Accounting 250 Final

Which of the following expressions is incorrect?

Operating expenses - cost of goods sold = gross profit

John and Sam met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a

Partnership

An income statement

presents the revenues and expenses for a specific period of time.

A small neighborhood barber shop that is operated by its owner would likely be organized as a

proprietorship.

Adjusting entries are

usually required before financial statements are prepared

The revenue recognition principle dictates that revenue should be recognized in the accounting records

when the performance obligation is satisfied.

The procedure of transferring journal entries to the ledger accounts is called

posting.

The basic accounting equation may be expressed as

Assets = Liabilities + Stockholders' Equity.

Which of the following correctly identifies normal balances of accounts?

Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Debit

The historical cost principle requires that when assets are acquired, they be recorded at

Cost

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

LIFO

are existing debts and obligations.

Liabilitys

Which of the following would not be considered an external user of accounting data for the GHI Company?

Management.

Which of the following would not be considered an internal user of accounting data for the GHI Company?

President of the employees' labor union.

Net income results when

Revenues > Expenses.

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

The appointment of a new CPA firm to perform an audit.

A journal provides

a chronological record of transactions.

Expenses incurred but not yet paid or recorded are called

accrued expenses.

The closing entry process consists of closing

all temporary accounts.

The usual sequence of steps in the transaction recording process is:

analyze → journal → ledger.

A balance sheet shows

assets, liabilities, and stockholders' equity.

Unearned revenues are

cash received and a liability recorded before services are performed.

Physical controls to safeguard assets do not include

cashier department supervisors.

The Sales Returns and Allowances account is classified as a(n)

contra revenue account.

A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the

economic entity assumption.

The expense recognition principle matches

expenses with revenues.

A trial balance is a listing of

general ledger accounts and balances.

The entire group of accounts maintained by a company is called the

general ledger.

The accounting process is correctly sequenced as

identification, recording, communication.

The double-entry system requires that each transaction must be recorded

in at least two different accounts.

The fair value principle is applied for

investment securities.

Revenues would not result from

issuance of common stock.

Accounts often need to be adjusted because

many transactions affect more than one time period.

Prepaid expenses are

paid and recorded in an asset account before they are used or consumed.

The normal balance of any account is the

side which increases that account.

In recording an accounting transaction in a double-entry system

the amount of the debits must equal the amount of the credits.

An error has occurred in the closing entry process if

the balance sheet accounts have zero balances.

The left side of an account is

the debit side.

The time period assumption states that

the economic life of a business can be divided into artificial time periods.