ACCT207 Exam 1

the closing entry process consists of closing

all temporary accounts - such as revenues, expenses, and dividends.

The usual sequence of steps in the transaction recording process is

analyze, journalize, and post to the ledger

a current asset is

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

what are examples of liabilities

Accounts payable, income taxes payable, income payables, salary payables, accrued expenses

Linkin Park has $7800 liability to motorhead. When Linkin park m akes a partial payment of $2800 on this liability, what is true about the journal entry made by Linkin Park to record this transaction?

Acounts payable is debited for $2800

equation for retained earnings

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

what are examples of assets

Cash, accounts receivables, inventory, buildings, equipment, furniture

equation for net income

Revenues - Expenses

The agency of the united states government that oversees the us financial markets is the

Security exchange comission

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is:

asset

equation for cost of goods sold

beginning inventory + purchases + freight in - ending inventory

what is an example of dividends

cash type, stock type, property type,

what are examples of owners equity

common stock, retained earnings, preferred stock

a business organized as a separate legal entity is a

corporation

You issued 1,000 shares of common stock for $100,000. The entry includes

credit to common stock

Supplies is a)current asset b) expense c) revenue d) liability

current asset

a decrease in a liability account is recorded by a

debit

Budke Corporation paid dividends of $5,000. As a result of this event,

dividends account was increased by $5000

a measure of profitability

earnings per share

Under the accrual basis of accounting

events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.

Revenue increases stockholders' equity and should be recorded whenever cash is received from customers.

false

The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

false

a debit to an account always indicates an increase in that account

false

the double entry system requires that each transaction must be recorded

in at least two different accounts

what is an advantage of using the multiple-step income statement

it highlights the components of net income

An advantage of a corporate form of business

its ownership is easily transferable via the sale of shares of stock.

are corporate stockholders personally liable for the debts of the corporation

no

what is an example of expenses

payments to suppliers, employee wages, operating expenses

which of the following statements concerning users of accounting information is incorrect

regulatory authorities are considered internal users

The best interpretation of the word "credit" is the

right side of an account

Long-term creditors are usually most interested in evaluating

solvency (because long term creditors need to ensure whether a company will be able to make periodic interest payments and repay the original amount due)

liquidity ratios measure

the short-term ability of a company to pay its maturing obligations and meet unexpected needs for cash

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

true

Two primary external users of accounting information are investors and creditors.

true

a decrease in a liability account is recorded by a debit

true

a T-account is

used for accounts that have both debit and credit balance

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

when the performance obligation is satisfied

a liability is classified as a current liability if it is to be paid

within the cfoming year