Accounting Test

The entry to close the expense accounts includes:

A debit to Retained Earnings.

All transactions related to a particular item over a period of time are summarized in a(n):

Account

A debit is used to decrease which of the following accounts?

Accounts Payable

Recording salaries owed to employees that will not be paid by the company until the following accounting period is an example of a(n):

Accrued expense.

Financial statements are prepared from which of the following trial balances?

Adjusted trial balance.

Which of the following is not a step in the process of measuring external transactions?

All of the steps listed are steps in the measurement process of external transactions.

Which of the following is a characteristic of adjusting entries?

Allows for proper application of the revenue recognition principle (revenues) or expenses recognition.

Which of the following represents a resource of the company?

Asset

Which of the following equations correctly represents the fundamental accounting equation?

Assets = Liabilities + Stockholders' Equity

The financial statement that shows the financial position of a company at a specific point in time is called the:

Balance Sheet

Which financial statement reports a company's assets and liabilities?

Balance Sheet

Which financial statement shows that a company's resources equal claims to those resources?

Balance Sheet

A credit is used to decrease which of the following accounts?

Cash

Which of the following describes the information reported in the statement of stockholders' equity?

Change in stockholders' equity through changes in common stock and retained earnings.

A list of all account names used to record transactions of a company is referred to as a:

Chart of accounts

Expenses represent:

Costs of providing products or services to customers.

The adjusting entry to record interest earned during the period includes a:

Credit to Interest Revenue.

Providing services to customers for cash would be recorded with a:

Credit to Service Revenue.

On November 1, 2021, a company receives cash of $6,000 from a customer for services to be provided evenly over the next six months. Deferred revenue is recorded at that time. Which of the following adjusting entries is needed on December 31, 2021?

Debit Deferred Revenue for $2,000; Credit Service Revenue for $2,000.

A company owes employee salaries of $5,000 on December 31 for work completed in the current year, but the company doesn't plan to pay those salaries until the following year. What adjusting entry, if any, is needed on December 31?

Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000.

The purchase of supplies with cash would be recorded as

Debit Supplies; Credit Cash.

The payment for utilities of the current month would be recorded as

Debit Utilities Expense; Credit Cash.

Paying dividends to stockholders would be recorded with a:

Debit to Dividends.

The adjusting entry to record supplies used during the period includes a:

Debit to Supplies Expense

The purchase of supplies on account would be recorded with a:

Debit to supplies

On December 10, a company pays $500 for advertising to appear on December 20. On which date should the expense be recorded under accrual-basis accounting?

December 20

Which of the following is possible for a particular business transaction?

Decrease assets; decrease liabilities.

The balance of retained earnings in the adjusted trial balance:

Equals the balance of retained earnings at the beginning of the accounting period.

Which of the following describes the cost of selling to customers?

Expenses

Which of the following does not represent an external business transaction?

Expiration of an insurance policy over time.

On January 17, Papa's Pizza signs a contract with Bug Zappers for exterminating services related to a recent sighting of cockroaches in the restaurant. Papa's pays for the extermination service on January 29, and Bug Zappers sprays for bugs on February 7. On which date should Papa's Pizza record the extermination expense?

February 7 (date of extermination service).

Based on the introductory section of this chapter, which course is most like financial accounting?

Foreign Language

After transactions are recorded in the journal, they are posted to the

General ledger

After the closing entries are posted to the accounts, all temporary accounts:

Have zero balances.

The revenue recognition principle states that companies typically record revenue:

In the period in which we provide goods and services to customers.

Under accrual-basis accounting, companies typically report expenses:

In the same period as the revenue they help to generate.

In which financial statement does a company report its expenses?

Income Statement

In which financial statement does a company report its revenues?

Income Statement

Which financial statement conveys a company's ability to generate profits in the current period?

Income Statement

Which financial statement shows a company's revenues and expenses?

Income Statement

Which of the following causes the accounting equation not to balance?

Increase assets; increase dividends.

Providing services to customers for cash would have what effect on the accounting equation?

Increase total assets and total stockholders' equity.

Which of the following best describes financial accounting?

Information measurement/communication process.

Financial accounting provides information primarily to

Investors and creditors.

Which of the following transactions causes an increase in total assets?

Issue common stock in exchange for cash.

Why does financial accounting have a positive impact on our society?

It allows investors and creditors to redirect their resources to successful companies and away from unsuccessful companies.

On January 17, Papa's Pizza signs a contract with Bug Zappers for exterminating services related to a recent sighting of cockroaches in the restaurant. Papa's pays for the extermination service on January 29, and Bug Zappers sprays for bugs on February 7. Using cash-basis accounting, on which date should Papa's Pizza record the extermination expense?

January 29 (date of cash payment).

Transactions are recorded using debits and credits in a(n):

Journal

In the language of accounting, the term "debit" always means

Left-hand side.

Which of the following represents an obligation of the company?

Liabilities

Closing entries are:

Made to transfer the balances of temporary accounts to retained earnings.

Financial accounting information is essential to:

Making good business decisions

On March 4, Tonkawa Law asks Green Lawn Services for basic lawn maintenance totaling $200. Green Lawn provides maintenance on March 8, and Tonkawa pays for the lawn maintenance on March 12. Under accrual-basis accounting, on which date should Tonkawa record lawn maintenance expense?

March 8 (date of lawn maintenance service).

On May 5, Johnson Plumbing receives a phone call from a customer needing a new water heater and schedules a service visit for May 7. On May 7, Johnson installs the new water heater. The customer pays for services on May 10. Using cash-basis accounting, on which date should Johnson record service revenue?

May 10 (date of cash receipt).

On May 5, Johnson Plumbing receives a phone call from a customer needing a new water heater and schedules a service visit for May 7. On May 7, Johnson installs the new water heater. The customer pays for services on May 10. According to the revenue recognition principle, on which date should Johnson record service revenue?

May 7 (date of service).

The primary function(s) of financial accounting is(are) to

Measure business activities of a company and communicate information about business activities to outside users.

Which definition best describes financial accounting?

Measuring a company's business activities and communicating those measurements to external parties.

Which single piece of information best explains most companies' stock price performance?

Net Income

Which of the following describes the information reported in the statement of cash flows?

Net cash flows from operating, investing, and financing activities.

A company reports the following in its income statement: Total revenues of $500,000 and total expenses of $300,000. Which of the following is true?

Net income equals $200,000.

Which of the following describes the information reported in the income statement?

Net income for the period calculated as revenues minus expenses.

Which of the following describes the information reported in the income statement?

Net income for the period is calculated by subtracting expenses from revenues.

Purchasing land with cash would have what effect on the accounting equation?

No effect

On November 15, Meier Company received $3,000 cash from a customer for services that were performed on November 1. According to the Revenue Recognition Principle, on which date should the revenue be recorded?

November 1

Which of the following transactions decreases total assets?

Pay dividends to stockholders.

Which of the following transactions decreases stockholders' equity?

Pay salaries for the current period.

Which of the following transactions causes a decrease in stockholders' equity?

Paying advertising expense for the current month.

Which of the following represents an external transaction?

Payment of utility bill.

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits?

Prepare a trial balance.

In a classified balance sheet, long-term assets used in the normal course of business are known as

Property, plant, and equipment.

Which of the following transactions causes an increase in stockholders' equity?

Provide services to customers on account.

Which of the following transactions increases total assets?

Provide services to customers on account.

Which of the following is an example of an accrued revenue?

Providing services to a customer without having yet collected the cash.

Which of the following transactions increases total liabilities?

Purchase office supplies on account.

Which of the following is not a characteristic of adjusting entries?

Reduce the balances of revenue, expense, and dividend accounts to zero.

Which of the following is an example of a prepaid expense?

Rent has been purchased in advance.

Which of the following transactions causes a decrease in total liabilities?

Repay amounts previously borrowed from the bank.

Which of the following accounts is listed in a post-closing trial balance?

Salaries Payable

On September 9, Clearmore Services receives a request for services from a customer. The service is scheduled for September 15. On September 15, the service is provided, and the customer pays one week later on September 22. Using accrual-basis accounting, on which date should Clearmore Services record service revenue?

September 15 (date of service).

A credit is used to increase which of the following accounts?

Service Revenue

Which of the following accounts normally has a credit balance?

Service Revenue

Which of the following accounts is not listed in a post-closing trial balance?

Service Revenue.

Which of the following accounts normally has a debit balance?

Supplies

Based on the introductory section of this chapter, financial accounting can also be described as a way to

Tell the financial story of a company.

The balance in retained earnings represents:

The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.

Which of the following shows a chronological record of all transactions?

The general journal

In a classified balance sheet, liabilities are separated into two categories based on

The length of time until the obligation is expected to be satisfied—less than one year versus more than one year.

Which of the following best describes an important function of financial accounting?

To support the efficient distribution of society's resources.

If a company has an increase in total expenses of $10,000, which of the following is possible?

Total assets decrease by $10,000.

Which of the following describes the information reported in the balance sheet?

Total assets equal total liabilities plus stockholders' equity.

A company reports the following in its balance sheet: Total assets of $800,000 and total liabilities of $700,000. Which of the following is true?

Total stockholders' equity equals $100,000.

Which of the following describes the closing process?

Transfer the balances of temporary accounts (revenues, expenses, and dividends) to retained earnings.

A debit is used to increase which of the following accounts?`

Utilities Expense

Resources of a company are referred to as

assets

A credit to Cash will:

decrease in assets

A debit to Salaries Expense will:

decrease stockholders' equity

Amounts owed by the company are referred to as

liabilities

Amounts owed to creditors are reported as:

liabilities

Sales of products or services are referred to as

revenues

Financial accounting is often referred to as a

the language of business