Question

1. ________ are items owed to a creditor. ________ are items owned by a company. ________ represents owners' claims to company resources.

Expenses; Revenues; Net income

Expenses; Revenues; Stockholders��� equity

Liabilities; Assets; Stockholders' equity

Liabilities; Assets; Net income

2. Under ________ accounting, revenues are recorded when earned and expenses are recorded with related revenues. Under ________ accounting, revenues are recorded when cash is received and expenses are recorded when cash is paid out. Financial statements are prepared using ________ accounting.

cash-basis; accrual-basis; accrual-basis

cash-basis; accrual-basis; cash-basis

accrual-basis; cash-basis; cash-basis

accrual-basis; cash-basis; accrual-basis

3. The ________ retains the power and authority to set accounting standards. Currently, this responsibility has been delegated to the________.

Securities and Exchange Commission; International Accounting Standards Board

International Accounting Standards Board; Financial Accounting Standards Board

Securities and Exchange Commission; Financial Accounting Standards Board

Financial Accounting Standards Board; Securities and Exchange Commission

4. In what order are the four primary financial statements prepared?

Statement of stockholders' equity > Income statement > Balance sheet > Statement of cash flows

Balance sheet> Income statement > Statement of cash flows> Statement of stockholders' equity

Income statement > Statement of stockholders' equity > Balance sheet > Statement of cash flows

Income statement > Balance sheet > Statement of stockholders' equity > Statement of cash flows

5. The difference between net income and dividends paid is known as what?

Addition to retained earnings

Ending balance in retained earnings

Gross profit

Total stockholders��� equity

Answer 1

Answer to Question 1:

Liabilities are items owed to a creditor. Assets are items owned by a company. Stockholders’ Equity represents owners' claims to company resources.

Answer to Question 2:

Under accrual-basis accounting, revenues are recorded when earned and expenses are recorded with related revenues. Under cash-basis accounting, revenues are recorded when cash is received and expenses are recorded when cash is paid out. Financial statements are prepared using accrual-basis accounting.

Answer to Question 3:

The Securities and Exchange Commission retains the power and authority to set accounting standards. Currently, this responsibility has been delegated to the Financial Accounting Standards Board.

Answer to Question 4:

Financial statements are prepared in the following order:

Income statement
Statement of stockholders' equity
Balance sheet
Statement of cash flows

Answer to Question 5:

The difference between net income and dividends paid is known as addition to retained earnings.