Financial Accounting
Dolphin Company received $1,500 in fees during Year 1, 1/3 of which will be earned in Year 2. The rest was earned when the amount was received. The company should report which of the following amounts as income in Year 1? A) $1,500 B) $1,000 C) $500 D) $0
$1000
Green Systems sold and delivered modems to Blue Computers for $660,000 to be paid by Blue in three equal installments over the next three months. The journal entry made by Blue Computers to record the last of the three installment payments will include a debit of A) $220,000 to Modem Expense B) $220,000 to Accounts Receivable C) $220,000 to Cash D)$220,000 to Accounts Payable
$220,000 to Accounts Payable
Swordfish Company earned $75,000 in Year 1 and expects to receive 2/3 of the amount in Year 2 and the remainder in Year 3. How much revenue should Swordfish Company report in Year 1? A) $0 B) $25,000 C) $50,000 D) $75,000
$75,000
Black Systems sold and delivered modems to White Computers for $330,000 to be paid by White in three equal installments over the next three months. The journal entry made by Black Systems to record this transaction will include a debit to A) Accounts Receivable for $110,000 B) Accounts Receivable for $330,000 C) Sales Revenue for $330,000 D) Cash for $330,000
Accounts Receivable for $330,000
Which of the following summarizes the rules of credit and debit? A) Asset accounts are increased by debits, whereas liabilities and owners' equity are increased by credits. B) Accounts on the left side of the balance sheet are increased by credits, whereas accounts on the right side are increased by debits. C) The balance of a ledger account is increased by debit entries and is decreased by credit entries. D) The balance of a ledger account is increased by credit entries and is decreased by debit entries.
Accounts on the left side of the balance sheet are increased by credits, whereas accounts on the right side are increased by debits.
Which of the following best defines an asset? A) Something with physical form that is valued at cost in the accounting records B) An economic resource owned by a business and expected to benefit future operations C) An economic resource representing cash or the right to receive cash in the near future D) Something owned by a business that has a ready market value
An economic resource owned by a business and expected to benefit future operations
In which of the following situations would Daystar Company record unearned revenue in May? A) In April, Daystar Company received payment from a customer for services that were performed in May. B) Daystar Company completes a job for a customer in May; payment will be received in June. C) Daystar Company is paid on May 25 for work done in the first two weeks of May. D) Daystar Company receives payment in May for work to be performed in June and July.
Daystar Company receives payment in May for work to be performed in June and July.
Gordy's Corporation has seven employees. Each earns $800 per week for a five-day work week ending on Friday. This month, the last day of the month falls on a Thursday. The company should make an adjusting entry A) debiting Wage Expense for $4,480 and crediting Wages Payable for $4,480 B) debiting Wage Expense for $640 and crediting Wages Payable for $640 C) crediting Wage Expense for $4,480 and debiting Wages Payable for $4,480 D) crediting Wage Expense for $640 and debiting Wages Payable for $640
Debiting Wage Expense for $4,480 and crediting Wages Payable for $4,480.
Omega Company adjusts its accounts at the end of each month. The following information has been assembled in order to prepare the required adjusting entries at December 31, Year 1 Fees of $9,800 were earned during the month for clients who had paid in advance. After the appropriate adjusting entry is recorded, the balance in the liability account Unearned Fees will A) decrease by $9,800 B) increase by $9,800 C) equal $9,800 D) be unaffected
Decrease by $9800
Financial accounting information is A) submitted to the IRS in lieu of a tax form B) designed to assist investors and creditors C) called "special-purpose" accounting information D) not applicable to individuals
Designed to assist investors and creditors
The accounting standards and concepts used in the preparation of financial statements are called A) certified principles of accounting (CPA) B) generally accepted accounting principles (GAAP) C) federal accounting standards and by laws (FASB) D) standards enforcing consistency (SEC)
Generally accepted accounting principles - GAAP
In 2012 the SEC issued an extensive report regarding the use of IFRS by U.S. public companies and listed which of the following as a major obstacle to adopting IASB standards? A) Cross-border financing is decreasing in popularity. B) IASB is dependent on funding from the major accounting firms. C) IASB standards are generally viewed as low quality. D) IASB is not a governmental agency, and therefore it is not positioned to develop accounting standards.
IASB is dependent on funding from the major accounting firms.
The American Institute of Certified Public Accountants has a Code of Professional Conduct that expresses the accounting profession's recognition of its responsibilities to all of the following EXCEPT A) clients B) colleagues C) the public D) the IRS
IRS
The general-purpose financial statements prepared annually by a corporation would NOT include the A) Balance Sheet B) Income Tax Return C) Income Statement D) Statement of Cash Flows
Income Tax Return
What is the normal order in which financial statements are prepared? A) Balance sheet, income statement, statement of retained earnings B) Income statement, statement of retained earnings, balance sheet C) Income tax return, income statement, balance sheet D) Income statement, annual report, balance sheet
Income statement, statement of retained earnings, balance sheet
Audits of financial statements are performed by A) the controller of the reporting company B) the Financial Accounting Standards Board (FASB) C) the management of the reporting company D) independent certified public accountants (CPAs)
Independent Certified Public Accountants
Which of the following is NOT a characteristic of internal accounting information? A) It is audited by a CPA. B) It must be timely. C) It is generally oriented toward the future D) It measures efficiency and effectiveness.
It is audited by a CPA
In which of the following situations would an adjusting entry be made at the end of January to record an accrued expense? A) Ramona's Nursery purchased playground equipment on January 1 with an estimated useful life of six years B) On January 25, Ramona's Nursery hired a college student to drive the minibus; the new employee is to begin work in February. C) January 31 falls on a Tuesday; salaries for Ramona's Nursery employees are paid on Friday of each week. D) On January 31, Ramona's Nursery paid the interest owed on a note payable for January.
January 31 falls on a Tuesday; salaries for Ramona's Nursery employees are paid on Friday of each week.
Which of the following is correct if at the end of Crystal Imports' first year of operations, Assets are $800,000 and Owners' Equity is $720,000? A) The owner(s) must have invested $800,000 to start the business. B) The business must be operating profitably. C) Liabilities are $80,000. D) Liabilities are $1,520,000.
Liabilities are 80k
Internal users of financial accounting information include all of the following EXCEPT A) Chief Financial Officer B) Chief Executive Officer C) Investors D) Managers
Managers
Which of the following accounting principles is concerned with offsetting revenue with the expenses incurred in producing that revenue? A) Realization principle B) Materiality C) Matching D) Depreciation
Matching Principle
As of January 31, Princess Company owes $500 to Butler Company for equipment rented during January. If no adjustment is made for this item on January 31, how will Princess's financial statements be affected? A) Cash will be overstated at January 31. B) Net income for January will be overstated. C) Owners' equity will be understated. D) The financial statements will be accurate since the $500 does not have to be paid yet.
Net income will be overstated at January 31.
Recently, Bon Appetit Café contracted and paid for a relatively expensive advertisement in Haute Cuisine magazine. Despite the fact that the ad will appear in Haute Cuisine three months after the end of Bon Appetit Café's current fiscal year, the Cafe's accountant recorded the disbursement to advertising expense. If no adjusting entry is made, how will this year's financial statements of Bon Appetite Café be affected? A) Net income will be overstated and total assets will be understated. B) Net income will be overstated and total assets will be overstated. C) Net income will be understated and total assets will be understated. D) Net income will be understated and total assets will be overstated.
Net income will be understated and total assets will be understated.
Where does the Income Summary account appear? A) Income statement B) Balance sheet C) Retained Earnings statement D) No financial statement
No financial statement
An expense is best defined as A) any payment of cash for the benefit of the company B) past, present, or future payments of cash required to generate revenues C) financial obligations of the company's owners D) purchases of long-term assets to generate revenues
Past, present, or future payments of cash required to generate revenues
What does a balance sheet do? A) Provides owners, investors, and other interested parties with all the financial information they need to evaluate the financial strength, profitability, and future prospects of a given business entity B) Shows the current market value of the owners' equity in the business at the balance sheet date C) Assists creditors in evaluating the debt-paying ability of a business by showing the assets and liabilities of the business, plus the assets and liabilities of its owner (or owners) D) Shows the assets, liabilities, and owners' equity of a business entity, valued in conformity with generally accepted accounting principles
Shows the assets, liabilities, and owners' equity of a business entity, valued in conformity with generally accepted accounting principles
Which of the following statements is considered a "snapshot" of the business in financial or dollar terms? A) Federal income tax return B) Income statement C) Statement of cash flows D) Statement of financial position
Statement of financial position
Which of the following entries causes an immediate decrease in assets and in net income? A) The entry to record depreciation expense B) The entry to record revenue earned but not yet received C) The entry to record the earned portion of rent received in advance D) The entry to record accrued wages payable
The entry to record depreciation expense
Which of the following is NOT a generally accepted accounting principle relating to the valuation of assets? A) The cost principle - in general, assets are valued at cost, rather than at estimated market values. B) The objectivity principle - accountants prefer to use objective, rather than subjective, information as the basis for accounting information. C) The safety principle - assets are valued at no more than the value for which they are insured. D) The going-concern assumption - one reason for valuing assets such as buildings and equipment at cost rather than at their current market values is the assumption that the business will use these assets rather than sell them.
The safety principle - assets are valued at no more than the value for which they are insured.
Publicly owned companies are those whose ownership shares are A) bought and sold through stock exchanges or over-the-counter markets B) bought and sold by public banks C) owned by other publicly owned companies D) owned by foreign corporations
bought and sold through stock exchanges or over-the-counter markets
The concept of adequate disclosure means that the A) accounting department of a business must inform management of the accounting principles used in preparing the financial statements B) company must inform users of any significant facts necessary for proper interpretation of the financial statements, including events occurring after the financial statement date C) independent auditors must disclose in the financial statements any and all errors detected in the company's accounting records D) financial statements should include a comprehensive list of each transaction that occurred during the year
company must inform users of any significant facts necessary for proper interpretation of the financial statements, including events occurring after the financial statement date
The valuation of assets in the balance sheet is based primarily upon A) what it would cost to replace the assets B) cost, because cost is usually factual and verifiable C) current fair market value as established by independent appraisers D) cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost
cost, because cost is usually factual and verifiable
Bruno's Pizza Restaurant makes full payment of $8,300 on an account payable to Stella's Cheese Company. Stella's would record this transaction with a A) debit to Accounts Payable for $8,300 B) credit to Cash for $8,300 C) credit to Accounts Receivable for $8,300 D) credit to Accounts Payable for $8,300
credit to Accounts Receivable for $8,300
Sue Costa, owner of A-1 Cleaning Services, invested an additional $75,000 in the company. Which of the following would be a part of the correct journal entry to record this transaction? A) A debit to the Cash account B) A debit to the Equity account C) A debit to the Capital Stock account D) A debit to the Cash Revenue account
debit to the cash account
A payment of a business debt NOT including interest A) increases total liabilities B) decreases total assets C) increases the owners' equity in the business D) decreases the owners' equity in the business
decreases total assets
The purpose of adjusting entries is to A) prepare the revenue and expense accounts for recording the revenue and expenses of the next accounting period B) record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions C) correct errors made during the accounting period D) update the owners' equity account for the changes in owners' equity that had been recorded in revenue and expense accounts throughout the period
record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions
The basic purpose of a subsidiary ledger is to A) provide a chronological record of all business transactions B) record details about the individual items comprising the balance of a general ledger account C) enable accountants to prepare financial statements D) provide persons outside of the organization with detailed information about the company's operations
record details about the individual items comprising the balance of a general ledger account
The price of the goods sold or services rendered during a given accounting period is called A) net income B) profit C)revenue D) equity
revenue
During the closing process all A) income statement accounts are credited to income summary B) income statement accounts are debited to income summary C) revenue accounts are debited and expense accounts are credited D) revenue accounts are credited and expense accounts are debited
revenue accounts are debited and expense accounts are credited
If a business closes its accounts only at year-end A) financial statements are prepared only at year-end B) adjusting entries are made only at year-end C) revenue and expense accounts reflect year-to-date amounts throughout the year D) monthly and quarterly financial statements cannot be prepared
revenue and expense accounts reflect year-to-date amounts throughout the year
Which of the following is NOT an alternative title for the income statement? A) Earnings Statement B) Statement of Operations C) Profit and Loss Statement D) Statement of Financial Position
statement of financial position
We can compare income of the current period with income of a previous period to determine whether the operating results are improving or declining only if A) each accounting period covered is a full year B) the same accountant prepares the income statement each period C) the accounting periods are equal in length D) a manual accounting system is used in both periods
the accounting periods are equal in length
Which of the following is considered an adjusting entry? A) The entry to record depreciation B) The entry to pay salaries C) The entry to pay outstanding bills D)The entry to declare a dividend distribution
the entry to record depreciation
The balance of an unearned revenue account appears in A) the balance sheet as a component of owners' equity B) the income statement along with other revenue accounts C) the liability section of the balance sheet D) a separate section of the income statement for revenue not yet earned
the liability section of the balance sheet
If $9,600 cash and a $31,000 note payable are given in exchange for some office machines to be used in a business A) total assets are increased B) total liabilities are decreased C) total assets are decreased D) the owners' equity is increased
total assets are increased
Adjusting entries are needed A) whenever revenue is not received in cash B) whenever expenses are not paid in cash C) only to correct errors or omissions in the initial recording of business transactions D) whenever transactions affect the revenue or expenses of multiple accounting periods
whenever transactions affect the revenue or expenses of multiple accounting periods
The balance in Income Summary A) should equal the balance in retained earnings B) will always be equal to the increase in retained earnings C) will equal net income less dividends D) will equal net income or net loss
will equal net income or net loss
If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal A) $67,500 B) $270,000 C) $472,500 D) cannot be determined from the information given
270 - 202500 = 67500
It is the function of management accounting to perform the following activities, EXCEPT A) create financial forecasts B) perform cost accounting C) complete internal audits D) audit financial statements
Audit financial statements
Browne & Sons Company adjusts its accounts at the end of each month. The following information has been assembled in order to prepare the required adjusting entries at December 31, Year 1: On December 1, Year 1, rent on the office building had been paid for four months. The monthly rent is $6,000. The entry to record rent expense will include a A) debit to Prepaid Rent for $6,000 B) credit to Prepaid Rent for $6,000 C) credit to Prepaid Rent for $18,000 D) debit to Prepaid Rent for $18,000
A credit to prepaid rent for $6,000
The following transactions occurred during May, the first month of operations for Baker Products, Incorporated: Issued 50,000 shares of capital stock to the owners of the corporation in exchange for $600,000 cash Purchased a piece of land for $400,000, making a $150,000 cash down payment and signing a note payable for the balance Made a $60,000 cash payment on the note payable from the purchase of land Purchased equipment on credit from HHW, Incorporated for $63,000 What is the total of Baker Products' liabilities at the end of May? A) $63,000 B) $190,000 C) $253,000 D) $313,000
253,000
If cash flows from operating activities is a positive amount, then the A) amount will be shown on the statement of cash flows in parentheses B) company must have had a net profit for the year C) company must have paid off more debts than it earned during the year D) company may still have a decrease in the total amount of cash for the period
company may still have a decrease in the total amount of cash for the period
If a company purchases equipment for cash A) assets will increase and owners' equity will also increase B) assets will increase and owners' equity will decrease C) assets will increase and owners' equity will remain unchanged D) assets and owners' equity will remain unchanged
Assets and owners' equity will remain unchanged
On the statement of financial position, how are assets and liabilities normally presented? A) Assets are presented in the order in which they become due; liabilities are presented in their order of permanence. B) Assets are presented in order of liquidity; liabilities are presented in the order in which they become due. C) Assets are presented in order of profitability; liabilities are presented in order of liquidity. D) Assets are presented in order of liquidity; liabilities are presented in order of profitability.
Assets are presented in order of liquidity; liabilities are presented in the order in which they become due
Land is purchased by making a cash down payment of $40,000 and signing a note payable for the balance of $130,000. The journal entry to record this transaction in the accounting records of the purchaser includes a A) credit to Land for $40,000 B) debit to Cash for $40,000 C) debit to Note Payable for $130,000 D) debit to Land for $170,000
debit to Land for $170,000
Which financial statement is prepared as of a specific date? A) Income Statement B) Balance sheet C) Statement of Cash Flows D) None
Balance sheet
Which financial statement is primarily concerned with reporting the financial position of a business at a particular time? A) Balance Sheet B) Income Sheet C) Statement of cash flows D) Consolidated statement of stockholders' equity
Balance sheet
The owner of Westhampton Fish Eatery purchased a new car for his daughter who is away at college at a cost of $43,000 and reported this amount as Delivery Vehicle in the restaurant's balance sheet. The reporting of this item in this manner violated the A) cost principle B) business entity concept C) objectivity principle D) going-concern assumption
Business entity concept
Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates the A) accounting equation B) stable-dollar assumption C) business entity concept D) cost principle
Cost principle
Eton Corporation purchased land in Year 1 for $190,000. In Year 10, it purchased a nearly identical parcel of land for $430,000. Eton valued these two parcels of land at a combined value of $860,000 in the balance sheet prepared at the end of Year 10. Reporting the land in this manner violated the A) cost principle B) principle of the business entity C) objectivity principle D) going-concern assumption
Cost principle
Blue Wholesale Shirt Company sold shirts to Pink Retail Shoppe. The owner of Pink Retail said she would pay Blue at a later date, which Blue Wholesale agreed to. Blue Wholesale Shirt Company is considered to be a A) borrower B) liability C) creditor D) debtor
Creditor
Which of the following is considered a return "on" investment? A) Dividends B) Repayment of a loan C) Purchase of an asset D) Securing a loan
Dividends
Which of the following would NOT appear on an income statement? A) Repair service revenue B) Insurance expense C) Dividends D) Net income
Dividends
The body created by the Sarbanes Oxley Act and charged with oversight of the accounting profession is the A) Public Company Accounting Oversight Board B) Auditing Standards Board C) International Accounting Standards Board D) Securities and Exchange Commission
Public Company Accounting Oversight Board
Which of the following will NOT cause a change in the owners' equity of a business? A) Withdrawal of cash by the owner B) Sale of land at a profit C) Losses from unprofitable operations D) Purchase of land with cash
Purchase of land with cash
Adjusting entries help achieve the goals of accrual accounting by applying which two accounting principles? A) Business entity concept and realization principle B) Cost principle and the accounting equation C) Realization principle and matching principle D) Matching principle and safety principle
Realization and matching principles
Why is revenue recorded by a credit entry to a revenue account? A) Revenue recognition follows the realization principle. B) Revenue recognition adheres to the matching principle. C) Revenue always involves a debit to the Cash account. D) Revenue increases owners' equity.
Revenue increases owners' equity.
Double-entry accounting is characterized by which of the following? A) Every transaction affects both an asset account and either a liability account or an owners' equity account. B) The total dollar amount of debit entries posted to the general ledger is equal to the dollar amount of the credit entries. C) The number of general ledger accounts with debit balances is equal to the number with credit balances. D) The number of debit entries posted to the general ledger equals the number of credit entries.
The total dollar amount of debit entries posted to the general ledger is equal to the dollar amount of the credit entries.
What is true about publicly-owned companies? A) They are managed and owned by the government. B) They must be not-for-profit companies C) .They are usually listed on a stock exchange. D) They are not permitted to be owned by individuals.
They are usually listed on a stock exchange.
Which of the following occurs when a corporation uses cash to pay for an expense? A) Total assets will decrease. B) Retained earnings will increase. C) Owners' equity will increase. D) Liabilities will increase.
Total assets will decrease
A strong statement of cash flows indicates that significant cash is being generated by A) operating activities B) financing activities C) investing activities D) effective tax planning
operating activities
According to the realization principle, when should revenue usually be recognized and recorded in the accounting records? A) When goods are sold or services are rendered to customers B) When cash is collected from customers C) At the end of the accounting period D) Only when the revenue can be matched by an equal dollar amount of expenses
When goods are sold or services are rendered to customers
In February of each year, the Carlton Hotel holds a very popular wine tasting event. Tickets must be ordered and paid for in advance, and are typically sold out by November of the preceding year. The realization principle indicates that the revenue from these ticket sales should be recognized in the period in which the A) order is placed B) wine tasting event is held C) payments are received D) expenses associated with the wine tasting are paid in full
Wine tasting event is held
Ben Dryden, president of Jet Glass, Incorporated noticed a $8,000 debit to Accounts Payable in the company's general ledger. This debit could correspond to A) an $8,000 sale to a customer B) a purchase of equipment costing $8,000 on credit C) a payment of $8,000 to a supplier to settle a balance due D) the failure to pay this month's $8,000 utility bill on time
a payment of $8,000 to a supplier to settle a balance due
Deer Park Corporation recently borrowed $70,000 cash from its bank. Which of the following was unaffected by this transaction? A) Assets B) Liabilities C) Owners' equity D) Cash
owner's equity
Closing entries would be prepared before A) the opening balance sheet B) the after-closing trial balance C) an adjusted trial balance D) adjusting entries
after-closing trial balance
The matching principle is best demonstrated by A) using debits to record decreases in owners' equity and credits to record increases B) the equation Assets = Liabilities + Owners' Equity C) allocating the cost of an asset to expense over the periods during which benefits are derived from the asset D) offsetting the cash receipts of the period with the cash payments made during the period
allocating the cost of an asset to expense over the periods during which benefits are derived from the asset
If a transaction causes an asset account to decrease, which of the following related effects may occur? A) An increase of equal amount in an owners' equity account B) An increase in a liability account C) An increase of equal amount in another asset account D) An increase in the combined total of liabilities and owners' equity
an increase of equal amount in another asset account
Adjusting entries A) generally fall into one of two categories B) assign revenues to the period in which they are received C) are generally made daily D) are needed whenever revenue transactions affect more than one period
are needed whenever revenue transactions affect more than one period
Generally accepted accounting principles are intended to assist accountants in preparing financial statements that A) comply with all income tax rules and regulations B) show the business to be both solvent and profitable C) are relevant, verifiable, comparable, and understandable D) are ideally suited to the specific needs of each user of the financial statements
are relevant, verifiable, comparable, and understandable
The basic purpose of an audit is to A) assure outsiders that financial statements are prepared in conformity with generally accepted accounting principles (GAAP) B) provide as much useful information to decision makers as possible, regardless of cost C) record changes in the financial position of an organization by applying the concepts of double entry accounting D) meet an organization's need for accounting information as efficiently as possible
assure outsiders that financial statements are prepared in conformity with generally accepted accounting principles (GAAP)
The term "revenue" can best be described as the A) selling price of goods and services rendered to customers during a given accounting period B) cash received from selling goods and serving customers during a given accounting period C) net increase in owners' equity during a given period"bottom line" in the income statement D) "bottom line" in the income statement
cash received from selling goods and serving customers during a given accounting period
A statement of retained earnings shows the A) changes in the Retained Earnings account occurring during the accounting period B) changes in the Cash account occurring during the accounting period C) types of assets that have been purchased with the earnings retained during the accounting period D) revenue, expense, and dividends of the period
changes in the Retained Earnings account occurring during the accounting period
The purchase of office equipment at a cost of $7,600 with an immediate payment of $4,200 and agreement to pay the balance within 60 days is recorded by the purchaser with a A) debit of $7,600 to Office Equipment, a debit of $4,200 to Accounts Receivable, and a credit of $3,400 to Accounts Payable B) debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Payable C) debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Receivable D) credit of $7,600 to Office Equipment, a debit of $4,200 to Cash, and a debit of $3,400 to Accounts Receivable
debit of $7,600 to Office Equipment, a credit of $4,200 to Cash, and a credit of $3,400 to Accounts Payable
The collection of accounts receivable is recorded by a A) debit to Cash and a debit to Accounts Receivable B) debit to Cash and a credit to Accounts Receivable C) credit to Cash and a debit to Accounts Receivable D) credit to Cash and a credit to Accounts Receivable
debit to Cash and a credit to Accounts Receivable
The purchase of equipment on credit is recorded by a A) debit to Equipment and a credit to Accounts Payable B) debit to Accounts Payable and a credit to Equipment C) debit to Equipment and a debit to Accounts Payable D) credit to Equipment and a credit to Accounts Payable
debit to Equipment and a credit to Accounts Payable
Decreases in owners' equity are caused by A) purchases of assets and payment of liabilities B) purchases of assets and incurrence of liabilities C) payment of liabilities and unprofitable operations D) distributions of assets to the owners and unprofitable operations
distributions of assets to the owners and unprofitable operations
No adjusting entry should consist of a debit to a(n) A) expense and a credit to an asset B) expense and a credit to revenue C) expense and a credit to a liability D) liability and a credit to revenue
expense and a credit to revenue
The FASB's conceptual framework A) is not recognized by the Securities and Exchange Commission B) has been superseded by generally accepted accounting principles C) explains and guides the future development of accounting standards D) sets forth the accounting standards referred to as generally accepted accounting principles
explains and guides the future development of accounting standards
Which of the following businesses is likely to have the shortest operating cycle? A) A department store B) An art store C) A food store D) A car store
food store
Brett Tarek, a manager at D&J Landscaping, Incorporated needs information regarding the amount of accounts payable currently owed by the company. This information would most easily be found in the A) general ledger B) general journal C) income statement D) notes to the financial statements
general ledger
The accounting principle that assumes that a company will operate in the foreseeable future is A) going concern B) objectivity C) liquidity D) disclosure
going concern
The change in owners' equity due to only revenue and expense transactions is explained by the A) statement of cash flows B) statement of financial position C) income statement D) tax return
income statement
A revenue transaction may result in all of the following EXCEPT A) a positive cash flow in either the past, present, or future B) an increase in assetsa C) n increase in owners' equity D) an increase in liabilities
increase in liabilities
The accrual of interest on a note payable will A) reduce total liabilities B) increase total liabilities C)have no effect upon total liabilities D) have no effect upon the income statement but will affect the balance sheet
increase total liabilities
The matching principle A) applies only to situations in which a cash payment occurs before an expense is recognized B) applies only to situations in which a cash receipt occurs before revenue is recognized C) is used in accrual accounting to determine the proper period in which to recognize revenue D) is used in accrual accounting to determine the proper period for recognition of expenses
is used in accrual accounting to determine the proper period in which to recognize expenses
Which of the following are NOT considered external users of financial statements? A) Owners B) Creditors C) Labor unions D) Managers
managers
Sales revenue is recognized in the period in which A) merchandise is delivered to the customer B) the customer orders the merchandise C) cash payment is received by the seller D) purchases are made to replace the merchandise sold
merchandise is delivered to the customer
Declaring a dividend will A) increase net income B) decrease net income C) not change net income D) increase the net worth of a company
not change net income
