File: Chapter 001 A Framework for Financial Accounting

[Question]
1.
Accounting is a system of maintaining records of a company’s operations and
communicating this information to decision makers.

[Question]
2.
Accounting information is used by investors to decide whether to invest in a
company’s stock.

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3.
Accounting information is used by creditors to decide whether to invest in a
company’s stock.

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4.
The primary functions of financial accounting are to measure business
activities of a company and to communicate those measurements to internal
parties for decision-making purposes.

[Question]
5.
Financing activities are transactions involving externals sources of funding.

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6.
Investing activities include the purchase and sale of (1) long-term resources
and (2) any resources not directly related to a company’s normal operations.

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7.
Operating activities include transactions that relate to the primary operations
of the company.

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8.
A corporation is an entity that is legally separate from its owners.

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9.
Cash, inventory, supplies, and buildings are examples of liabilities.

[Question]
10.
Amounts owed to suppliers, workers, governments, and utility companies are
examples of liabilities.
[Question]
11.
If total assets of a company equal $12,000 and total stockholders’ equity
equals $4,000, then total liabilities equal $8,000.

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12.
If total liabilities of a company equal $16,000 and total stockholders’ equity
equals $9,000, then total assets equal $7,000.

[Question]
13.
The accounting equation shows that a company’s resources equal creditors’ and
owners’ claims to those resources.

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14.
The costs of advertising, utilities, and salaries in the current reporting
period are examples of liabilities.

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15.
The difference between revenues and expenses is referred to as net income or
net loss.

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16.
If a company reports revenues of $17,000 and expenses of $12,000, then net
income equals $5,000.

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