principles of financial accounting test 1

If assets are $300,000 and liabilities are $192,000, then equity equals

$108,000.

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

$500,000.

A business's record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is known as a(n)

Account

Identify the account below that is classified as a liability account

Accounts Payable

Which of the following statements is not true

Accounts receivable are increased by customer payments.

A debit is used to record which of the following

An increase in the dividends account.

Prepaid accounts (also called prepaid expenses) are generally:

Assets that represent prepayments of future expenses

Resources a company owns or controls that are expected to yield future benefits are:

Assets.

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

Business entity assumption

A company's list of accounts and the identification numbers assigned to each account is called a

Chart of accounts

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a

Debit to Telephone Expense for $300.

A credit entry

Decreases asset and expense accounts, and increases liability, common stock, and revenue accounts.

The difference between a company's assets and its liabilities, or net assets is

Equity

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

Expense recognition (Matching) principle

Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called

Expenses

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:

Going-concern assumption.

A business's source documents may include all of the following except:

Ledgers

Which of the following accounting principles require that all goods and services purchased be recorded at actual cost?

Measurement (Cost) principle

The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is

Objectivity principle

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be

One asset increases $1,300 and another asset decreases $1,300, causing no effect

Identify the statement below that is correct.

Promises of future payment by the customer are called accounts receivable

The primary objective of financial accounting is to:

Provide accounting information that serves external users.

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the:

Revenue recognition principle

On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received?

Revenue recognition principle.

Identify the account below that is classified as an asset account

Supplies

An account balance is

The difference between the total debits and total credits for an account including the beginning balance

Revenues are:

The increase in equity from a company's sales of products and services.

Identify the statement below that is correct

The left side of a T-account is the debit side.

Identify the statement below that is incorrect

The normal balance of an expense account is a credit.

Identify the account below that impacts the Equity of a business

Utilities Expense