Accounting

Which of the following is NOT an asset account? A. Cash B. Land C. Services Revenue D. Buildings E. Equipment

C. Services Revenue

Cost included in the merchandise inventory account can include all of the following except: A. Invoice price minus any account B. Transportation-in C. Storage D. Insurance E. Damaged inventory that cannot be sold.

C. Storage

The basic financial statements include all of the following except: A. Balance sheet B. Income statement C. statement of retained earnings D. statement of cash flows E. statement of changes in assets

Statements of Changes in Assets

International Revenue Services (IRS)

the federal agency that collects income taxes

a debit:

is the left-hand side of a T-account

adjusting entries

journal entries recorded to update general ledger accounts at the end of a fiscal period

Fraud Triangle Components

opportunity, pressure, rationalization

If equity is $300,000 and liabilities are $192,000, then assets equal:

$492,000

Identify the account below that is classified as a liability in a company's chart of accounts: A. Accounts Receivable B. Accounts Payable C. Common Stock D. Unearned Revenue E. Service Revenue

A. Accounts Receivable

Assets created by selling goods and services on credit are:

Accounts Receivable

A debit to Sales Returns and Allowances and a credit to Accounts Receivable: A. Reflects an increase in amount due from a customer B. Recognizes that a customer returned merchandise and/or received an allowance C. Records the cost side of a sales return D. Is recorded when a customer takes a discount E. Reflects a decrease in amount due to a supplier

B. Recognizes that a customer returned merchandise and/or received an allowance

Which of the following statements regarding sales returns and allowances is not true? A. A reduction in the selling prices because of damaged merchandise is included in sales returns and allowances B. Sales returns and allowances do not have an impact on gross profit C. Sales returns and allowances are recorded in a separate contra-revenue account D. Sales return and allowances are rarely disclosed in financial statements E. Sales returns and allowances are closed in the income statement

B. Sales returns and allowances do not have an impact on gross profit

Accounts payable appear on which of the following statements? A. Balance sheet B. Income Statement C. Statement of retained earnings D. Statement of cash flows E. Transaction statement

Balance Sheet

which of the following does not require an adjusting entry at year-end? A. Accrued interest on notes payable B. Supplies used during the period C. Cash invested by stockholders D. Accrued wages E. Expired portion of prepaid insurance

C. Cash invested by stockholders

which of the following statements regarding gross profit is not true? A. Gross profit is also called gross margin B. Gross profit less other operating expenses equals income from operations C. Gross profit is not calculated on the multi-step income statement. D. Gross profit must cover all operating expenses to yield a return for the owner(s) of the business E. Gross profit equals net sales less cost of goods sold

C. Gross profit is not calculated on the multi-step income statement.

Generally Accepted Accounting Principles require that the inventory of a company be reported at: A. Market Value B. Historical cost C. Lower of cost or market D. Replacement cost E. Retail Value

C. Lower of cost or market

Which of the following statements regarding merchandise inventory is not true? A. Merchandise inventory is reported on the balance sheet as current asset. B. Merchandise inventory refers to products a company owns and intends to sell. C. Merchandise inventory may include cost of freight-in and making them ready for sale. D. Merchandise inventory appears on the balance sheet of a service company E. Purchasing Merchandise inventory is part of the operating cycle for a business.

D. Merchandise inventory appears on the balance sheet of a service company

A credit is used to record an increase in all of the following accounts except: A. Accounts Payable B. Service Revenue C. Unearned Revenue D. Wages Expense E. Common Stock

D. Wages Expense

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Debit unearned Legal Fees and credit Legal Fees Earned.

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

Depreciation expense

All of the following statements regarding the financial statement impact of inventory costing are true except: A. When purchase prices are changing, the methods of to assign inventory costs result in different amounts of costs for goods sold B. Inventory on the balance sheet approximates current cost when FIFO is used C. The Weighted average method smooths out erratic changes in costs. D. Selected costing method does not impact net income E. Cost of goods sold on the income statement approximates current cost when LIFO is used

E. Cost of goods sold on the income statement approximates current cost when LIFO is used

Which of the following statements is incorrect? A. Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. B. Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded C. Adjusting entries can be used to record both accrued expenses and accrued revenues D. prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time E. adjusting entries affect only balance sheet accounts

E. adjusting entries affect only balance sheet accounts

The Securities and Exchange Commission (SEC) gave task of setting GAAP to who?

FASB

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is: A. Specific identification B. Average cost C. Weighted-average D. FIFO E. LIFO

FIFO

The process of transferring general journal entry information to the ledger is called:

Posting

FASB (Financial Accounting Standards Board)

generally accepted accounting principles (GAAP)

Managerial Accounting

the area of accounting that serves the decision-making needs of internal users

On May 1, a two-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended in December 31.

$6,000

closing entries

1) close revenue to income summary 2) close expenses to income summary 3) close income summary to retained earnings 4) close dividends to retained earnings

Certified Public Accountant (CPA)

1.Must meet education and experience requirements 2. Must pass an examination 3. Must exhibit ethical character 4. May also be a Certified Management Accountant

a company's ledger is:

A record containing all accounts and their balances used by the company.

Accounting Cycle

A six-step procedure that results in the preparation and analysis of the major financial statements. 1) Analyze the transaction 2) journal entry 3) post to the ledger 4) trial balance

Adjusting Entries:

Affect both income statement and balance sheet accounts

The adjusted trial balance contains information pertaining to:

All General ledger accounts

AICPA (American Institute of Certified Public Accountants)

Auditing standards, Ethics, CPA exams

Outflows of cash and other resources to stockholders are:

Dividends

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is: A. Specific identification method B. Average cost method C. Weighted-average method D. FIFO method E. LIFO method

D. FIFO method

The amount recorded for merchandise inventory includes all of the following accept: A. Purchase Discounts B. Returns and allowances C. Freight costs paid by the buyer D. Freight cost paid by the seller E. Trade discounts.

D. Freight cost paid by the seller

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

Equipment was purchased on credit.

Partnership

Has unlimited liability for its partners

International Accounting Standards Board (IASB)

International Rules. Global Standards

Unearned revenues are generally

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,300 and another asset decreases $1,300, causing no effect.

Multi-Step Income Statement

Sales - Sales return and allowances - sales discount - cost of goods sold = Gross profit - operating expenses = income from operations +/- other revenues/expenses = net income.

Government Accounting Standards Board (GASB)

The federal agency that sets the accounting standards to be followed by government entities. nonprofits

While in the process of posting from the journal to the ledger, a company failed to post a $500 debit to the Equipment account. The effect of this error will be that:

The trial balance will not balance

A business uses a credit to record:

a decrease in an asset account