Accounting Exam 1

revenue recording

a company records REVENUES when it makes a sale or performs a service rather than when it receives the cash payment from its customer

matching principle

a company records the EXPENSES incurred to earn revenue in the same time period in which it earns and records the related revenue

Toy Emporium has a fiscal year that begins May 1. The company's third quarter consists of which months? a. November, December, January b. August, September, October c. July, August, September d. May, June, July

a. November, December, January (1. may, june, july 2. august, sept, oct 3. nov, dec, jan)

which of the following statements is true about companies in the United States? a. corporations earn more combined revenue than companies with any other form of business organization b. more partnerships exist than any other form of business organization c. sole proprietorships and partnerships combined earn more revenues than corporations d. more sole corporations exist than any other form of business organization

a. corporations earn more combined revenue than companies with any other form of business organization

when the variable cost per unit decreases, the number of units that must be sold to break-even: a. decreases b. stays the same c. increases d. the answer cannot be determined from above info

a. decreases -costs producer less per unit to make product, so making more money off each unit sold

historical cost concept

transactions are recorded based on the amount of money exchanged (the cost) at the time the transaction occured

assets listed on a company's balance sheet are: a. resources that the company has on hand on the date of the balance sheet that are available to use after that date b. resources that the company used up during the last year c. stated at their current market value d. resources that the company purchased during the year that ended on the balance sheet date

a. resources that the company has on hand on the date of the balance sheet that are available to use after that date

which of the following describes the TOTAL contribution margin?

a. the amount of the company's sales revenue left over after recovering its total variable costs

Which of the following statements about audited financial statements is NOT true? a. the financial statements are the responsibility of the company's auditors b. auditing is necessary to overcome potential bias of the company's managers c. auditing provides assurance that the financial statements fairly represent the results of the activities of the company d. all corporations that sell stock to the public must have their financial statements audited

a. the financial statements are the responsibility of the company's auditors

which of the following statements is true about companies in the US?

a. there are more proprietorships and partnerships than there are corporations

which of the following is affected when sales volume increases?

a. total costs

monetary unit concept

all transactions are recorded in terms of money - in the US, the dollar

which of the following statements is true about business plans?

b. a company should prepare or update a business plan on a regular basis

which of the following budgets would NOT be useful in preparing a company's projected income statement? a. sales budget b. cash budget c. selling expenses budget d. general and administrative budget

b. cash budget

factors that distinguish members of a profession, such as accounting, from people who hold other jobs or careers include all of the following except:

b. high level of training or skill required of members

fixed costs because in all of the following ways except:

b. increase in total as a company's sales volume increases

ABC chewing gum inc. makes a sale on credit to a customer, and the customer will pay for the purchase two months from now. ABC records the expenses involved in making the sale the same period as the sale, according to the: a. dual effect concept b. matching principle c. historical cost concept d. revenue recording concept

b. matching principle -record revenues and expenses as soon as they happen, don't have to wait until they are actually collected/paid

the operating cycle of a company is the

b. time it takes to use cash to develop a product or service, sell it, and collect from the customers

the following comments were heard in Cornell Hall the other day. which comment probably describes the least creative person?

b. when I asked why we have to use pencils on all his exams, he said its because thats the way its always been done

a company records revenue:

c. after it sells its product and delivers it

the overall purpose of the Securities and exchange commission is to oversee the: a. external financing reporting of all companies b. accounting done by all companies c. external financing reporting of all publicly-owned corporations d. internal accounting reporting of all publicly-owned corporations

c. external financing reporting of all publicly-owned corporations

a company breaks even in all of the following cases expect:

c. its total revenues exactly equal its fixed costs

aaron's skiwear uses a calendar year. the company's third quarter consists of which months?

c. july, august, sept

if a company plans to raise the selling price of a product, which of the following budget schedules would NOT be affected by this decision? (assume that the price change will have no effect on the projected sales quantity) a. cash budget b. projected income statement c. purchases budget d. sales budget e. projected balance sheet

c. purchases budget -purchase the same amount, but make more $

which of the following is NOT a source of data for the cash budget? a. the sales budget b. the purchases budget c. the budgeted income statement d. the general and administrative budget (expenses)

c. the budgeted income statement -doesn't relate to cash specifically, not a budget... more of a record

Which of the following would NOT be considered when preparing a cash budget? a. minimum cash requirements imposed by the bank from which the company borrowed money b. the timing of expected collections from customers c. the company's profit d. the potential of having excess idle cash not being put to work earning interest e. when the company plans to pay its supplier

c. the company's profit

an expense reflects:

c. the cost of something used by the company

revenues represent: a. the cash collected from customers during the year of the income statement b. the cash collected from sales made during the year of the income statement c. the sum of the selling prices of all goods sold to customers during the year of the income statement d. the sum of the costs of all goods sold to the customers during the year of the income statement

c. the sum of the selling prices of all goods sold to customers during the year of the income statement

which of the following statements is true about business plans? a. a company should have a business plan only when it is starting up b. a company's business plan should be at least 200 pages long c. a business plan is only necessary when a company is applying for a loan d. a company should create or revise its business plan on a regular basis e. a business plan should be a broad summary of the major aspects of the company

d. a company should create or revise its business plan on a regular basis

the term generally accepted accounting principles (GAAP) refers to

d. agreed-upon principles that apply to US public companies' financial reporting

Generally accepted accounting principles: a. are standardized worldwide b. are non-binding guidelines for accountants to use in fulfilling their responsibilities c. must be followed in all accounting reports (internal and external) d. are agreed-upon principles that help external users understand the meaning of public companies' accounting information

d. are agreed-upon principles that help external users understand the meaning of public companies' accounting information

which of the following statements is true regarding sole proprietorships, partnerships, and corporations?

d. corporations get more press from the business media than sole proprietorships and partnerships combined because their sales revenues are much higher and because they control a lot more of the world's resources

which of the following is the best response to this pricing model: "its OK to sell products for less than what you paid for them because that will bring you more customers"

d. disagree, the more the company sells, the bigger its loss will be

which of the following would you expect to find in a cash (CFS) budget?

d. how much cash related to sales that the company expects to collect in the budget period

the purpose of an audit of a company's financial statements by an independent certified public accounting is to

d. provide and opinion to the public about whether the company's financial statements fairly represent the results of the company's activities during the time period of the financial statements

The governmental organization responsible for overseeing the financial statements of publicly-owned companies and which also has the legal authority to establish accounting regulations for those companies is the a. american institute of certified public accountants (AICPA) B. general accounting office (GAO) c. american accounting association (AAA) d. securities exchange commission (SEC)

d. securities exchange commission (SEC)

as a result of the sarbanes-oxley act, each company that is overseen by the SEC must have a code of ethics that: a. applies to all of its employees b. it makes available to the public as part of its annual report, on its web site, or as otherwise set forth c. that applies specifically to the company's board of directors d. specifically outlines ethical and unethical conduct for its financial officers

d. specifically outlines ethical and unethical conduct for its financial officers

if a company's fixed cost increases and nothing else changes, which of the following will happen?

d. the company will have to sell more products in order to achieve its target profit

an audit of a company's financial statements requires that the auditor:

d. use inductive logic because the auditor must make a judgment about the company's financial statements after sampling the company's transactions for the time period represented on the company's financial statements

which of the following basic financial statements reflects the activities of a company during a given year?

e. income statement and cash flow statement

the break-even point is the sales volume where: a. variable costs equal variable revenues b. fixed costs equal total revenues c. total contribution margin equals fixed costs e. total revenues equal variable costs f. c and e are both correct

f. c and e are both correct