summer accounting course exam 1

what are the 3 importances of accounting?

1) identyfing 2) recording 3) communicating

external or internal? 1) customers 2) suppliers 3) external auditors 4) business press 5) managers 6) district attonery 7) shareholders 8) lenders 9) controllers 10) FBI & IRS 11) consumer group 12) directors

1- E 2- E 3- E 4- E 5- I 6- E 7- E 8- E 9- I 10- E 11- E 12- E

Internal or External? 1) research development 2) Human resources 3) politician 4) shareholder 5) distribution manager 6) creditor 7) production supervisor 8) purchasing manager

1- I 2- I 3- E 4- E 5- I 6- E 7- I 8-I

Prepaid accounts (also called prepaid expenses) are generally: A) Assets that represent prepayments of future expenses. B) Classified as liabilities on the balance sheet. C) Decreases in equity. D) Payments made for products and services that never expire. E) Promises of payments by customers.

A- assets that represent prepayments are future expenses

The difference between a company's assets and its liabilities, or net assets is: A) Equity. B) Expense. C) Net loss. D) Revenue. E) Net income.

A- equity

Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called: A) Expenses. B) Equity. C) Dividends. D) Common Stock. E) Liabilities.

A- expenses

A business's source documents may include all of the following except: A) Ledgers. B) Bank statements. C) Sales tickets. D) Purchase orders. E) Checks.

A- ledgers

Which of the following accounting principles require that all goods and services purchased be recorded at actual cost? A) Measurement (Cost) principle. B) Business entity assumption. C) Going-concern assumption. D) Consideration assumption. E) Expense recognition (Matching) principle.

A- measurement (cost) principle

An account balance is: A) The difference between the total debits and total credits for an account including the beginning balance. B) The total of the credit side of the account. C) Always a credit. D) The total of the debit side of the account. E) Assets = liabilities + equity.

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

Revenues are: A) The increase in equity from a company's sales of products and services. B) Resources owned or controlled by a company. C) The costs of assets or services used. D) The same as net income. E) The excess of expenses over assets.

A- the increase in equity from a company's sales of products and services

Identify the account below that impacts the Equity of a business: A) Utilities Expense B) Cash C) Unearned Revenue D) Accounts Receivable E) Accounts Payable

A- utilities expense

If assets are $300,000 and liabilities are $192,000, then equity equals: A) $492,000. B) $108,000. C) $192,000. D) $792,000. E) $300,000.

B- $108,000

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: A) Going-concern assumption. B) Business entity assumption. C) Revenue recognition principle. D) Time-period assumption. E) Measurement (Cost) principle.

B- business entity assumption

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: A) Business entity assumption. B) Revenue recognition principle. C) Going-concern assumption. D) Measurement (Cost) principle. E) Objectivity principle.

B- revenue recognition principle

A company's list of accounts and the identification numbers assigned to each account is called a: A) Journal. B) General Journal. C) Chart of accounts. D) Source document. E) Trial balance.

C- chart of accounts

A debit is used to record which of the following: A) An increase in a revenue account. B) A decrease in an asset account. C) An increase in the common stock account. D) An increase in the dividends account. E) A decrease in an expense account.

D- an increase in the dividends account

Resources a company owns or controls that are expected to yield future benefits are: A) Liabilities. B) Revenues. C) Expenses. D) Assets. E) Stockholders' Equity.

D- assets

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 A) Debit to Cash for $300. B) Credit to Telephone Expense for $300. C) Debit to Accounts Payable for $300. D) Debit to Telephone Expense for $300. E) Credit to Accounts Payable for $300.

D- debit to telephone expense for $300

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be: A) Assets decrease $1,300 and equity increases $1,300. B) Assets decrease $1,300 and equity decreases $1,300. C) Assets increase $1,300 and liabilities decrease $1,300. D) One asset increases $1,300 and another asset decreases $1,300, causing no effect. E) Assets increase $1,300 and liabilities increase $1,300.

D- one asset increases $1,300 and another asset decreases $1,300, causing no effect

Identify the account below that is classified as an asset account: A) Common Stock B) Service Revenue C) Unearned Revenue D) Supplies E) Accounts Payable

D- supplies

Identify the statement below that is incorrect. A) The normal balance of accounts receivable is a debit. B) The normal balance of the common stock account is a credit. C) The normal balance of dividends is a debit. D) The normal balance of an expense account is a credit. E) The normal balance of unearned revenues is a credit.

D- the normal balance of an expense account is a credit

A credit entry: A) Is always a decrease in an account. B) Is always an increase in an account. C) Increases asset and expense accounts, and decreases liability, common stock, and revenue accounts. D) Is recorded on the left side of a T-account. E) Decreases asset and expense accounts, and increases liability, common stock, and revenue accounts.

E- decreases asset and expense accounts, and increases liability, common stock and revenue accounts

Identify the statement below that is correct. A) Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts. B) The left side of a T-account is the credit side. C) Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts. D) In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction. E) The left side of a T-account is the debit side.

E- the left side of a t-account is the debit side

the ____ is a collection of all accounts and their balances for an accounting system. A company's size and diversity of operations affect the number of accounts needed

General Ledger

the ____ is a record of all accounts used by the company

General Ledger

a ____ is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense

account

what is the term? - short term (NO INTEREST) - maximum 30 days or less - liability

account payable

what is the term? - we sell to customers on credit terms - asset

accounts receivable

the primary objective of financial accounting is to: A) Serve the decision-making needs of internal users. B) Provide information on both the costs and benefits of looking after products and services. C) Provide accounting information that serves external users. D) Know what, when, and how much product to produce. E) Monitor and control company activities.

c) provide accounting information that serves external users

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets? A) It is impossible to determine unless the amount of stockholder investments is known. B) $700,000. C) $500,000. D) $900,000. E) $200,000.

c- $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): A) Chart of accounts. B) Trial balance. C) Account. D) Journal. E) Posting.

c- account

Which of the following statements is not true: A) Accounts receivable are held by a seller. B) Accounts receivable are increased by billings to customers. C) Accounts receivable are increased by customer payments. D) Accounts receivable are classified as assets. E) Accounts receivable arise from credit sales.

c- accounts receivable are increased by customer payments

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported? A) Business entity assumption. B) Consideration assumption. C) Expense recognition (Matching) principle. D) Going-concern assumption. E) Measurement (Cost) principle.

c- expense recognition (matching) principle

The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is: A) Going-concern assumption. B) Time-period assumption. C) Objectivity principle. D) Business entity assumption. E) Revenue recognition principle.

c- objectivity principle

identify the statement below that is correct. A) When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense. B) An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business. C) Promises of future payment by the customer are called accounts receivable. D) Accrued liabilities include accounts receivable. E) Increases and decreases in cash are always recorded in the common stock account.

c- promises of future payment by the customer are called accounts receivable

what is the term? - retained earnings - equity

common stock

Identify the account below that is classified as a liability account: A) Common Stock B) Equipment C) Cash D) Accounts Payable E) Salaries Expense

d- accounts payable

How do you increase and decrease equity?

debit- decreases credit- increases

how do you increase and decrease a liability?

debit- decreases credit- increases

how do you increase and decrease an asset?

debit- increases credit - decreases

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: A) Objectivity principle. B) Measurement (Cost) Principle. C) Monetary unit assumption. D) Business entity assumption. E) Going-concern assumption.

e- going-concern assumption

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? A) Business entity assumption. B) Monetary unit assumption. C) Measurement (Cost) principle. D) Going-concern assumption. E) Revenue recognition principle.

e- revenue recognition principle

what principle? a company records its expenses incurred to generate the revenue reported

expense recognition principle (matching principle)

expenses are ____ and dividends are ___ revenues are ___

expenses and dividends are debited revenue is credited

____ users of accounting information are NOT DIRECTLY INVOLVED in running the organization

external

what principle? - a company reports the details behind financial statements that would impact users decisions in the notes to the financial states

full disclosure

_____ users of accounting information ARE DIRECTLY INVOLVED in managing and operating in organization

internal

what principle? -accounting information is based on actual cost. Actual cost is considered objective

measurement

what are the 4 key principles of GAAP?

measurement revenue recognition full disclosure expense recognition

what is the term? -in writing has interest - liability

notes payable

what is the term? - in writing, and is some type of loan - asset

notes receivable

what accounting principle / assumption? In december of this year chavez landscaping received a customer order and cash prepayment to install sod at a house that would not be ready for installation until march of next year. Chavez should record the revenue from customers in march of next year, not in dec. of this year

revenue recognition principle

what principle? -Preformed; recognize revenue when goods or services are provided to customers and at an expected to be received from the customer

revenue recognition principle

a ___ describes transactions entering an account system, such as a purchase order

source document

bills from suppliers sales receipts checks purchase orders payroll orders are all examples of?

source documents

The ____ is a list of all accounts and includes an identifying number for each account

the chart of accounts

what do expenses and dividends do to equity?

they decrease it

what do revenues and common stock do to equity?

they increase it

what is the term? - when we receive money before we do anything - liability

unearned revenue