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    Classifications of Accounting Concepts and Accounts

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    The lettered items below represent a classification scheme for the concepts of financial accounting. Match each number term with the letter of the category in which it belongs.

    a. Decision makers (users of accounting information)
    b. Business activities or entities relevant to accounting measurement
    c. Objectives of accounting information
    d. Accounting measurement considerations
    e. Accounting processing considerations
    f. Qualitative characteristics
    g. Accounting conventions
    h. Financial statements

    1. conservatism
    2. verifiability
    3. statement of cash flows
    4. materiality
    5. reliability
    6. recognition
    7. cost-benefit
    8. understandability
    9. business transactions
    10. consistency
    11. full disclosure
    12. finishing information that is useful to investors and creditors
    13. Specific business entities
    14. classification
    15. management
    16. neutrality
    17. internal accounting
    18. valuation
    19. investors
    20. timeliness
    21. relevance
    22. furnishing information that is useful in assessing cash flow prospects


    Each of the statements below violates a convention in accounting. State which of the following accounting conventions is violated: comparability and consistency, materiality, conservatism, full disclosure, or cost-benefit.

    1. A series of reports that are time-consuming and expensive to prepare is presented to the board of directors each month even though the reports are never used.
    2. A company changes its method of accounting for depreciation.
    3. The company in #2 does not indicate in the financial statements that the method of depreciation was changed, nor does it specify the effect of the change on net income.
    4. A new office building next to the factory is debited to the Factory account because it represents a fairly small dollar amount in relation to the factory.
    5. The asset account for a pickup truck still used in the business is written down to what the truck could be sold for even though the carrying value under conventional depreciation methods is higher.


    The lettered items below represent a classification scheme for a balance sheet, and the numbered items are account titles, Match each account with the letter of the category in which it belongs.

    a. current assets
    b. investments
    c. property, plant, and equipment
    d. intangible assets
    e. current liabilities
    f. long-term liabilities
    g. owner's equity
    h. not on balance sheet

    1. patent
    2. building held for sale
    3. prepaid rent
    4. wages payable
    5. note payable in five years
    6. building used in operations
    7. fund held to pay off long-term debt
    8. inventory
    9. prepaid insurance
    10. depreciation expense
    11. accounts receivable
    12. interest expense
    13. unearned revenue
    14. short-term investments
    15. accumulated depreciation
    16. M. Capelli, Capital


    The following data pertain to a corporation: Prepare a classified balance sheet; omit the heading.

    Cash, $31,200
    Investments in Six-Month Government Securities, $16,400
    Accounts Receivable, $38,000
    Inventory, $40,000
    Prepaid Rent, $1,200
    Investment in Corporate Securities (long-term), $20,000
    Land, $8,000
    Building, $70,000
    Accumulated Depreciation, Building, $14,000
    Equipment, $152,000; Accumulated Depreciation, Equipment, $17,000
    Copyright, $6,200
    Accounts Payable, $51,000
    Revenue in Advance, $2,800
    Bonds Payable, $60,000
    Common Stock, $10 par, 10,000 shares authorized, issued, and outstanding, $100,000
    Paid-in Capital in Excess of Par Value, $50,000
    Retained Earnings, $88,200



    Owner's Equity


    Using the classification scheme below for a multistep income statement, match each account with the letter of the category in which it belongs.

    a. net sales
    b. cost of goods sold
    c. selling expenses
    d. general and administrative expenses
    e. other revenues and expenses
    f. not on income statement

    1. Purchases
    2. Sales Discounts
    3. Merchandise Inventory (beginning)
    4. Interest income
    5. Advertising Expense
    6. Office Salaries Expense
    7. Freight Out Expense
    8. Prepaid Insurance
    9. Utilities Expense
    10. Sales Salaries Expense
    11. Rent Expense
    12. Purchases Returns and Allowances
    13. Freight In
    14. Depreciation Expense, Delivery Equipment
    15. Wages Payable
    16. Interest Expense

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