Principles of accounting Pre assesment

How is a worksheet used?

To help prepare adjusting entries and financial statements

An accounting supervisor is reviewing a junior accountant's journal entries prior to posting to the general ledger. Which journal entry would cause the trial balance to be imbalanced? $500 cash collection from billed customers; $550 debit to cash and $550 credit to accounts receivable $7,000 cash payment for property tax to County of Main; $700 debit to property tax expense and $700 credit to cash $800 cash refund received for over-payment to a vendor; $80 debit to supplies expense and $80 credit to supplies $600 insurance bill received and paid in the same month; $600 debit to insurance expense and $60 credit to cash

$600 insurance bill received and paid in the same month; $600 debit to insurance expense and $60 credit to cash

An accountant for a firm is preparing a post-closing trial balance and has the following figures that represent all debit and credit accounts: Cash: 100,000 Accounts Receivable: 20,000 Accounts Payable: 50,000 Accumulated Depreciation: 20,000 Prepaid Rent: 10,000 Equipment: 40,000 Capital Stock: 80,000 Retained Earnings: 20,000 What should the matching totals in the debit and credit columns be when the trial balance is prepared? 100,000 150,000 170,000 190,000

170,000

A firm sells a truck to a customer for $35,000, and the customer is required to pay for the vehicle within 90 days. How is this purchase entered on the firm's accounts receivable ledger? $0 debit $0 credit $35,000 debit $35,000 credit

35,000 debit

An examination of Company A's finances shows assets of $50,000 and stockholder's equity of $45,000. What are the liabilities for Company A?

5,000

What are the key components of every double-entry accounting record?

At least one debit entry and at least one credit entry

Stevie and Kate are new business owners trying to decide on a price for widgets. Stevie decided widgets should be $40. Which type of decision-making style did Stevie use?

Autocratic

Which financial statement(s) contain the information needed to compute the current ratio?

Balance sheet

Where should deadlines be included in a business letter?

Body

Which form of communication should be used to convey to investors about the successes and future plans of the company?

Business report

How can accounting technology affect small businesses?

By simplifying the daily posting of routine transactions with accounting packages

James is a manager at a university. He has been asked to make a decision regarding the need for new employees. He asks Mary for advice, as she has made similar decisions in the past. What role in the RACI matrix does Mary hold?

Consulted

A corporation paid $5,000 in gross pay to its employees for the current month's payroll. Which entry is needed?

Debit wages expense $5,000

Mindy owns a small accounting firm that is considering increasing their prices for some services. She calls the entire staff of 10 accountants to vote on which services should make price changes. Which type of decision-making style is Mindy using?

Democratic

Which statement reflects effective internal controls? The person who signs a check should be the person who mails it. The person who writes a check should be the person who signs the check. Each check should be matched to an approved invoice or payment authorization. When not in use, the check book should be kept under the control of the accounts payable clerk.

Each check should be matched to an approved invoice or payment authorization

Jim made a budget and tracked his expenses in the month of June. Expected Actual Rent $1,200 $1,200 Gas and Travel $150 $220 Groceries $400 $310 Eating at restaurants $100 $180 Contributions to savings $40 $40 What can Jim do in July to make his expected budget align more closely with his actual budget?

Eat at restaurants less, and get more groceries to cook at home.

On March 5, a company purchased a new machine for $10,000 cash. The machine has an estimated useful life of five years and an estimated salvage value of $2,000. The company plans to use straight-line depreciation. How will this be posted into the general ledger at the time of purchase? Equipment $8,000 credit and cash $8,000 debit Equipment $10,000 debit and cash $10,000 credit Equipment $10,000 debit and liabilities $10,000 credit Equipment $12,000 debit and cash $12,000 credit

Equipment $10,000 debit and cash $10,000 credit

Why is financial accounting information valuable to consumers? External users can evaluate the financial health of a business. External users can determine the core values of a business. External users can examine the environmental impact of a business. External users can determine the human resource needs of a business.

External users can evaluate the financial health of a business

Which account balance is entered in the balance sheet columns from the adjusted trial balance?

Fees income Rent expense Accounts receivable Depreciation expense

Which organization is focused on developing generally accepted accounting principles (GAAP) within the United States? American Accounting Association (AAA) American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) International Accounting Standards Board (IASB

Financial Accounting Standards Board (FASB)

Leticia knows that the income statement she is preparing for her organization will be shared with investors who are not accounting professionals. What should Leticia do to ensure effective communication with the investors?

Have a verbal discussion with the investors to provide additional feedback after they have had an opportunity to read the income statement

Why was the Sarbanes-Oxley Act enacted?

In response to numerous U.S. corporate accounting scandals

Which financial statement(s) contain the information needed to compute return on sales?

Income statement

What does horizontal analysis evaluate?

Increases or decreases in financial statement information over a period of time

A chief financial officer (CFO) wants to increase the net income and assets on the financial statements in order to get a bank loan. The CFO increased revenues and accounts receivable by $50,000 to improve the financials even though there was not an actual sale to a customer for that amount. What is this behavior considered, according to accounting ethics standards?

It is unethical because it was fraudulent financial reporting.

Why is the accounting cycle important? It results in the creation of the company's financial accounting statements. It holds accountants to a uniform set of ethical standards. It demonstrates when the fundamental accounting equation is incorrect. It helps management negotiate with workers' unions.

It results in the creation of the company's financial accounting statements.

A company has a lease that requires the company to pay its annual office space rent in advance on December 31 of each year. On a quarterly basis, this expense totals $10,000. How should the rent expense be recorded on the firm's books in the following year to account for this transaction? It should be recorded as a decrease of $40,000 in the asset accounts under prepaid rent. It should be recorded as a decrease of $40,000 in the asset accounts under paid expense. It should be recorded as a decrease of $40,000 in the expense accounts under prepaid rent. It should be recorded as a decrease of $40,000 in the expense accounts under prepaid expense.

It should be recorded as a decrease of $40,000 in the asset accounts under prepaid rent.

What is a drawback of the United States using International Financial Reporting Standards (IFRS)?

It would cost U.S. companies time and money in the short term to adopt.

Alex received accounting information via a message that was formatted with a header that included date, to, from, and subject lines. Which form of communication was used?

Memorandum

What is a benefit of adopting a single set of international accounting standards?

More uniform financial reporting among international companies

Which list includes assets held by a local small business?

Office equipment, company vehicles, and cash

When are revenue and expenses recognized in accrual basis accounting?

Revenue is recognized when earned, and expenses are recognized when incurred.

Why does a stockholder's equity need to be completed prior to preparing a balance sheet? The balance sheet is part of the statement of stockholder's equity. The amount of ending balance from the statement of stockholder's equity must be presented on the balance sheet. The amount of beginning balance from the statement of stockholder's equity must be presented on the balance sheet. The statement of stockholder's equity is more useful to external users than the balance sheet.

The amount of ending balance from the statement of stockholder's equity must be presented on the balance sheet

What information is contained in the balance sheet and the income statement?

The balance sheet contains assets, liabilities, and stockholder's equity, and the income statement contains revenues and expenses.

Why would an accountant conduct financial forecasting

To determine if a company will need additional investors

Jan, a sales representative in a manufacturing company, is discussing the recent announcement of layoffs due to a reduction in product demand. Little information has been circulated by management regarding which departments will be affected. Jan has begun telling coworkers that employees in the sales department will be impacted first because that is what happened at her last job at a pharmaceutical company. Why is Jan's statement considered an assumption?

The statement is unsupported by communication from management.

What should be considered when deciding on a time period for a budget? Amount of financial activity Amount of income Amount of expenses Amount of emergencies

amount if financial activity

What determines the frequency of deposits of federal income taxes withheld and Social Security and Medicare taxes?

amount owed by the firm

What is an example of recurring income?

bank account interest

Which account appears on a post-closing trial balance? Capital stock Expenses Income Dividends

capital stock

A company has four employees who are paid every two weeks. Each biweekly payroll has a total expense of $7,500 and covers ten working days. The company accountant is completing the bookkeeping for January, which includes four days of the current pay period. Which adjustment will need to be entered for these accruals?

credit salary payable 3,000

A corporation had not yet received the monthly electric bill, so it decides to accrue an estimate of $1,000. What would appear in the appropriate journal entry? Credit to cash Credit to utilities payable Debit to prepaid insurance Debit to entertainment expense

credit to utilities payable

What must an accountant record when journalizing a transaction?

description of transaction

Which accounts do closing entries move to retained earnings? Expense and asset Expense and liability Asset and liability Expense and revenue

expense and revenue

What information does a balance sheet show? Results of business operations for a calendar year Revenues and expenses over a fiscal year Amount of net income or loss in a fiscal quarter Financial position of a business at a specific date

financial position of a business at a specific date

Marcus collected this data in his budget for the month of March: Cash from handyman work $70 Paycheck income $1,500 Rent and bills -$800 Purchase of lawnmower -$150 Total income $1570 Total Expenses -$950 Which description matches Marcus' March budget?

he ran a surplus of 620

Which item is a living expense?

health care premiums

Which financial statement shows all of the expenses of doing business over a specific period of time? Balance sheet Income statement Statement of cash flows Statement of stockholder's equity

income statement

Which financial statement shows the results of operations for a given period? Balance sheet Income statement Statement of cash flows Statement of stockholder's equity

income statement

Which statement is a financial accounting statement? Income statement Special journals General ledger Inventory report

income statment

What should a journal entry include when a company purchases inventory on account?

increase in liabilities

What is a characteristic of an asset account?

increases w/ a debit

Which account will be a part of the adjusting journal entry to record the interest that has been incurred, but not paid, on a note payable? Cash Notes payable Interest payable Dividend expense

interest payable

What is an example of a macro factor in planning a budget? Interest rates Pay raise at work Adopting a pet Personal health

interest rates

Which step should an accountant perform next after analyzing source documents to determine their effects on the basic accounting equation? Prepare t-accounts Prepare a trial balance Post the journal entries Journalize the transactions

journalize the transaction

Which concept is measured by the current ratio?

liquidity

What would an accountant debit in order to record the purchase of machinery made using a long-term loan?

machiery

What should be included in a short-term budget? Plans for retirement in five years Monthly water bill expenses Expected changes in mortgage interest rates Certificate of Deposit matures

monthly water bill expense

A company writes a check to purchase a case of printer cartridges. Which account would be debited in the journal entry to record this purchase? Cash Office supplies Accounts payable Supplies expense

office supplies

Which group should make use of financial accounting information when determining whether to open an additional store location? Suppliers Customers Owners and managers Employees and union

owners and managers

Which method is used when calculating uncollectible accounts expense using the income statement approach? Direct write off Total accounts receivable Aging of accounts receivable Percentage of net credit sales

percentage of net credit sales

What does double-entry accounting refer to?

recording equal debits and credits for each transaction

Which characteristic of an organization is assessed using financial statement analysis?

solvency

How would a bank use financial accounting information? To approve lines of credit To determine manufacturing needs To make purchasing decisions To manage personnel needs

to approve lines of credit

How can potential creditors use financial statement analysis?

to determine a company's ability to pay short-term debts

How would an employee labor union use financial accounting information? To approve lines of credit or loans To determine ability to pay an increase in wages To make purchasing-related decisions To manage long-term personnel needs

to determine ability to pay an increase in wages

Why are special journals used in accounting information systems?

to group together transactions of a similar type

A firm has the following assets and liabilities: Cash: $10,500 Accounts Receivable: $35,000 Allowance for Doubtful Accounts: $2,000 Accounts Payable: $8,000 After preparing a classified balance sheet, what should the firm's total assets and liabilities be? Total assets of $45,500, and total liabilities of $10,000 Total assets of $45,500, and total liabilities of $8,000 Total assets of $43,500, and total liabilities of $8,000 Total assets of $43,500, and total liabilities of $10,000

total assets 43.500 and total liabilities 8,000

Which financial statement is used to ensure that all debits and credits balance? Income statement Balance sheet Cash flow statement Trial balance

trial balance