CHAPTER 1 pp
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
,Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
, INTRODUCTION TO FINANCIAL STATEMENTS pp pp pp
CHAPTER LEARNING OBJECTIVES pp pp
1. Identify the forms of business organization and the uses of accounting information.
pp pp pp pp pp pp pp pp pp pp pp
A sole proprietorship is a business owned by one person. A partnership is a business
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
owned by two or more people associated as partners. A corporation is a separate legal
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
entity for which evidence of ownership is provided by shares of stock. Internal users are
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
managers who need accounting information to plan, organize, and run business
pp pp pp pp pp pp pp pp pp pp pp
operations. The primary external users are investors and creditors. Investors
pp pp pp pp pp pp pp pp pp pp
(stockholders) use accounting information to decide whether to buy, hold, or sell shares of
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
a company‘s stock. Creditors (suppliers and bankers) use accounting information to
pp pp pp pp pp pp pp pp pp pp pp
assess the risk of granting credit or loaning money to
pp pp a business. Other groups who
pp pp pp pp pp pp pp pp p p pp pp pp pp
have an indirect interest in a business are taxing authorities, customers, labor unions, and
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
regulatory agencies.
pp pp
2. Explain the three principal types of business activity. Financing activities involve
pp pp pp pp pp pp pp pp pp pp
collecting the necessary funds to support the business. Investing activities involve
pp pp pp pp pp pp pp pp pp pp pp
acquiring the resources necessary to run the business. Operating activities involve putting
pp pp pp pp pp pp pp pp pp pp pp pp
the resources of the business into action to generate a profit.
pp p p pp pp pp pp pp pp pp pp pp
3. Describe the four financial statements and how they are prepared. An income
pp pp pp pp pp pp pp pp pp pp pp
statement presents the revenues and expenses of a company for a specific period of time.
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
A retained earnings statement summarizes the changes in retained earnings that have
pp pp pp pp pp pp pp pp pp pp pp pp
occurred for a specific period of time. A balance sheet reports the assets, liabilities, and
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
stockholders‘ equity of a business at a specific date. A statement of cash flows
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
summarizes information concerning the cash inflows (receipts) and outflows (payments)
pp pp p p pp pp pp pp pp pp pp
for a specific period of time. Assets are resources owned by a business. Liabilities are the
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
debts and obligations of the business. Liabilities represent claims of creditors on the
pp pp pp pp pp pp pp pp pp pp pp pp pp
assets of the business. Stockholders‘ equity represents the claims of owners on the
pp pp pp pp pp pp pp pp pp pp pp pp pp
assets of the business. Stockholders‘ equity is subdivided into two parts: common stock
pp pp pp pp pp pp pp pp pp pp pp pp pp
and retained earnings. The basic accounting equation is Assets = Liabilities +
pp pp pp pp pp pp pp pp pp pp pp pp
Stockholders‘ Equity. Within the annual report, the management discussion and analysis
pp pp pp pp pp pp pp pp pp pp pp
provides management‘s interpretation of the company‘s results and financial position as
pp pp pp pp pp pp pp pp pp pp pp
well as a discussion of plans for the future. Notes to the financial statements provide
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
additional explanation or detail to make the financial statements more informative. The
pp pp pp pp pp pp pp pp pp pp pp pp
auditor‘s report expresses an opinion as to whether the financial statements present fairly
pp pp pp pp pp pp pp pp pp pp pp pp pp
the company‘s results of operations and financial position.
pp pp pp pp pp pp pp pp
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in
pp pp pp pp pp pp pp pp pp pp pp pp
fields such as public and private accounting, governmental, and forensic accounting.
pp pp pp pp pp pp pp pp pp pp pp
Accounting is a popular major because there are many different types of jobs, with
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
unlimited potential for career advancement
pp pp pp pp pp
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
, 2-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making,
pp pp pp pp pp pp pp pp pp pp
10e
Difficulties:
Easy: 143 pp
Medium: 101 pp
Hard: 12 pp
Question List by Section pp pp pp
Business Organization and Accounting Information Uses:
pp pp pp pp pp
Forms of Business Organization; 47, 48, 202, 246
pp pp pp pp pp pp pp pp
Sole Proprietorship: 5, 44, 49, 58, 59
pp pp pp pp pp pp
Partnership: 1, 4, 46, 56 pp pp pp pp
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245 pp pp pp pp pp pp pp pp pp pp pp
Hybrid Forms of Organization: 60, 61 pp pp pp pp pp
Users and Uses of Financial Information: 6, 7, 11, 74, 87
pp pp pp pp pp pp pp pp pp pp
Internal Users: 62, 63, 64, 75, 77, 82, 234 pp pp pp pp pp pp pp pp
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
Data Analytics: 66, 67, 68, 69, 70, 235, 236
pp pp pp pp pp pp pp pp
Ethics in Financial Reporting: 71, 72, 73, 237,
pp pp pp pp pp pp pp
255 The Three Types of Business Activity: 97
pp pp pp pp pp pp pp pp
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
Investing Activities: 14, 16, 98, 99, 115, 116 pp pp pp pp pp pp pp
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
114
The Four Financial Statements:
pp pp pp
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
pp pp pp pp pp pp pp pp pp pp pp pp
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
pp pp pp pp pp pp pp pp pp pp pp pp pp
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
pp pp pp pp pp pp pp pp pp pp pp
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249
pp pp pp pp pp pp pp pp pp pp
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184, pp pp pp pp pp pp pp pp pp pp pp pp pp pp
250, 251, 256 pp pp
Elements of an Annual Report: 36, 41, 192, 196, 197pp pp pp pp pp pp pp pp pp
Management Discussion and Analysis: 40, 191 pp pp pp pp pp
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
pp pp pp pp pp pp pp pp pp pp pp
Auditor‘s Report: 38, 39, 195 pp pp pp pp
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
,Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
, INTRODUCTION TO FINANCIAL STATEMENTS pp pp pp
CHAPTER LEARNING OBJECTIVES pp pp
1. Identify the forms of business organization and the uses of accounting information.
pp pp pp pp pp pp pp pp pp pp pp
A sole proprietorship is a business owned by one person. A partnership is a business
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
owned by two or more people associated as partners. A corporation is a separate legal
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
entity for which evidence of ownership is provided by shares of stock. Internal users are
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
managers who need accounting information to plan, organize, and run business
pp pp pp pp pp pp pp pp pp pp pp
operations. The primary external users are investors and creditors. Investors
pp pp pp pp pp pp pp pp pp pp
(stockholders) use accounting information to decide whether to buy, hold, or sell shares of
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
a company‘s stock. Creditors (suppliers and bankers) use accounting information to
pp pp pp pp pp pp pp pp pp pp pp
assess the risk of granting credit or loaning money to
pp pp a business. Other groups who
pp pp pp pp pp pp pp pp p p pp pp pp pp
have an indirect interest in a business are taxing authorities, customers, labor unions, and
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
regulatory agencies.
pp pp
2. Explain the three principal types of business activity. Financing activities involve
pp pp pp pp pp pp pp pp pp pp
collecting the necessary funds to support the business. Investing activities involve
pp pp pp pp pp pp pp pp pp pp pp
acquiring the resources necessary to run the business. Operating activities involve putting
pp pp pp pp pp pp pp pp pp pp pp pp
the resources of the business into action to generate a profit.
pp p p pp pp pp pp pp pp pp pp pp
3. Describe the four financial statements and how they are prepared. An income
pp pp pp pp pp pp pp pp pp pp pp
statement presents the revenues and expenses of a company for a specific period of time.
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
A retained earnings statement summarizes the changes in retained earnings that have
pp pp pp pp pp pp pp pp pp pp pp pp
occurred for a specific period of time. A balance sheet reports the assets, liabilities, and
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
stockholders‘ equity of a business at a specific date. A statement of cash flows
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
summarizes information concerning the cash inflows (receipts) and outflows (payments)
pp pp p p pp pp pp pp pp pp pp
for a specific period of time. Assets are resources owned by a business. Liabilities are the
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
debts and obligations of the business. Liabilities represent claims of creditors on the
pp pp pp pp pp pp pp pp pp pp pp pp pp
assets of the business. Stockholders‘ equity represents the claims of owners on the
pp pp pp pp pp pp pp pp pp pp pp pp pp
assets of the business. Stockholders‘ equity is subdivided into two parts: common stock
pp pp pp pp pp pp pp pp pp pp pp pp pp
and retained earnings. The basic accounting equation is Assets = Liabilities +
pp pp pp pp pp pp pp pp pp pp pp pp
Stockholders‘ Equity. Within the annual report, the management discussion and analysis
pp pp pp pp pp pp pp pp pp pp pp
provides management‘s interpretation of the company‘s results and financial position as
pp pp pp pp pp pp pp pp pp pp pp
well as a discussion of plans for the future. Notes to the financial statements provide
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
additional explanation or detail to make the financial statements more informative. The
pp pp pp pp pp pp pp pp pp pp pp pp
auditor‘s report expresses an opinion as to whether the financial statements present fairly
pp pp pp pp pp pp pp pp pp pp pp pp pp
the company‘s results of operations and financial position.
pp pp pp pp pp pp pp pp
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in
pp pp pp pp pp pp pp pp pp pp pp pp
fields such as public and private accounting, governmental, and forensic accounting.
pp pp pp pp pp pp pp pp pp pp pp
Accounting is a popular major because there are many different types of jobs, with
pp pp pp pp pp pp pp pp pp pp pp pp pp pp
unlimited potential for career advancement
pp pp pp pp pp
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
, 2-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making,
pp pp pp pp pp pp pp pp pp pp
10e
Difficulties:
Easy: 143 pp
Medium: 101 pp
Hard: 12 pp
Question List by Section pp pp pp
Business Organization and Accounting Information Uses:
pp pp pp pp pp
Forms of Business Organization; 47, 48, 202, 246
pp pp pp pp pp pp pp pp
Sole Proprietorship: 5, 44, 49, 58, 59
pp pp pp pp pp pp
Partnership: 1, 4, 46, 56 pp pp pp pp
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245 pp pp pp pp pp pp pp pp pp pp pp
Hybrid Forms of Organization: 60, 61 pp pp pp pp pp
Users and Uses of Financial Information: 6, 7, 11, 74, 87
pp pp pp pp pp pp pp pp pp pp
Internal Users: 62, 63, 64, 75, 77, 82, 234 pp pp pp pp pp pp pp pp
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
Data Analytics: 66, 67, 68, 69, 70, 235, 236
pp pp pp pp pp pp pp pp
Ethics in Financial Reporting: 71, 72, 73, 237,
pp pp pp pp pp pp pp
255 The Three Types of Business Activity: 97
pp pp pp pp pp pp pp pp
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
Investing Activities: 14, 16, 98, 99, 115, 116 pp pp pp pp pp pp pp
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
114
The Four Financial Statements:
pp pp pp
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
pp pp pp pp pp pp pp pp pp pp pp pp
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
pp pp pp pp pp pp pp pp pp pp pp pp pp
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp pp
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
pp pp pp pp pp pp pp pp pp pp pp
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249
pp pp pp pp pp pp pp pp pp pp
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184, pp pp pp pp pp pp pp pp pp pp pp pp pp pp
250, 251, 256 pp pp
Elements of an Annual Report: 36, 41, 192, 196, 197pp pp pp pp pp pp pp pp pp
Management Discussion and Analysis: 40, 191 pp pp pp pp pp
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
pp pp pp pp pp pp pp pp pp pp pp
Auditor‘s Report: 38, 39, 195 pp pp pp pp
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use
pp pp pp pp pp pp pp pp pp pp
Only)
