales volume where:
Which of the following statements is true about business plans?
A company should create or revise its business plan on a regular basis
Which of the following is not a source of data for the cash budget?
The budgeted income statement
Which of the following budgets would NOT be useful in preparing a company's projected income statement?
If a company plans to raise the selling price of its product, which of the following budget schedules would not be affected by this decision? (Assume that the price change will have no effect on the projected sales quantity.)
ABC Chewing Gum Inc. makes a sale on credit to a customer, and the customer will pay for the purchase two months from now. ABC records the expenses involved in making the sale in the same period as the sale, according to the: