Accounting exam 1

An account has $800 on the debit side and $200 on the credit side. The overall balance in the account is a.$600 debit balance. b.$600 credit balance. c.$800 debit balance. d.$200 credit balance. e.$1,000 debit balance.

a.$600 debit balance.

The process of identifying, recording, and communicating the economic events of a business to interested users of the information.

Accounting

Events that require recording in the company's accounting system because they affect assets, liabilities, or owner's equity.

Accounting transaction

Accounts receivable

Asset

Cash

Asset

Inventories

Asset

accouting equation

Assets=Liabilities+Owners Equity

A financial statement that reports the assets, liabilities, and stockholders' equity at a specific date.

Balance sheet

A list of a company's accounts.

Chart of accounts

A person or company to whom money is owed (i.e., someone you owe money to).

Creditor

The left side of an account.

Debit

A person or company that owes money (i.e., someone that owes you money).

Debitor

A system that records the dual effect of each transaction in appropriate accounts.

Double-Entry Accounting System

Stockholders' Equity divided by Total Assets.

Equity Ratio

Cost of goods sold

Expense

Income tax expense

Expense

Interest expense

Expense

Selling and administrative expenses

Expense

The cost of assets consumed or services used in the process of ongoing operations to generate revenues(also called "the cost of doing business").

Expenses

An accounting record in which transactions are initially recorded in chronological order; also referred to as a "book of original entry."

Journal

The procedure of entering transaction data in the journal.

Journalizing

Accounts payable

Liability

Long-term debt

Liability

Notes payable

Liability

The procedure of transferring journal entries to the ledger accounts.

Posting

Net Sales

Revenue

Other revenue

Revenue

Common stock

Stockholders equity

Retained earnings

Stockholders' equity

10.A list of accounts and their balances at a given time.

Trial Balance

The term used to describe the money that Starbucks earns for selling its coffee is: a.paid-in capital. b.revenue. c.inventory. d.accounts receivable.

b.revenue.

Assets total $14,000, stockholders' equity totals $9,000, and revenues total $6,000. What is the dollar amount of liabilities? a.$23,000 b.$17,000 c.$11,000 d.$5,000

d.$5,000

The amount by which expenses exceed revenues.

net loss

An individual accounting record of increases and decreases in a specific asset, liability, and owner'sequity items.

Account

Which of the following accounts are found on a balance sheet?a.Accounts payable, cash, and inventory b.Cash, sales, and accounts receivable c.Cost of goods sold, notes payable, and common stock d.Cash, wages payable, dividends

a.Accounts payable, cash, and inventory

Which of the following accounts are found on a balance sheet?a.Accounts payable, cash, and inventory. b.Cash, sales, and accounts receivable. c.Cost of goods sold, notes payable, and common stock. d.Cash, wages payable, dividends.

a.Accounts payable, cash, and inventory.

Which of the following is a correct expression of the accounting equation? a.Assets -Liabilities = Stockholders' Equity. b.Assets + Liabilities = Stockholders' Equity. c.Assets = Liabilities -Stockholders'Equity. d.Liabilities = Assets + Stockholders' Equity. e.More than one of the above.

a.Assets -Liabilities = Stockholders' Equity.

Which of the following is an advantage of corporations relative to partnerships and proprietorships? a.Lower legal liability for owners b.Lower taxes c.Lower costs to create and operate d.All of the above

a.Lower legal liability for owners

Which of the following accounts are found on an income statement? a.Revenues and expenses. b.Revenues, expenses, and cash. c.Revenues, expenses, and dividends. d.Revenues, expenses, dividends, and cash.

a.Revenues and expenses.

Which of the following financial statements provides information about the operating, investing, and financing activities of a company? a.Statement of cash flows. b.Balance sheet. c.Income statement. d.Statement of retained earnings.

a.Statement of cash flows.

The basic steps in the recording process are: a.analyze the transaction, enter the transaction in the journal, and transfer the information to the general ledger. b.enter the transaction in the journal, analyze the transaction, and transfer the information to the general ledger. c.analyze the transaction, enter the transaction in the financial statements, and enter the transaction in the journal. d.None of the above.

a.analyze the transaction, enter the transaction in the journal, and transfer the information to the general ledger.

When your company performs services for a customer and receives cash for the services, which accounts are increased?a.cash and service revenue. b.cash and accounts receivable. c.cash and accounts payable. d.accounts receivable and service revenue.

a.cash and service revenue.

Corporations may issue several classes of stock, but the stock representing the primary ownership interest is: a.common stock. b.retrained earnings. c.financing activity. d.dividends.

a.common stock.

To report the success or failure of the company's operations during the period is the purpose of the: a.income statement. b.retained earnings statement. c.balance sheet. d.statement of cash flows.

a.income statement.

If the Cash account is debited in the journal, then: a.the Cash account will be debited in the ledger. b.the Cash account will be credited in the ledger. c.the Cash account will be both debited and credited by equal amounts in the ledger. d.none of the above is correct.

a.the Cash account will be debited in the ledger.

Assets = Liabilities + Stockholders' Equity.

accounting equation

Equipment

asset

Inventory

asset

Office supplies

asset

Resources owned by a business.

assets

In Year 1, Ashgar Company had revenue of $450,000, expenses of $375,000, and paid dividends of $100,000. The amount of net income or net loss for Year 1 was: a.$450,000 net income. b.$75,000 net income. c.$25,000 net loss. d.$375,000 net loss.

b.$75,000 net income.

In Year 1, Ranshaw Corporation's total assets increased $200,000 and total liabilities increased $120,000. The amount and direction (increase or decrease) of the change in owners' equity in Year 1 is: a.$320,000 increase. b.$80,000 increase. c.$80,000 decrease. d.$320,000 decrease.

b.$80,000 increase.

Cash and other assets that the company expects to use up or convert to cash within one year or the operating cycle, are called: a.fixed assets. b.current assets. c.intangible assets. d.long-term investments. e.property, plant, and equipment.

b.current assets.

The process of entering transaction data into the journal is called: a.posting. b.journalizing. c.balancing. d.none of the above.

b.journalizing.

If a corporate accountant wanted to know the balance in the company's Cash account, then she would look in: a.the journal. b.the ledger. c.the source documents. d.the chart of accounts.

b.the ledger.

1. A business operating as an entity separate from its owners and in which ownership is divided into shares of stock is known as a(n) a.Partnership. b.Proprietorship. c.Corporation. d.Agency. e.Department.

c.Corporation.

Which of the following statements is correct? a.A sole proprietor has no personal liability for debts of his business. b.There are far more corporations than there are sole proprietorships and partnerships. c.Total revenue produced by U.S. corporations is much greater than that produced by proprietorships and partnerships. d.It is very difficult for a corporation to raise capital.

c.Total revenue produced by U.S. corporations is much greater than that produced by proprietorships and partnerships.

A trial balance will not balance if: a.a correct journal entry is posted twice. b.the purchase of supplies on account is debited to Supplies and credited to Cash. c.a $100 purchase of inventory for cash is debited to the Inventory account for $1,000 and credited to Cash for $100. d.a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

c.a $100 purchase of inventory for cash is debited to the Inventory account for $1,000 and credited to Cash for $100.

All of the following are characteristics of a sole proprietorship except: a.a business owned by one person. b.owner has control of the business. c.a separate legal entity. d.small owner-operated business.

c.a separate legal entity.

All of the following accounts normally have debit balances with the exception of: a.accounts receivable. b.wages expense. c.accounts payable. d.prepaid insurance.

c.accounts payable.

A listing of a company's assets, liabilities, and owner's equity as of a specific date is a(n): a.owner's equity statement. b.statement of cash flows. c.balance sheet. d.income statement.

c.balance sheet.

The financial statement which presents a picture at a point in time of what a business owns and owes is a(n): a.income statement. b.retained earnings statement. c.balance sheet. d.statement of cash flows.

c.balance sheet.

Expense(s) is (are): a.another word for a liability b.cash payments for costs incurred to earn revenues. c.costs (whether paid or not) incurred to earn revenues. d.decreases in revenue.

c.costs (whether paid or not) incurred to earn revenues.

If revenues are $20,000 and expenses are $5,000, then the business: a.incurred a net loss of $25,000. b.earned net income of $20,000. c.earned net income of $15,000. d.incurred a net loss of $15,000.

c.earned net income of $15,000.

Debits: a.increase both assets and liabilities. b.decrease both assets and liabilities. c.increase assets and decrease liabilities. d.decrease assets and increase liabilities.

c.increase assets and decrease liabilities.

Patents, copyrights, and goodwill are: a.fixed assets. b.current assets. c.intangible assets. d.long-term investments. e.property, plant, and equipment.

c.intangible assets.

Transactions are initially recorded in chronological order in a before they are transferred to the accounts. a.ledger b.T account c.journal d.source document e.trial balance

c.journal

Accounts that normally have credit balances are: a.asset and liability accounts. b.asset, liability, and owners' equity accounts. c.liability and owners' equity accounts. d.asset and owners' equity accounts.

c.liability and owners' equity accounts.

All of the following are current assets except: a.accounts receivable. b.cash. c.patents. d.marketable securities.

c.patents.

A company will have "net income" when: a.revenue exceeds liabilities. b.assets exceed liabilities. c.revenue exceeds expenses. d.revenue exceeds assets. e.expenses exceed revenue.

c.revenue exceeds expenses.

A business organized as a separate legal entity having ownership divided into transferable shares of stock.

corporation

At the end of Year 1, Turner Company had total assets of $140,000. During Year 1, TurnerCompany earned revenues of $60,000. As of December 31, Year 1, contributed capital was $10,000, and retained earnings was $80,000. What is the dollar amount of liabilities? a.$230,000 b.$170,000 c.$110,000 d.$50,000

d.$50,000

If beginning retained earnings is $10,000, net loss is $3,000, and dividends are $1,000, then the ending retained earnings shown on the statement of retained earnings is: a.$14,000. b.$12,000. c.$8,000. d.$6,000.

d.$6,000.

Which of the following is an example of a financing activity?a.Buying inventory b.Buying equipment to be used to manufacture goods c.Selling goods to customers d.Issuing shares of common stock e.Paying a utility bill for electricity used in the production of goods

d.Issuing shares of common stock

Current liabilities include: a.obligations to be paid within the coming year. b.accounts payable. c.wages payable. d.all of the above.

d.all of the above.

A ledger contains: a.only asset and liability accounts. b.only owner's equity accounts. c.only asset and owner's equity accounts. d.all the asset, liability, and owner's equity accounts.

d.all the asset, liability, and owner's equity accounts.

Resources owned by a business and used in carrying out its operating activities are: a.liabilities. b.stockholders' equity. c.revenues. d.assets.

d.assets.

The resources owned by a business are called: a.revenue. b.expenses. c.owners' equity. d.assets. e.liabilities.

d.assets.

If your company borrows money and issues a 3-month note in exchange, then the journal entry requires a:a.debit to Unearned Revenue and a credit to Cash. b.debit to Cash and a credit to Unearned Revenue. c.debit to Notes Payable and a credit to Unearned Revenue. d.debit to Cash and a credit to Notes Payable.

d.debit to Cash and a credit to Notes Payable.

Acquiring long-term assets necessary to operate the business is called a(n): a.financing activity. b.operating activity. c.revenue activity. d.investing activity.

d.investing activity.

All of the following are characteristics of a corporation except: a.a separate legal entity. b.ownership evidenced by shares of stock. c.produce eight times more revenue than sole proprietorships and partnerships in the United States. d.owners have unlimited liability.

d.owners have unlimited liability.

Profitable operations are evident when: a.assets increase. b.the difference between assets and liabilities increases. c.contributed capital increases. d.retained earnings increases.

d.retained earnings increases.

Posting: a.normally occurs before transactions are recorded in a journal. b.transfers information about transactions from the ledger to a journal. c.is an optional step in the accounting process. d.transfers information about transactions from a journal to the ledger. e.more than one of the above.

d.transfers information about transactions from a journal to the ledger.

Distributions of cash or other assets from an incorporated business to its shareholders.

dividends

Cash paid to stockholders (dividends)

financing activities

Cash received from issuing new common stock

financing activities

Cash paid to purchase a new office building

investing activities

The group of accounts maintained by a company.

ledger

Debts and obligations of a business.

liabilities

Accounts payable

liability

Salaries payable

liability

Cash received from customers

operating activities

Cash paid to suppliers of inventory

operating activity

The amount of net income kept in the corporation for future use, not distributed to stockholders as dividends.

retained earnings

Common stock

stockholders equity

Retained earnings

stockholders equity