ADM 1340 Study Guide - Final Guide: Income Statement, Accounts Receivable, Retained Earnings

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ADM 1340 Full Course Notes

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Document Summary

Shows the profitability of a company during the time interval specified in its heading: the period of time that the statement covers is chosen by the business and will vary. How revenues are turned into the net income. Shows revenues, expenses, gains, and losses; it does not show cash receipts (money you receive) nor cash disbursements (money you pay out). Demonstrated its ability to use borrowed and invested funds in a successful manner. Revenue: cash inflows or other enhancements of assets, includes accounts receivable. Other activities that constitute the entity"s ongoing major operations: usually presented as: Sales (sales discounts + returns + sales revenue: every time a business sells a product or performs services, it obtains revenue. Referred to as gross revenue or sales revenue. Expenses: cash outflows or liabilities including accounts payable, cogs, selling, general and administrative expenses. Depreciation or sales store building and equipment. Depreciation of office building or office equipment.

Related Questions

Multiple Choice:

21. All the following are true regarding Quotesexcept:

a. Quotes post entries to general ledger accounts

b. Quotes can be transferred to create an invoice

c. Quotes can be linked to customer jobs

d. Quotes can be linked to items

22. If a customer was overcharged for theservices, the customer's invoice can be reduced by posting a:

a. Sales invoice

b. Customer receipt

c. Debit memo

d. Credit memo

23. On the statement of cash flows, the cashflows from operating activities section would include:

a. Receipts from the issuance of capital stock

b. Receipts from the sale of investments

c. Payments for the acquisition of investments

d. Net income

24.The Income Statement will include thefollowing accounts:

a. Revenues less Expenses (ordered largest to smallest amount)with Other Expenses listed last
b. Revenues less Expenses (ordered smallest to largest amounts.With Miscellaneous Expenses listed last

c. Revenues less Expenses (ordered in alphabetical order) withOther Expenses listed last

d. Revenues less Expenses (order is not important)

25. The Statement of Cash Flows answers all ofthe following except:

a. Where the receipts come from

b. Where the cash payments were used for

c. What the overall change in cash was

d. If there will be enough cash to pay the currentliabilities

26. On the Navigation Bar, make the followingselections to enter a sales invoice:

a. Customers & Sales Navigation Center, click on theCustomers icon and select View and Edit Customers

b. Customers & Sales Navigation Center, click on the SalesInvoices icon and select Set up Invoice Defaults

c. Tasks; Purchases/Receive Inventory

d. Customers & Sales Navigation Center, click on the SalesInvoices icon and select New Sales Invoice

27. The following would be included in theheading of an income statement:

a. Title of the statement

b. Name of the business

c. Period of time covered by the statement

d. All of the above

. 28. A departmentalized accounting systemprovides information that can be used to:

a. Custom design departmental statements

b. Evaluate profitability and cost effectiveness

c. Evaluate current assets

d. Modify PCA's standard forms

29. In Peachtree, information about a sale isrecorded in the:

a. Purchase window

b. Inventory window

c. Purchases/Receive Inventory window

d. Sales/Invoicing window

30. The sample company, Bellwether GardenSupply, uses which method of posting?

a. Batch posting

b. Real-time posting

c. Cash basis posting

d. Accrual basis posting

jadekoala82

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.

True

False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:

Assets = Liabilities + Equity

Assets = Liabilities â Equity

Assets = Liabilities + Revenues

Equity = Liabilities + Revenues

QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.

Accounting Standards

Ethics

Generally Accepted Accounting Principles

FASB

QUESTION 4

The _____ is a collection of all accounts within a companyâsaccounting system.

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.

True

False

QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.

During the accounting cycle, we analyze transactions toprepare statements.

True

False

QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).

During the accounting cycle, to complete step 7 youwould:

Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.

Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.

Prepare statements--Use adjusted trial balance to preparefinancial statements.

Close--Journalize and post entries to close temporaryaccounts.

QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:

Balance sheet, adjusted trial balance, income statement

Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity

Income statement, adjusted trial balance, Statement of OwnerâsEquity

Balance sheet, Income statement, Statement of OwnerâsEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):

Adjusted trial balance

Worksheet

Post-closing trial balance

Unadjusted trial balance

General ledger

QUESTION 13

The two goals for completing the closing process are:

To identify accounts for closing and record the closingentries

To journalize and post transactions

To post transactions and prepare post-closing trialbalance

To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.

QUESTION 14

Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.

True

False

QUESTION 16

The Income Statement:

Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.

Summarize adjusted ledger accounts and amounts

Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities

Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.

QUESTION 17

An internal control system consists of the policies andprocedures used to:

Protect assets and Ensure reliable accounting

Urge adherence to company policies and Promote efficientoperations

All of the above

None of the above.

QUESTION 18

The cost-benefit principle is the second limitation of_______.

Bank reconciliations

Petty cash controls

Voucher system of controls

Internal controls

QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:

$200 decrease to net income

$200 increase to net income

$200 different between the debit and credit columns of theUnadjusted Trial Balance

An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

peararmadillo281

Rent and insurance payments are examples of

	A.	variable expenses.
	B.	fixed expenses.
	C.	long-term liabilities.
	D.	short-term liabilities.

Matthew is concerned about his ability to save money regularlyand has prepared a budget. Which of the following budgetclassifications would be most appropriate for Matthew'sbudget?

	A.	Savings as a fixed expenditure
	B.	Saving whatever may be left over
	C.	Savings as a variable expenditure

Question 3

A successful financial plan includes

	A.	explicitly stated financial goals.
	B.	specified values that underlie the plan.
	C.	all of these.
	D.	logical and consistent financial strategies.

Question 4

A cash-flow statement is also known as a(n) ____ statement.

	A.	taxable income
	B.	net worth
	C.	income and expense
	D.	asset-and-liability

Question 5

A long-term goal is one that is projected to be acheived beyondhow much time?

	A.	five year
	B.	ten years
	C.	six months
	D.	one year

Question 6

A balance sheet includes ____, ____, and ____.

	A.	income; expenses; net worth
	B.	assets; expenses; liabilities
	C.	income; liabilities; net worth
	D.	assets; liabilities; net worth

Question 7

Disposable income is income

	A.	after all employer withholding including taxes.
	B.	minus fixed expenditures.
	C.	before taxes.
	D.	after all employer withholding except taxes.

Question 8

Which of the following would be classified as a long-termliability?

	A.	Education loan balance
	B.	Credit card debt
	C.	Bank card debt
	D.	All of these

Question 9

Stephen Scott's monthly pay stub indicates that his monthlygross income is $3,800. However, $800 is withheld for income andSocial Security taxes, $200 is withheld for his health anddisability insurance, and another $200 is contributed to hispension plan. How much is Stephen's disposable income?

	A.	$2,800
	B.	$3,000
	C.	$2,600
	D.	$3,800

Question 10

Which of the following provides information about a person'sfinancial condition at a specific point in time?

	A.	Federal tax return
	B.	Balance sheet
	C.	All of these
	D.	Income and expense statement

Question 11

The two most useful financial statements are ____ and____.

	A.	federal tax returns; income and expense statements
	B.	balance sheets; wills
	C.	cash-flow statements; balance sheets
	D.	wills; federal tax returns

Question 12

Which of the following is the best example of awell-stated financial goal?

	A.	Pay off your credit cards as soon as possible
	B.	Purchase a three-bedroom home in five years
	C.	Buy a $3,000 computer in 18 months
	D.	Buy a $2,000 stereo

Question 13

The first step in the budgeting process is

	A.	setting financial goals.
	B.	evaluating.
	C.	organizing.
	D.	decision making.

Question 13

The first step in the budgeting process is

	A.	setting financial goals.
	B.	evaluating.
	C.	organizing.
	D.	decision making.

Which of the following is a characteristic of a cash-flowstatement?

	A.	It shows if you were able to live within your income for theperiod covered.
	B.	All of these.
	C.	It covers a period of time, usually one month or one year.
	D.	The statement includes three sections: income, expenses, andsurplus (or deficit).

Question 15

The formula for calculating net worth is

	A.	income minus liabilities.
	B.	assets minus expenses.
	C.	income minus expenses.
	D.	assets minus liabilities.

Question 16

Food, clothing, and entertainment are examples of

	A.	long-term liabilities.
	B.	short-term liabilities.
	C.	fixed expenses.
	D.	variable expenses.

Question 17

To construct a balance sheet, you need to compile dollar valuesfor your assets and liabilities. Good sources from which to beginare

	A.	checkbook or savings account records.
	B.	all of these.
	C.	investments.
	D.	receipts of various payments.

Question 18

Discretionary income is used to pay for things like

	A.	housing.
	B.	vacations.
	C.	utilities.
	D.	food.

Question 19

A short-term goal is one that is projected to be acheived withinhow much time?

	A.	one month
	B.	three months
	C.	one year
	D.	five years

Question 20

The advantages of having organized financial records include

	A.	helping you take advantage of all available tax deductions.
	B.	all of these.
	C.	enabling you to review the results of financialtransactions.
	D.	helping you save money as well as make money.

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ADM 1340 Study Guide - Final Guide: Income Statement, Accounts Receivable, Retained Earnings

ADM 1340 Full Course Notes

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