Accounting Final Exam
Which of the following entries records the receipt of cash from clients on account?
Cash, debit; Accounts Receivable, credit
Which of the following entries records the collection of cash from cash customers?
Cash, debit; Fees Earned, credit
Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance?
Depreciation Expense
The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred. What will the accountant do to confirm this suspicion?
Determine the amount of the error and divide by 9. If the result is evenly divided, then this type of error is likely.
A company depreciates its equipment $500 a year. The adjusting entry on December 31 is a debit to Depreciation Expense of $500 and a credit to Equipment of $500.
F
A company receives $6,500 for two season tickets sold on September 1. If $2,500 is earned by December 31, the adjusting entry made at that time is a debit to Cash of $2,500, and a credit to Ticket Revenue of $2,500.
F
A contra asset account for Land will normally appear on the balance sheet.
F
A debit is abbreviated as Db and a credit is abbreviated as Cr.
F
A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet.
F
A trial balance determines the accuracy of the numbers.
F
Accounts payable are accounts that you expect will be paid to you.
F
Accumulated depreciation is reported on the income statement.
F
Adjusting entries affect balance sheet accounts to the exclusion of income statement accounts.
F
Depending on the account title, the right side of the account is referred to as the credit side.
F
Depreciation Expense is reported on the balance sheet as an addition to the related asset.
F
Financial accounting reports are relevant only to users within the business.
F
If the debit portion of an adjusting entry is to an asset account, then the credit portion must be to a liability account.
F
If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made.
F
Paying an account payable increases liabilities and decreases assets.
F
Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal.
F
Proper ethical conduct implies that you only consider what's in your best interest.
F
Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
F
Receiving payments on an account receivable increases both equity and assets.
F
Revenues are equal to the difference between cash receipts and cash payments.
F
The chart of accounts should be the same for each business.
F
The drawing account is an expense.
F
The erroneous arrangement of digits, such as writing $45 as $54, is called a slide.
F
The excess of revenue over the expenses incurred in earning the revenue is called capital.
F
The financial statements of a proprietorship should include the owner's personal assets and liabilities.
F
The normal balance of a capital account is a debit.
F
The posting reference notation used in the journal is the page number.
F
The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing and therefore should be equal.
F
To determine the balance in an account, always subtract credits from debits.
F
When an account receivable is collected in cash, the total assets of the business increase.
F
Withdrawals decrease owner's equity and are listed on the income statement as a deduction from revenue.
F
Within the United States, the dominant body in the primary development of accounting principles is the
Financial Accounting Standards Board (FASB)
Which of the following is a manufacturing business?
General Motors
At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following is true?
Net income will be overstated for the current year.
Which of the following is an example of a prepaid expense?
Supplies
A company pays an employee $3,000 for a five-day workweek, Monday-Friday. The adjusting entry on December 31, which is a Wednesday, is a debit to Wages Expense of $1,800, and a credit to Wages Payable of $1,800.
T
A company realizes that the last two days' revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.
T
Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.
T
An adjusting entry to accrue an incurred expense will affect total liabilities.
T
An example of an external user of accounting information is the federal government.
T
Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting.
T
Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.
T
Generally accepted accounting principles regulate how and what financial information is reported by businesses.
T
Generally accepted accounting principles require the accrual basis of accounting.
T
If net income for a proprietorship was $50,000, the owner withdrew $20,000 in cash, and the owner invested $10,000 in cash, the capital of the owner increased by $40,000.
T
If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.
T
Normal account balances are on the increase side of the accounts.
T
The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles.
T
The matching principle requires expenses be recorded in the same period that the related revenue is recorded.
T
The process of transferring the debits and credits from the journal entries to the accounts is known as posting.
T
The updating of accounts when financial statements are prepared is called the adjusting process.
T
Unearned revenue is a liability.
T
The term used to describe an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is
accrued
The type of account and normal balance of Prepaid Insurance would be
asset, debit
Which of the following groups of accounts have a normal debit balance?
assets and expenses
How does the purchase of equipment by signing a note affect the accounting equation?
assets increase; liabilities increase
The year-end balance of the owner's capital account appears in
both the statement of owner's equity and the balance sheet
The payment for the monthly rent will require which of the following entries?
debit Rent Expense and credit Cash
The entry to adjust the accounts for salaries accrued at the end of the accounting period is
debit Salaries Expense; credit Salaries Payable
The balance in the supplies account before adjustment at the end of the year is $6,250. The proper adjusting entry if the amount of supplies on hand at the end of the year is $1,500 would be
debit Supplies Expense, $4,750; credit Supplies, $4,750
The adjusting entry for gym memberships earned that were previously recorded in the unearned gym memberships account is
debit Unearned Gym Memberships; credit Gym Memberships Revenue
Data for an adjusting entry described as "accrued wages, $2,020" requires a
debit to Wages Expense and a credit to Wages Payable
A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to
decrease an asset, decrease a liability
A debit may signify a(n)
decrease in liability accounts
The unexpired insurance at the end of the fiscal period represents a(n)
deferred expense
As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
depreciation
Which of the following is not a business entity?
entrepreneurship
The initials GAAP stand for
generally accepted accounting principles
Which of the following would not normally operate as a service business?
grocer
The process of recording a transaction in the journal is called
journalizing
Which of the following statements is not true about liabilities?
liabilities do not include wages owed to employees of the company
Which of the following groups of accounts increases with a credit?
liabilities, capital, revenues
The account type and normal balance of Unearned Revenue would be
liability, credit
The classification and normal balance of the accounts payable account are
liability, credit balance
The accounting principle upon which deferrals and accruals are based is
matching
Deferred revenue is revenue that is
not earned but the cash has been received
Transactions affecting owner's equity include
owner's investments, owner's withdrawals, earning of revenues, and incurrence of expenses
Which of the following describes the classification and normal balance of the fees earned account?
revenue, credit
A debit signifies a decrease in
revenues
Which of the following will increase owner's equity?
revenues > expenses
In which of the following types of accounts are increases recorded by credits?
revenues and liabilities
Expenses follow the same debit and credit rules as
the drawing account
Which of the following is true regarding normal balances of accounts?
the normal balance is on the increase side of the account
Which are the parts of the T account?
title, debit side, credit side
A chart of accounts is
usually a listing of accounts in financial statement order
Using accrual accounting, expenses are recorded and reported only
when they are incurred, whether or not cash is paid
Financial reports are used by
All of these choices (creditors, investors, and management)
Deferrals are recorded transactions that delay the recognition of an expense or revenue.
T
Revenue accounts are increased by credits.
T
All of the following are general-purpose financial statements except a(n)
cash budget
Which of the following is most likely to obtain large amounts of resources by issuing stock?
corporation
The adjusting entry to record the depreciation of a building for the fiscal period is
debit Depreciation Expense; credit Accumulated Depreciation
Gracie Company made a prepaid rent payment of $2,800 on January 1. The company's monthly rent is $700. The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is
$2,100
Equipment with an estimated market value of $30,000 is offered for sale at $45,000. The equipment is acquired for $15,000 in cash and a note payable of $20,000 due in 30 days. The amount used in the buyer's accounting records to record this acquisition is
$35,000
Which of the following is true regarding a limited liability company?
All of these choices (combines the attributes of a partnership and a corporation, provides tax and liability advantages to the owners, and makes up 10% of business organizations in the US)
What effect will this adjustment have on the accounting records? Unearned Fees, debit $6,375; Fees Earned, credit $6,375
All of these choices (increase net income, increase revenues reported for the period, and decrease liabilities)