ACCT 201a Prep Test 1 -Ch. 1-4
Questions Fully Solved 2026-2027
Spring.
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 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 are operating activities? - Answer primary activities for which the organization is in
business
-revenue, expenses, net income, and net loss
what are creditors? - Answer persons or entities to whom the company owes money
what are bonds payable? - Answer debt securities sold to investors that must be repaid at a
particular date some years in the future
-liability
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? - Answer assets = 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? - Answer helps 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? - Answer assets
-current assets
-long-term investments
-property, land, and equipment
-intangible assets
liabilities and stockholders equity
-current liabilities
-long-term liabilities
-stockholders equity
Questions Fully Solved 2026-2027
Spring.
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 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 are operating activities? - Answer primary activities for which the organization is in
business
-revenue, expenses, net income, and net loss
what are creditors? - Answer persons or entities to whom the company owes money
what are bonds payable? - Answer debt securities sold to investors that must be repaid at a
particular date some years in the future
-liability
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? - Answer assets = 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? - Answer helps 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? - Answer assets
-current assets
-long-term investments
-property, land, and equipment
-intangible assets
liabilities and stockholders equity
-current liabilities
-long-term liabilities
-stockholders equity
