Accounting

On May 1, Cut Above, Inc. collected $3,000 in advance from customers to mow their lawns in June. Under cash basis accounting, revenues in May will equal Blank______. Multiple choice question. $0 $1,500 $3,000

$3,000

Miss Step, the bookkeeper, forgot to record the adjusting entry for supplies used during the period. This will cause which of the following items on the statement of stockholders' equity to be overstated? (Check all that apply.) Multiple select question. Dividends declared Ending retained earnings Total stockholders' equity Contributed capital (Common stock and Additional paid-in capital) Beginning retained earnings Net income

Ending retained earnings Total stockholders' equity Net income

Miss Step, the bookkeeper, forgot to record the adjusting entry for some accrued expenses during the period. This will cause which of the following items on the statement of stockholders' equity to be in error? (Check all that apply.) Multiple select question. Ending retained earnings will be overstated. Total stockholders' equity will be understated. Beginning retained earnings will be overstated. Ending retained earnings will be understated. Net income will be understated. Net income will be overstated.

Ending retained earnings will be overstated. Net income will be overstated.

Which are the 2 accounting principles underlying accrual accounting. (Check all that apply.) Multiple select question. Earnings per share Expense recognition Historical cost Cash basis Revenue recognition

Expense recognition Revenue recognition

Which of the following statements is correct? Multiple choice question. Financial statements are prepared before adjustments to ensure that debits equal credits before concluding the adjustment process. Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance. Financial statements are prepared before adjustments to ensure that debits equal credits before beginning the adjustment process. Financial statements are prepared before adjustments to ensure that all accounts have been brought to their correct balance.

Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance.

Which statement is correct regarding entering transactions into the accounting equation? Multiple choice question. If total assets are increased, then liabilities only are increased as well. If one account is credited, then at least one other account must be credited as well. If total assets increased, then the total of liabilities plus stockholders' equity must also have increased. If one asset account is increased, then another asset account must be decreased in order for the left side of the accounting equation to be balanced.

If total assets increased, then the total of liabilities plus stockholders' equity must also have increased.

The trial balance at year end shows Blank______. Multiple choice question. the ending balance in each T-account only decreases in T-accounts only increases in T-accounts

the ending balance in each T-account

True or false: After the closing entries have been posted, the new balance in the retained earnings account will equal the retained earnings reported on the balance sheet. True false question

true

Adjusting entries Blank______. (Check all that apply.) Multiple select question. are required in cash basis accounting only update the accounts to their proper balances are needed in order to measure the period's net income or loss

update the accounts to their proper balances are needed in order to measure the period's net income or loss

Which of the following accounts would be listed above Property and equipment (net of accumulated depreciation) on a classified balance sheet? (Check all that apply.) Multiple select question. Accounts Payable Cash Retained Earnings Accounts Receivable Unearned Revenue

Cash Accounts Receivable

Which of the following would affect the operating activities section of the statement of cash flows? (Check all that apply.) Multiple select question. Cash received from customers Cash paid to suppliers Cash paid to repay debt Cash paid for land Cash paid to employees

Cash received from customers Cash paid to suppliers Cash paid to employees

Who has primary responsibility for making sure that a company's financial statements follow GAAP? (Check all that apply.) Multiple select question. The Securities and Exchange Commission (SEC) Chief financial officer Chief executive officer The Public Company Accounting Oversight Board (PCAOB)

Chief financial officer Chief executive officer

Which of the following line items appear on a statement of stockholders' equity? (Check all that apply.) Multiple select question. Common stock Dividends declared Earnings per share Retained earnings from the prior period Net income Cash

Common stock Dividends declared Retained earnings from the prior period Net income

Identify various sources of financial information for the investing public. (Select all that apply.) Multiple select question. Financial analysts' XBRL Service Companies' Websites Financial analysts' EDGAR Service Financial analysts' earnings forecasts SEC's EDGAR Service

Companies' Websites Financial analysts' earnings forecasts SEC's EDGAR Service

Identify various sources of financial information for the investing public. (Select all that apply.) Multiple select question. Financial analysts' XBRL Service Companies' Websites SEC's EDGAR Service Financial analysts' earnings forecasts Financial analysts' EDGAR Service

Companies' Websites SEC's EDGAR Service Financial analysts' earnings forecasts

Monster Music Company provided music lessons for customers and earned $10,000, receiving $6,000 in cash and recording an accounts receivable for the remainder. What is Monster Music Company's revenue under the cash basis accounting? Multiple choice question. $6,000 $4,000 $10,000

$6,000

How does the timing of adjusting entries differ from the accounting for daily transactions? Multiple choice question. Adjustments are made throughout the accounting period as information becomes available. Adjustments are made at the beginning of the accounting period to ensure accuracy is maintained during the cycle. Adjustments are made at the discretion of management and are not necessary for each accounting period. Adjustments are made at the end of the accounting period to update accounts for reporting purposes.

Adjustments are made at the end of the accounting period to update accounts for reporting purposes.

Which of the following is used to record the summary of effects on one particular item? Multiple choice question. A general journal A general ledger An account A trial balance

An account

Why is the Unearned Revenue account reduced during the adjustment process? Multiple choice question. As the revenue is earned, it is removed from the Unearned Revenue account and transferred into a revenue account. As the revenue is earned, it is removed from the Unearned Revenue account and transferred into the Accounts Receivable account. As cash is paid to the customer, the unearned revenue account is reduced. As cash is received from the customer, the Unearned Revenue account is reduced.

As the revenue is earned, it is removed from the Unearned Revenue account and transferred into a revenue account.

___________are economic resources owned by the company.

Assets

Which of the following are the five elements of the accounting equation? Multiple choice question. Liabilities, Stockholders' Equity, Revenues, Dividends, Expenses Cash, Liabilities, Stockholders' Equity, Revenues, Expenses Assets, Liabilities, Revenues, Expenses, Dividends Assets, Liabilities, Stockholders' Equity, Revenues, Expenses

Assets, Liabilities, Stockholders' Equity, Revenues, Expenses

What do independent auditors provide for companies who hire them? Multiple choice question. Assurance that this year's financial statements are perfect Assurance that the company's stock is a good investment Assurance that the financial statements follow Generally Accepted Accounting Principles A guarantee that next year's operations will be profitable

Assurance that the financial statements follow Generally Accepted Accounting Principles

Which of the following are major actors involved in ensuring the integrity of financial statements of a publicly-traded company? (Check all that apply.) Multiple select question. Board of Directors Management SEC Independent Auditors PCAOB Treasury Department Internal Revenue Service

Board of Directors Management SEC Independent Auditors PCAOB

The ________ of ___________ is elected by the stockholders and is responsible for ensuring that processes are in place for maintaining the integrity of the company's accounting records.

Board of directors

Company X issued 10,000 shares of its $1 par value stock to its owners for $10,000 cash. It recorded the transaction by increasing assets and increasing liabilities. Which of the following statements are correct? (Check all that apply.) Multiple select question. Liabilities will be overstated. Stockholders' equity will be overstated. Assets will be understated. Liabilities will be understated. Assets will be overstated. Stockholders' equity will be understated

Liabilities will be overstated. Stockholders' equity will be understated.

Who has the responsibility to apply accounting standards when communicating with investors and creditors? Multiple choice question. Management Auditors The SEC The FASB Correct Answer

Management

Who uses accounting information? (Check all that apply.) Multiple select question. Managers Creditors Institutional investors Debentures Private investors

Managers Creditors Institutional investors Private investors

Which of the following line items appear on a statement of stockholders' equity? (Check all that apply.) Multiple select question. Earnings per share Net income Retained earnings from the prior period Cash Dividends declared Common stock

Net income Retained earnings from the prior period Dividends declared Common stock

Which of the following line items appear on a statement of stockholders' equity? (Check all that apply.) Multiple select question. Net income Cash Retained earnings from the prior period Dividends declared Common stock Earnings per share

Net income Retained earnings from the prior period Dividends declared Common stock

A closing entry may include a Blank______. Multiple choice question. debit to Unearned Revenue credit to Wages Expense debit to Prepaid Insurance credit to Interest Revenue

credit to Wages Expense

Which of the following statements about net income are correct? (Select all that apply.) Multiple select question. Net income equals the amount of cash generated by the business during the reporting period. Net income on the income statement rarely equals cash flows from operating activities on the statement of cash flows. Net income equals revenues earned minus expenses incurred, regardless of whether cash was collected or paid. Net income equals the total change in assets during the period.

Net income on the income statement rarely equals cash flows from operating activities on the statement of cash flows. Net income equals revenues earned minus expenses incurred, regardless of whether cash was collected or paid.

Where is earnings per share disclosed in the financial statements? Multiple choice question. On the balance sheet On the statement of owners' equity On the income statement On the statement of cash flows

On the income statement

___________ activities are the primary sources of revenue and expenses involved in running a business. (Enter only one word per blank.)

Operating

Which of the following financial statement line items is not an expense? Multiple choice question. Rent Expense Advertising Expense Cost of goods sold Salaries and Wages Expense Prepaid Rent

Prepaid Rent

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period? (Check all that apply.) Multiple select question. Revenues earned at the end of the period, but not yet billed to Accounts Receivable, should be recorded as a revenue. Revenues need to be adjusted so that revenues equals the amount of cash received during the current period. Payments received in advance, and originally recorded as a liability, should be reduced for any portion earned during the current period.

Revenues earned at the end of the period, but not yet billed to Accounts Receivable, should be recorded as a revenue. Payments received in advance, and originally recorded as a liability, should be reduced for any portion earned during the current period.

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period? (Check all that apply.) Multiple select question. Revenues need to be adjusted so that revenues equals the amount of cash received during the current period. Revenues earned at the end of the period, but not yet billed to Accounts Receivable, should be recorded as a revenue. Payments received in advance, and originally recorded as a liability, should be reduced for any portion earned during the current period.

Revenues earned at the end of the period, but not yet billed to Accounts Receivable, should be recorded as a revenue. Payments received in advance, and originally recorded as a liability, should be reduced for any portion earned during the current period.

Multiple Choice Question Which government agency is responsible for the functioning of stock markets in the US? Multiple choice question. Internal Revenue Service Financial Accounting Standard Board Securities and Exchange Commission Department of Homeland Security

Securities and Exchange Commission

Which one of these activities is part of the operating cycle? Multiple choice question. Issuing new shares Selling goods and services Buying property, plant and equipment

Selling goods and services

When a business issues common stock, what does it give to its owners? Multiple choice question. Promissory note Retained earnings Cash Stock certificates

Stock certificates

Miss Step, the bookkeeper, forgot to record the adjusting entry for supplies used during the period. This will cause which of the following on the balance sheet? (Check all that apply.) Multiple select question. Net income will be understated. Supplies will be overstated. Retained earnings will be overstated. Current assets will be overstated. Current liabilities will be overstated.

Supplies will be overstated. Retained earnings will be overstated. Current assets will be overstated.

Which of the following statements is incorrect regarding the need to make accrual adjustments at the end of the accounting period? Multiple choice question. Revenues and expenses should be recorded in the period in which they occur, even though the cash will be paid or received in a future period. The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period. Certain events occur over time that would be too tedious and time-consuming to record on a daily basis. Since financial statements are prepared at the end of the period, the asset and liability account balances should be brought up to date.

The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period.

When recording journal entries which account titles are indented? Multiple choice question. The account titles that are debited. All account titles are indented. No account titles are indented. The account titles that are credited.

The account titles that are credited.

Transaction analysis is based on which two principles? Every transaction affects cash Every transaction affects stockholders' equity The accounting equation remains in balance with each transaction Every transaction affects at least two accounts Every transaction affects assets

The accounting equation remains in balance with each transaction Every transaction affects at least two accounts

Which of the following statements is true regarding the post-closing trial balance? Multiple choice question. The post-closing trial balance will be distributed to investors and other stakeholders along with the financial statements. The post-closing trial balance proves that all entries have been made correctly and accurately during the accounting period. The post-closing trial balance is a report prepared before the adjustments and the financial statements to prove that debits equal credits. The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

What is the purpose of the audit report? Multiple choice question. To add credibility to the financial statements. To provide investment advice. To report taxable income to the IRS.

To add credibility to the financial statements.

If there is an error in recording an adjusting entry on the income statement causing Net Income to be overstated, then Blank______. (Check all that apply.) Multiple select question. Total stockholders' equity on the balance sheet will be overstated Cash on the balance sheet will be overstated Total assets on the balance sheet will understated Retained Earnings on the statement of stockholders' equity will be overstated

Total stockholders' equity on the balance sheet will be overstated Retained Earnings on the statement of stockholders' equity will be overstated

Which of the following accounting cycle steps describes the process of recording journal entries? Multiple choice question. A list of accounts and ending balances are summarized, and the list is checked to be sure total debits equal total credits. Dollar amounts from entries are copied (posted) to the appropriate account in the ledger, so that account balances can be totaled. Transactions are recorded chronologically showing the accounts debited along with the corresponding accounts credited.

Transactions are recorded chronologically showing the accounts debited along with the corresponding accounts credited.

Which of the following accounting cycle steps describes the process of recording journal entries? Multiple choice question. Dollar amounts from entries are copied (posted) to the appropriate account in the ledger, so that account balances can be totaled. A list of accounts and ending balances are summarized, and the list is checked to be sure total debits equal total credits. Transactions are recorded chronologically showing the accounts debited along with the corresponding accounts credited.

Transactions are recorded chronologically showing the accounts debited along with the corresponding accounts credited.

True or false: The SEC, FASB, external auditors, and management of companies are involved in ensuring the integrity of financial statements. True false question.

True

If the journal entry to record services provided to a customer on account was recorded with a debit to Accounts Receivable and a credit to Service Revenue, then the company is using Blank______ basis accounting Multiple choice question. operating cash accrual investing

accrual

Adjusting entries are required before financial statements are prepared to ensure that Blank______. (Select all that apply.) Multiple select question. the expenses include only the amounts paid during the period all revenues earned during the period are recorded all expenses incurred during the period are recorded revenues earned equals the cash collected from customers during the period

all revenues earned during the period are recorded all expenses incurred during the period are recorded

During the closing process, the closing entries to individual expense accounts will be recorded with a Blank______ to reduce the account balance to zero. Multiple choice question. debit credit

credit

Adjusting entries Blank______. (Check all that apply.) Multiple select question. are needed in order to measure the period's net income or loss are required in cash basis accounting only update the accounts to their proper balances

are needed in order to measure the period's net income or loss update the accounts to their proper balances

A common characteristic of (assets/liabilities) is their ability to provide benefits to the company.

assets

Company X receives $10,000 from issuing 10,000 shares of $1 par value common stock to its owners. The effect on the accounting equation is Blank______. (Check all that apply.)

assets increase stockholders' equity increases

The ______________ committee of the board of directors must consist of non-management, independent directors with financial knowledge and is responsible for hiring the independent auditors. (Enter one word per blank.)

audit

Lox, Stock and Bagel, Inc., issued $100,000 of stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry, the accounting equation will Blank______. Multiple choice question. balance balance, but the transaction was recorded in the wrong accounts be out of balance

be out of balance

Lox, Stock and Bagel, Inc., issued $100,000 of stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry, the accounting equation will Blank______. Multiple choice question. balance be out of balance balance, but the transaction was recorded in the wrong accounts

be out of balance

T-accounts (general ledger) show Blank______. (Check all that apply.) Multiple select question. beginning balances of zero for all balance sheet accounts beginning balances of zero for all income statement accounts the prior period ending balances as beginning balances for all balance sheet accounts the prior period ending balances as beginning balances for all income statement accounts the activity for the current period

beginning balances of zero for all income statement accounts the prior period ending balances as beginning balances for all balance sheet accounts the activity for the current period

Reporting revenues only when cash is received and expenses only when cash is paid is called the basis of accounting

cash

A closing entry includes a Blank______. Multiple choice question. credit to Accounts Receivable credit to Cash debit to Sales Revenue debit to Interest Expense

debit to Sales Revenue

A closing entry includes a Blank______. Multiple choice question. debit to Sales Revenue credit to Accounts Receivable credit to Cash debit to Interest Expense

debit to Sales Revenue

The account(s) that is/are Blank______ is/are always listed first in a journal entry. Multiple choice question. decreased increased credited debited

debited

Cash basis accounting may be used by organizations that Blank______. Multiple choice question. do not need to report to external users collect cash from customers in advance are required to follow accrual accounting in accordance with Generally Accepted Accounting Principles are large publicly-traded corporations

do not need to report to external users

The Unearned Revenue account should be reduced and the Service Revenue account increased for the amount of revenue______________ during the period.

earned or generated

To see the detail of increases and decreases in a company's Cash account, you should look at Blank______. Multiple choice question. the company's income statement either the company's balance sheet or its income statement the company's balance sheet the company's general ledger

the company's general ledger

Accrual basis accounting records Blank______. (Check all that apply.) Multiple select question. expenses even when cash has not yet been paid correct revenue only when cash is collected revenue even when cash has not been collected correct revenue when earned incorrect expenses when incurred to generate revenue incorrect expenses only when cash is paid

expenses even when cash has not yet been paid revenue even when cash has not been collected revenue when earned expenses when incurred to generate revenue

Earnings per share is disclosed at the bottom of the ?

income statement

On June 1, Pizza Company paid $100 for advertisements to be run on June 1. Pizza Company's entry to record this payment will include a $100 Blank______. (Check all that apply.) Multiple select question. decrease in Advertising Expense increase in Prepaid Advertising increase in Advertising Expense decrease in Cash increase in Unearned Advertising

increase in Advertising Expense decrease in Cash

When a company gives common stock to an investor, the effect is to Blank______. Multiple choice question. decrease liabilities increase liabilities decrease cash increase stockholders' equity

increase stockholders' equity

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) in total liabilities and/or (equity/assets)

increase, equity

Assets appear on the _________ side of the accounting equation and are increased by amounts that appear on the_________ side of asset T-accounts. (Enter one word per blank.)

left, left (or debit)

The five elements of the accounting equation include Blank______. (Select all five.) Multiple select question. liabilities revenues assets stockholders' equity general journals expenses general ledgers

liabilities revenues assets stockholders' equity expenses

An unqualified (clean) audit opinion, should help Blank______ the expected rate of return investors charge for providing capital. Multiple choice question. eliminate maximize increase lower

lower

Investors rely on Blank______ for information needed to make investment decisions. Multiple choice question. management discussion and analysis FASB many sources the PCAOB

many sources

Property and equipment, net is reported on the balance sheet at the Blank______. Multiple choice question. amount depreciated during the period original cost original cost plus depreciation expense for the period net book value

net book value

Return on assets (ROA) equals Blank______. Multiple choice question. net income divided by average number of common shares net income divided by average total assets average assets divided by net income net income divided by total assets

net income divided by average total assets

Mauricio, the owner of Pizza Aroma, spent $2,500 of his own money to take his family to Disney World. Because of the separate-entity assumption, Pizza Aroma's financial statements will report Blank______. nothing about this trip a business travel expense of $2,500 a cash payment of $2,500 sales of $2,500 a cash receipt of $2,500

nothing about this trip

The separate entity assumption assumes the balance sheet of a corporation reports Blank______. Multiple choice question. only the debts of the business and its owners the results of all the business and personal activities affecting the business and the owners only the results of the business's activities only the results of the business owners' personal activities

only the results of the business's activities

Preparing a(n) _______________ _____________ trial balance is the last step in the accounting cycle. (Enter one word per blank.)

post closing

The purpose of an independent auditor's report is to Blank______. (Check all that apply.) Multiple select question. provide assurance that the financial statements represent what they claim to represent reduce the risk that the company's financial condition is misrepresented in the financial statements report whether the company is a good investment

provide assurance that the financial statements represent what they claim to represent reduce the risk that the company's financial condition is misrepresented in the financial statements

The purpose of an independent auditor's report is to Blank______. (Check all that apply.) Multiple select question. reduce the risk that the company's financial condition is misrepresented in the financial statements report whether the company is a good investment provide assurance that the financial statements represent what they claim to represent

reduce the risk that the company's financial condition is misrepresented in the financial statements provide assurance that the financial statements represent what they claim to represent

The two principles underlying accrual accounting are the _________ and __________ recognition principles

revenue expense

The two basic accounting principles that determine when revenues and expenses are recorded under accrual accounting are Blank______ principles. Multiple choice question. historical cost and time period cash basis and accrual basis matching and measurement recognition revenue and expense recognition

revenue and expense recognition

Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records Blank______. (Check all that apply.) Multiple select question. expenses only in the period when cash is paid revenues in the period when the revenue is earned, even though the cash has not yet been collected revenues in the period when the cash was collected, even if the service was performed in a prior period expenses in the period incurred, even though cash has not yet been paid

revenues in the period when the revenue is earned, even though the cash has not yet been collected expenses in the period incurred, even though cash has not yet been paid

Accrual accounting results in recording Blank______. (Check all that apply.) Multiple select question. revenues when collected regardless of when the good or service is delivered revenues when earned regardless of when collected expenses when incurred regardless of when paid expenses when paid regardless of when the service or resource is consumed

revenues when earned regardless of when collected expenses when incurred regardless of when paid

Liabilities appear on the _______ side of the accounting equation and are increased with amounts that appear on the ________ side of liability T-accounts. (Enter one word per blank.)

right, right (or credit)

Although the unadjusted trial balance's debits equal credits, some balances are not properly stated because Blank______ have not yet been recorded. (Check all that apply.) Multiple select question. some revenues earned adjusting entries cash collections some expenses incurred cash payments

some revenues earned adjusting entries some expenses incurred

Z Best, Inc. issued $1,000,000 of stock for cash. Z Best recorded the transaction by increasing cash and decreasing common stock and additional paid-in capital. As a result of this entry, Blank______. (Check all that apply.) Multiple select question. liabilities are understated the accounting equation is out of balance contributed capital is understated stockholders' equity is understated assets are understated

the accounting equation is out of balance contributed capital is understated stockholders' equity is understated