Accounting Test #1
If an apartment leasing company receives the rent for January 2016 from a tenant in December 2015, this will be reported by the leasing company as:
A liability in 2015
contra account
account that is an offet to or reduction of another account
depreciation
allocating cost of assets as they are used
An economic resource that is owned by a company and will provide future benefits is referred to as:
an asset
If certain assets are partially used up during the accounting period, then:
an asset account is decreased and an expense is recorded
net profit margin
net income / revenues * 100
the statement of retained earning includes
net income, dividends
debit retained earnings for
net loss
SE defintion
owners claim to the business resources
deferral adjustments
postponing reporting expenses and revenues on income statement decrease balance sheet account, increase income statement account
PPE
property plant and equiptment
expense recognition
record expenses in same period as the revenues associated
cash basis accounting
records revenue when cash is recieved and expenses when cash is paid
Accrual basis accounting
report revenues and expenses when services are provided regardless of when cash is recieved
revenue recognition
revenues recognized when earned
The income statement includes
revenues, expenses, net income
operating cycle
sell goods and services collect money from customers buy goods and services pay money to suppliers and employees
contributed captial
summarizes the total value of stock that shareholders have directly purchased from the issuing company
Order of financial statements
the income statement statement of retained earnings balance sheet statement of cash flows
current liabilities
will be paid within the next year
Alpha sold $2,000 of services to Beta on credit. Beta promised to pay for it next month. Alpha will report a $2,000:
Accounts receivable
Which of the following statements about the income statement is NOT correct?
Amounts received from customers in payment of their accounts arising from service in the prior period would be revenues in the income statement for the current period
Accounting systems:
Analyze, record, summarize, and the activities affecting its financial condition and performance
A company neglected to proceed services provided on credit. What would be the effect of this commission?
Assets and revenues would be understated
Adjusting entries are typically prepared:
At the end of the accounting period
Which of the following financial statements does not cover a period of time but rather reports amounts at a specific point in time?
Balance sheet
Adjusting entries affect:
Both income statement and balance sheet accounts
Mauricio invested $30,000 in Pizza Aroma in exchange for its stock. Pizza Aroma now has:
Common stock
West Corporation issued a $100 gift card. What journal entry will West Corporation record?
Debit cash and credit unearned revenue for $100
The adjusting entry to record the amount earned that previously had been collected in advance will:
Decrease liabilities and increase revenue
The entry to record the payment of accounts payable:
Decreases assets
Which of the following statements about financial accounting is correct?
Financial accounting reports are primarily prepared to provide information for external decision makers
Which of the following statements about financial accounting is correct?
Financial accounting reports are primarily prepared to provide information for external decision makers
Receiving cash from a customer to pay for a previously recorded account receivable will:
Have no effect on total assets
A business can obtain financing by issuing stock or borrowing from third parties, such as banks. What are the balance sheet effects of issuing stock to obtain cash?
Increase assets; no effect on liabilities; increase stockholders' equity
An example of an account that could be in an accrual adjustment for expense is:
Interest payable
A credit would make which of the following accounts decrease?
Inventory
With respect to the audience targeted for financial accounting reports, which of the parties below is not an external user?
Managers of the company issuing the reports
If a company incorrectly records a payment as an asset instead of an expense, how will this error affect net income in the current period?
Net income will be too high
If a company incorrectly records cash received for services to be provided in the future with a debit to cash and credit to sales revenue, how will this error affect net income for the current period?
Net income will be too high
Statement of cash flows order
Operating costs Investment costs financing costs
Creditors are:
People or organizations to whom a business owes money
Which of the following will result in an increase in revenue?
Selling $10,000 of groceries
If supplies are purchased for cash:
Total assets will remain the same
Definition of accounting
an informational system designed by an organization to capture the activities affecting its financial condition and performance and then report the results to decision makers
current assets
assets that business will use up within a yeat
The balance sheet includes
assets, liabilities, stockholders equity
transaction
business action that affects accounting equation
debit financing
cash a business obtains through loans
equity financing
cash obtained through owners contributions and reinvestment of profit
accrual adjustments
company earned revenue or incurred expense but has not paid yet
current ratio
current assets / current liabilities the higher the ratio (1-2) the better the ability to pay liquity
operating activities
day to day business activities ie. buying and selling goods and services
When closing accounts
debit revenue, credit expense credit/debit retained earnings credit dividends
Trial Balance
debits assets, credits liabilities and SE, Total
asset definition
economic resources presently controlled by the company that has measurable value
temporary accounts
expense, revenues, dividends
permanent accounts
liabilities, assets, equity
liabilities definition
measurable amounts that the company owes to creditors
credit retained earnings for
net income
