Accounting 153 Quiz 1 Chapters 1 and 2

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alexbura
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Accounting 153 Quiz 1 Chapters 1 and 2
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2013-02-05 01:53:05
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  1. What is the first financial statement should you make?

    Pweesh describe the header :)
    Income Statement

    • SIERRA CORPORATION
    •      Income Statement
    • For the Month Ended October 31,2012
  2. How do you perpare an income statement??
    You take all Revenues and apply them under the Revenues tab.

    Then you take all expenses and place them under the expenses tab.

    Finally you subtract total revenue from total expenses.

    Which will give either give you a Net Income or Net Loss.



    Header

    • Revenues
    •   Service Revenues                      $ 10,000

    • Expenses
    •   Salaries Expense        $ 4,000
    •   Supplies Expense          2,000
    •   Rent Expense               1,000
    •       Total expense                        7,000
    • Net Income                                 $3,000
    •                                                   _____
  3. What does a balance sheet communicate to its user?
    Balance sheets report assets and claims to assets at a specific point in time
  4. Balance Sheet
    A financial statement that reports the assets and claims to those assets at a specific point in time.

    A balance sheet describes all of a companies assets and liabilities at a certain point in time.

    • In the balance sheet the users see's 
    • all of a companies assets (accounts receivable, cash,inventories, supplies,buildings and non tangible assets).

    The balance sheet also has the claims to those assets under the section 

    Liabilities and Stockholders' Equity

    In this section of the balance sheet the user see's Liabilities (which are basically bills that a company must pay to its creditors (Bank).

    Examples of this include: Notes Payable and Accounts Payable.


    Don't worry about how these two are different.

    the second section of the Liabilities and Stock holder's of a balance sheet is the

    Stockholders' Equity Section

    In this section the users see Common Stock and Retained Earnings.

    Common stock is the total amount of money brought into the company by investors (stockholders)

    While the Retained earnings represents the amount of Net income that the company has kept for itself. 
  5. Describe an Income Statement
    An Income Statement is used to describe how much money or how much money has been lost by a company within a certain time period either a calender year or fiscal year

    An income statement shows how much money a company has earned minus total expenses
  6. Dividends
    Payments of cash from a corporation to its stockholders.

    Dividends are not payouts to employees
  7. Expense
    Expenses are the cost of assets consumed in the processes of generating revenue.

    I.e; the cost of supplies,the cost of employees, the cost of rent, the cost of insurance, 
  8. Retained earnings
    retained earnings is the amount of money that is reinvested into the corporation
  9. Describe three forms of buisnesses
    • Sole
    • -owned by one person
    • -get tax breaks

    • Partnership
    • -owned by more then one person
    • -get tax breaks

    • Corporation
    • -seprate legal entity owners not liable
    • -pay high taxes
  10. Users of accounting information
    Internal users: managers for the corporation use this information to plan ,organize and run business operations.

    External Users: include investors and creditors. Investors (stockholders), Creditors (banks and suppliers) use this information to decide whether they want to grant credit or loan money to a business.
  11. Explain the three principle activities of a business
    Financing

    -collecting the necessary funds to support the business.

    Investing activities

    -acquiring the resources necessary to run the business.

    Operating activities:

    -putting the resources of the business into action in order to generate a profit (day to day activities)
  12. Describe the three types of financial statements and their purpose
    Income Statement:

    - Presents the revenues and expenses of a company for a specific period of time. 

    Retained Earnings

    -Summarizes the changes in retained earnings that have occurred for a specific period of time; either a calender year or a fiscal year

    Balance Sheet

    -Reports the assets,liabilities, and stockholders' equity of a business at a specific date.
  13. Basic Accounting Equation
    Assets = Liabilities + Stock holders Equity

    Liabilities - Assets = Stockholders' Equity
  14. Define Stockholders' Equity
    An owners claim to the company.
  15. Common Stock
    A term to represent the total amount paid in by stockholders

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