Accounting Exam 1
Issuing shares of stocks in exchange for cash is an example of a(n)
Financing activity
All of the following are characteristics of accounting information except
Flexibility
The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the
Going concern assumption
A balance sheet shows
assets, liabilities, and stockholder's equity
Resources owned by a business are referred to as
Assets
Which of the following represents the expanded basic accounting equation?
Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues
An investment by the stockholders in a business increases
Assets and stockholders' equity
Which of the following correctly identifies normal balances of accounts
Assets: Debit Liabilities: Credit Common Stock: Credit Revenues: Credit Expenses: Debit
Which of the following is not a current liability?
Bonds payable
Which of the following statements is true?
Credits decreases assets and increases liabilities
Liabilities are generally classified on a balance sheet as
Current liabilities and long-term liabilities
Current assets divided by current liabilities is known as the
Current ratio
When a company receives a utility bill but will not pay it right away, it should
Debit Utilities Expense and credit Accounts Payable
When a company performs a service but has not yet received payment, it
Debits Accounts Receivable and credits Service Revenue
A company that receives money in advance of performing a service
Debits cash and credits unearned fees
Declaring a cash dividend will
Decrease retained earnings
The payment of a liability
Decreases assets and liabilities
Which of the following is not a principle type of business activity?
Delivering
A credit is not the normal balance for which account listed below?
Dividends account
A measure of profitability is the
Earnings per share
A current asset is
Expected to be converted to cash or used in the business within a relatively short period of time.
Generally accepted accounting principles
Are accounting rules that are recognized as a general guide for financial reporting
A journal provides
A chronological record of transactions
The usual sequence of steps in the recording process is to
Analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts
On a classified balance sheet, companies usually list current assets
In the order in which they are expected to be converted into cash
Which financial statement is prepared first?
Income statement
To show how successfully your business performed during a period of time you would report its revenues and expenses in the
Income statement.
Reporting a net income of $95,000 will
Increase retained earnings
Collection of a $600 Accounts Receivable
Increases an asset $600; decreases an asset $600
The purchase of an asset on credit
Increases assets and liabilities
A ledger:
Is a collection of the entire group of accounts maintained by a company
Relevant accounting information
Is information that is capable of making a difference in a business decision
Posting is performed by transferring information from the
Journal to the ledger
The purchase of an asset for cash
Leaves total assets unchanged
Debt and obligations of a business are referred to as
Liabilities
The relationship between current assets and current liabilities is important in evaluating a company's
Liquidity
An income statement shows
Revenues, expenses, and net income
Net income results when
Revenues>Expenses
A debit is not the normal balance for which account listed below?
Service Revenue
The normal balance of any account is the
Side which increases the account
Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX) of 2002?
The act calls for decreased independence of outside auditors reviewing corporate financial statements.
In recording an accounting transaction in a double-entry systen
The amount of debits must equal the amount of credits
The left side of an account is
The debit side
Which of the following is the most appropriate and modern definition of accounting?
The information system that identifies, records and communicates the economic events of an organization to interested users.
All of the following are advantages for choosing a proprietorship for a business except:
Transfer of ownership is easily achieved through stock sales