Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, CHAPTER 1 k
INTRODUCTION kTO kFINANCIAL kSTATEMENTS
CHAPTER kLEARNING kOBJECTIVES
1. Identify kthe kforms kof kbusiness korganization kand kthe kuses kof kaccounting
kinformation. kA ksole kproprietorship kis ka kbusiness kowned kby kone kperson. kA kpartnership
kis ka kbusiness kowned kby ktwo kor kmore kpeople kassociated kas kpartners. kA kcorporation kis
ka kseparate klegal kentity kfor kwhich kevidence kof kownership kis kprovided kby kshares kof
kstock. kInternal kusers kare kmanagers kwho kneed kaccounting kinformation kto kplan,
korganize, kand krun kbusiness koperations. kThe kprimary kexternal kusers kare kinvestors kand
kcreditors. kInvestors k(stockholders) kuse kaccounting kinformation kto kdecide kwhether kto
kbuy, khold, kor ksell kshares kof ka kcompany‘s kstock. kCreditors k(suppliers kand kbankers) k use
k accounting k information k to k assess kthe k risk k of k granting k credit k or k loaning k money kto ka
kbusiness. kOther kgroups kwho khave kan kindirect kinterest kin ka kbusiness kare ktaxing
kauthorities, kcustomers, klabor kunions, kand k regulatory kagencies.
2. Explain kthe kthree kprincipal ktypes kof kbusiness kactivity. kFinancing kactivities k involve
kcollecting kthe knecessary kfunds kto ksupport kthe kbusiness. kInvesting kactivities kinvolve
kacquiring kthe kresources knecessary kto krun kthe kbusiness. kOperating kactivities kinvolve
kputting k the kresources kof k the kbusiness kinto kaction kto kgenerate ka k profit.
3. Describe kthe kfour kfinancial kstatements kand khow kthey kare kprepared. kAn kincome
kstatement kpresents kthe krevenues kand kexpenses kof ka kcompany kfor ka kspecific kperiod kof
ktime. kA kretained kearnings kstatement ksummarizes kthe kchanges kin kretained kearnings
kthat khave koccurred kfor ka kspecific kperiod kof ktime. kA kbalance ksheet kreports kthe kassets,
kliabilities, kand kstockholders‘ kequity kof ka kbusiness kat ka kspecific kdate. kA kstatement kof
kcash kflows k summarizes k information kconcerning kthe kcash kinflows k(receipts) kand
koutflows k(payments) kfor ka kspecific kperiod kof ktime. kAssets kare kresources kowned kby ka
kbusiness. kLiabilities kare kthe kdebts kand kobligations kof kthe kbusiness. kLiabilities krepresent
kclaims kof kcreditors kon kthe kassets kof kthe kbusiness. kStockholders‘ kequity krepresents kthe
kclaims kof kowners kon kthe kassets kof kthe kbusiness. kStockholders‘ kequity kis ksubdivided
kinto ktwo kparts: kcommon kstock kand kretained kearnings. kThe kbasic kaccounting kequation
kis kAssets k= kLiabilities k+ kStockholders‘ kEquity. kWithin kthe kannual kreport, kthe
kmanagement kdiscussion kand kanalysis kprovides kmanagement‘s kinterpretation kof kthe
kcompany‘s kresults kand kfinancial kposition kas kwell kas ka kdiscussion kof kplans kfor kthe
kfuture. kNotes kto kthe kfinancial kstatements kprovide kadditional kexplanation kor kdetail kto
kmake kthe kfinancial kstatements kmore kinformative. kThe kauditor‘s kreport kexpresses kan
kopinion kas kto kwhether kthe kfinancial kstatements kpresent kfairly kthe kcompany‘s kresults kof
koperations kand kfinancial kposition.
*4. kExplain kthe kcareer kopportunities kin kaccounting. kAccounting koffers kmany kdifferent
kjobs kin kfields ksuch kas kpublic kand kprivate kaccounting, kgovernmental, kand kforensic
kaccounting. kAccounting kis ka kpopular kmajor kbecause kthere kare kmany kdifferent ktypes kof
kjobs, kwith kunlimited kpotential kfor kcareer kadvancement
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, 2-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
Difficulties:
Easy: k143
Medium: k101
Hard: k12
Question kList kby kSection
Business kOrganization kand kAccounting kInformation
kUses:kForms kof kBusiness kOrganization; k47, k48,
k202, k246
Sole kProprietorship: k5, k44, k49, k58, k59
Partnership: k1, k4, k46, k56
Corporation: k2, k3, k45, k50, k51, k52, k53, k55, k57, k233, k245
Hybrid kForms kof kOrganization: k60, k61
Users kand kUses kof k Financial kInformation: k6, k7, k11, k74, k87
Internal kUsers: k62, k63, k64, k75, k77, k82, k234
External kUsers: k8, k9, k10, k12, k65, k76, k78, k79, k80, k81, k83, k84, k85, k86, k88, k89
Data kAnalytics: k66, k67, k68, k69, k70, k235, k236
Ethics kin kFinancial kReporting: k71, k72, k73,
k237, k255kThe k Three k Types kof k Business kActivity:
k97
Financing kActivities: k13, k15, k18, k90, k91, k93, k94, k95, k96, k97, k102, k109, k117, k118, k119, k238
Investing kActivities: k14, k16, k98, k99, k115, k116
Operating kActivities: k17, k19, k20, k100, k101, k103, k104, k105, k106, k107, k108, k110, k111, k112, k113,
114
The kFour kFinancial kStatements:
Income kStatement: k21, k22, k23, k24,127, k128, k132, k133, k134, k138, k142, k143
Retained kEarnings kStatement: k120, k122, k123, k 124, k125, k126, k129, k130, k131, k135, k137, k139,
k140,
141, k144, k145, k146, k147, k148, k149, k150, k154, k164, k169, k178, k181, k252
Balance kSheet: k25, k27, k28, k29, k30, k31, k32, k33, k34, k35, k136, k151, k152, k153, k163, k165, k166,
k168,
170, k173, k177, k179, k180, k182, k185, k186, k187, k188, k199, k200, k201, k207, k208, k213, k214,
k215, k216,
217, k218, k219, k220, k221, k222, k225, k229, k239, k240, k241, k253
Statement kof k Cash kFlows: k26, k121, k171, k174, k183, k242, k249
Interrelationships kof kStatements: k155, k156, k157, k158, k159, k160, k161, k162, k167, k175, k176, k184,
250, k251, k256
Elements kof kan kAnnual kReport: k36, k41, k192, k196, k197
Management kDiscussion kand kAnalysis: k40, k191
Notes kto kthe kFinancial kStatements: k37, k42, k190, k193, k194, k198, k254
Auditor‘s kReport: k38, k39, k195
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, A Further Look at Financial Statements 2-3
TRUE-FALSE kSTATEMENTS
1. A k business k organized k as k a k separate k legal k entity k and k owned k by k stockholders
k is k akpartnership.
Ans: k F, k LO: k 1, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Partnership, k Bloom: k K, k Difficulty:
k Easy, k Min: k 1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
2. Corporate kstockholders khave kno kpersonal kliability kfor kthe kdebts kof kthe kcorporation.
Ans: k T, k LO: k 1, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Corporation, k Bloom: k K, k Difficulty:
k Easy, k Min: k 1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
3. The kliability kof kcorporate kstockholders kis klimited kto kthe kamount kof ktheir kinvestment.
Ans: k T, k LO: k 1, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Corporation, k Bloom: k K, k Difficulty:
k Easy, k Min: k 1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
4. The kmajority kof k U.S. kbusiness kis ktransacted kby kpartnerships.
Ans: k F, k LO: k 1, k Bloom: k K, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Partnership, k Difficulty:
k Easy, k Min: k 1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
5. Sole kproprietorships kin k the kUnited kStates kgenerate kmore k revenue kthan kthe kother
ktwo kformskof kbusiness kenterprise.
Ans: k F, k LO: k 1, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Sole k Proprietorship, k Bloom: k K,
k Difficulty: k Easy, k Min: k 1, kAACSB: k Knowledge, k AICPA kBC: kNone, kAICPA kAC: kReporting, kAICPA kPC: kNone, k IMA:
k Reporting kand kControl
6. Owners kof kbusiness kfirms kare kthe konly kpeople kwho kneed kaccounting kinformation.
Ans: k F, k LO: k 1, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Users k and k Uses k of
k Financial k Information, k Bloom: k K, kDifficulty: kEasy, kMin: k1, kAACSB: kKnowledge, kAICPA kBC: kNone, kAICPA kAC:
kReporting, kAICPA kPC: kNone, k IMA: kReporting kand kControl
7. Some kusers kof k accounting kinformation k are kinternal kto kthe kcompany k while kothers
k arekexternal.
Ans: k T, k LO: k 1, k Section: k Business k Organization k and k Accounting k Information k Uses, k Subsection: k Users k and k Uses k of
k Financial k Information, k Bloom: k K, kDifficulty: kEasy, kMin: k1, kAACSB: k Knowledge, kAICPA kBC: kNone, kAICPA kAC:
kReporting, kAICPA kPC: kNone, k IMA: kReporting kand kControl
8. Management k of k a k business k enterprise k is k the k major k external k user k of
k accountingkinformation.
Ans: kF, kLO: k1, kSection: kBusiness k Organization kand k Accounting k Information kUses, kSubsection: kExternal k Users, k Bloom: kK, kDifficulty:
kEasy, k Min: k1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
9. External kusers kof k accounting k information k include k managers kwho k plan, k organize,
k and k run k akbusiness.
Ans: kF, kLO: k1, kSection: kBusiness k Organization kand k Accounting k Information kUses, kSubsection: kExternal k Users, k Bloom: kK, kDifficulty:
kEasy, k Min: k1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
10. The kaccounting kinformation kneeds kand kquestions kof kexternal kusers kvary kconsiderably.
Ans: kT, kLO: k 1, kSection: kBusiness k Organization kand k Accounting k Information kUses, kSubsection: kExternal k Users, k Bloom: kK, kDifficulty:
kEasy, k Min: k1, k AACSB: kKnowledge, k AICPA kBC: kNone, kAICPA k AC: kReporting, kAICPA kPC: kNone, k IMA: kReporting kand
kControl
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
