241 - Unit 1

Investors are motivated to provide resources to businesses because they receive _____.

• an ownership interest in the business

• interest payments on their investment

• a share of the company's earnings

Which of the following statements about assets are true?

• Assets may be used only for the purpose of repaying debt.

• All businesses have the same type and number of assets.

• A business may acquire assets from three sources including creditors, investors, and its operations.

• Assets are resources used in the process of generating revenue

The organization with primary authority for establishing accounting standards in the United States is ____?

• AICPA

• GAAP

• IMA

• FASB

Retained Earnings is all past and present income____.

• minus all past and present dividends.

• minus all past and present liabilities

• plus all past and present common stock.

• plus all past and present dividends.

Assets are normally shown on the company's books at ____.

• appraised value

• market value

• historical value

• future value

Which of the following describes the matching concept?

• Net income should be matched with the cash flow from operating activities.

• Revenue should be matched with the period in which cash is collected.

• Assets should be matched with their respective market values.

• Expenses should be matched with the revenue they produce.

Financing activities include_____.

• issuing common stock

• paying expenses

• cash receipts from customers

• selling a building

• repaying the principal on a loan

How does borrowing from creditors affect the income statement?

• Increases net income

• Increases expenses

• Increases revenues

• No effect

An accrual occurs when an expense is recognized _____.

• at the same time cash is exchanged

• after the associated cash has been exchanged

• before the associated cash is exchanged

Accrual accounting practices cause differences between net income on the income statement and cash flow from operating activities on the statement of cash flows.

• True

• False