Accounting Exam #1

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

President of the employees' labor union

Accumulated depreciation-equip.

Property, plant, and equipment

Information that makes a difference in a decision.

Relevance

Which of the following financial statements is concerned with the company at a point in time?

Balance Sheet

A company uses the same accounting principles from year to year.

Consistency

A business organized as a separate legal entity is a

Corporation

Inventory

Current assets

Prepaid insurance

Current assets

Salaries and wages payable

Current liabilities

Information that is free from error.

Faithful representation

Economic events can be identified with a particular unit of accountability.

Economic entity assumption

Which of the following steps in the accounting process is done after analyzing business transactions? a. Preparing the financial statements b. Preparing a trial balance c. Entering transactions in a journal d. Posting journal entries

Entering transactions in a journal

Information accurately depicts what really happened

Faithful representation

What organization issues U.S. accounting standards?

Financial Accounting Standards Board

Circumstances and events that make a difference to financial statement users should be disclosed.

Full disclosure principle

The business will continue in operation long enough to carry out its existing objectives.

Going concern assumption

Assets should be recorded at their cost.

Historical cost principle

Patents

Intangible assets

Trademarks would appear in which balance sheet section?

Intangible assets

Land (held for investment)

Investments

Which of the following accounts is increased with a debit? a. Land b. Service Revenue c. Interest Payable d. Common Stock

Land

Which of the following describes the classification and normal balance of the Unearned Rent Revenue account?

Liability, credit

Mortgage payable

Long-term liabilities

Only transaction data that can be expressed in terms of money should be included in the accounting records.

Monetary unit assumption

Interest expense

Not on the balance sheet

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

Periodicity assumption

A debit is NOT the normal balance for which account listed below?

Revenue

Which accounts normally have credit balances?

Revenues, liabilities, and retained earnings

Common stock

Stockholders' equity

Retained earnings

Stockholders' equity

Information presented in a clear and concise fashion.

Understandability

Accounts Receivable is classified on the balance sheet as

a current asset.

On July 7, 20XX, Shireman Enterprises received cash $1,400 for services rendered. The entry to record this transaction will include

a debit to Cash of $1,400

The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)

account payable

The right to receive money in the future is called a(n)

account receivable

The cost of assets consumed or services used is also known as

an expense

Powers Corporation received a cash advance of $500 from a customer. As a result of this even

assets increased by $500.

Debits

increase assets and decrease liabilities.

When a company performs a service but has not yet received payment, it a. debits Service Revenue and credits Accounts Receivable. b. debits Accounts Receivable and credits Service Revenue. c. debits Service Revenue and credits Accounts Payable. d. makes no entry until cash is received.

debits Accounts Receivable and credits Service Revenue.

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time

The concept that a business has a reasonable expectation of remaining in business for the

going concern assumption.

In order for accounting information to be relevant, it must

help predict future events or confirm prior expectations.

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash.

To show how successfully your business performed during a period of time, you would report its revenues and expenses in the

income statement

The purchase of an asset for cash

leaves total assets unchanged.

The assumption that requires only those things that can be expressed in money are included in the accounting records is the

monetary unit assumption.

An income statement

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

Equipment is classified on the balance sheet as

property, plant, and equipment.

The primary purpose of the trial balance is to

prove the equality of the debit and credit amounts after posting.

The two fundamental qualities of useful information are

relevance and faithful representation.

The best definition of assets is the

resources belonging to a company that have future benefit to the company.

Dividends are reported on the

retained earnings statement

If services are rendered on account, then

stockholders' equity will increase.

The right side of a t-account is

the credit side.