ACCT 201a, Test 1, Ch. 1-4 QUESTIONS
& ANSWERS(RATED A+)
What did the Sarbanes- Oxley Act (SOX) create? - ANSWER-was passed by
congress to reduce unethical corporate behavior and decrease likelihood of future
corporate scandals
-as a result, increased independence of outside auditors who review accuracy of
corporate financial statements.
-Also, management must now certify the accuracy of financial info.
what are operating activities? - ANSWERprimary activities for which the organization
is in business
-revenue, expenses, net income, and net loss
what are creditors? - ANSWERpersons or entities to whom the company owes
money
what are bonds payable? - ANSWERdebt securities sold to investors that must be
repaid at a particular date some years in the future
-liability
what are financing activities? - ANSWER-borrowing from creditors
----liabilities are amounts owed to creditors
----note payable (bank loan)
----bonds payable (debt securities)
-selling shares of stock to investors
----common stock(total amount paid in by stockholders for the shares they
purchased)
----dividends (payments to stockholders)
what are investing activities? - ANSWER-purchase of resources (assets) needed to
operate the business
-land, building, equipment, cash, and investments in debt or equity securities of
another company
What is an income statement and what does it consist of? - ANSWER-report's a
company's revenues and expenses and resulting net income or loss for a specific
PERIOD of time
only consist of revenue - expenses = net income
What is a retained earnings statement and what does it consist of? - ANSWER-
shows the amounts and causes of changes in retained earnings for a specific period
of time. (same as covered in income statement)
, starts with retained earnings (beginning of time period), add net income, subtract
dividends, gives retained earnings (end of time period)
What is a balance sheet and what does it consist of? - ANSWER-reports assets and
claims to assets(liabilities and stockholders equity) at a specific POINT in time
known as "balance" sheet because the assets must equal the liabilities +
stockholders equity
what is the basic accounting equation? - ANSWERassets = liabilities + stockholders'
equity
What is a statement of cash flows and what does it consist of? - ANSWER-to provide
financial information about the cash receipts and cash payments of a business for a
specific period of time
-reports cash effects of a company's operating, investing, and financing activities
What is a classified balance sheet? - ANSWERhelps users evaluate:
--the company's ability to pay its debts
--the claims of short-term and long-term creditors
what are the balance sheet standard classifications? - ANSWERassets
-current assets
-long-term investments
-property, land, and equipment
-intangible assets
liabilities and stockholders equity
-current liabilities
-long-term liabilities
-stockholders equity
what are current assets? - ANSWER-assets that are expected to be converted to
cash or used in the business within a short period of time, usually one year
-ex: cash, short-term investments, receivables, inventories, supplies and prepaid
expenses
what are long-term investments? - ANSWER-assets that can be converted into cash,
but is not expected within one year
-ex: stock investments or bonds, investment in real estate, investments in securities
what are property, plant, and equipment? - ANSWER-assets with relatively long
useful lives
-ex: land, buildings, machinery, delivery equipment, and furniture and fixtures
what are intangible assets? - ANSWER-rights, privileges, and competitive
advantages that have no physical substance
-ex: franchises, patents, copyrights and trademarks
& ANSWERS(RATED A+)
What did the Sarbanes- Oxley Act (SOX) create? - ANSWER-was passed by
congress to reduce unethical corporate behavior and decrease likelihood of future
corporate scandals
-as a result, increased independence of outside auditors who review accuracy of
corporate financial statements.
-Also, management must now certify the accuracy of financial info.
what are operating activities? - ANSWERprimary activities for which the organization
is in business
-revenue, expenses, net income, and net loss
what are creditors? - ANSWERpersons or entities to whom the company owes
money
what are bonds payable? - ANSWERdebt securities sold to investors that must be
repaid at a particular date some years in the future
-liability
what are financing activities? - ANSWER-borrowing from creditors
----liabilities are amounts owed to creditors
----note payable (bank loan)
----bonds payable (debt securities)
-selling shares of stock to investors
----common stock(total amount paid in by stockholders for the shares they
purchased)
----dividends (payments to stockholders)
what are investing activities? - ANSWER-purchase of resources (assets) needed to
operate the business
-land, building, equipment, cash, and investments in debt or equity securities of
another company
What is an income statement and what does it consist of? - ANSWER-report's a
company's revenues and expenses and resulting net income or loss for a specific
PERIOD of time
only consist of revenue - expenses = net income
What is a retained earnings statement and what does it consist of? - ANSWER-
shows the amounts and causes of changes in retained earnings for a specific period
of time. (same as covered in income statement)
, starts with retained earnings (beginning of time period), add net income, subtract
dividends, gives retained earnings (end of time period)
What is a balance sheet and what does it consist of? - ANSWER-reports assets and
claims to assets(liabilities and stockholders equity) at a specific POINT in time
known as "balance" sheet because the assets must equal the liabilities +
stockholders equity
what is the basic accounting equation? - ANSWERassets = liabilities + stockholders'
equity
What is a statement of cash flows and what does it consist of? - ANSWER-to provide
financial information about the cash receipts and cash payments of a business for a
specific period of time
-reports cash effects of a company's operating, investing, and financing activities
What is a classified balance sheet? - ANSWERhelps users evaluate:
--the company's ability to pay its debts
--the claims of short-term and long-term creditors
what are the balance sheet standard classifications? - ANSWERassets
-current assets
-long-term investments
-property, land, and equipment
-intangible assets
liabilities and stockholders equity
-current liabilities
-long-term liabilities
-stockholders equity
what are current assets? - ANSWER-assets that are expected to be converted to
cash or used in the business within a short period of time, usually one year
-ex: cash, short-term investments, receivables, inventories, supplies and prepaid
expenses
what are long-term investments? - ANSWER-assets that can be converted into cash,
but is not expected within one year
-ex: stock investments or bonds, investment in real estate, investments in securities
what are property, plant, and equipment? - ANSWER-assets with relatively long
useful lives
-ex: land, buildings, machinery, delivery equipment, and furniture and fixtures
what are intangible assets? - ANSWER-rights, privileges, and competitive
advantages that have no physical substance
-ex: franchises, patents, copyrights and trademarks
