Test 1 ACC TopHat/Quiz Questions
What are the First Six steps in the accounting cycle
1. Use source documents to identify which accounts are affected by a transaction. 2. Analyze the impact of the transaction on the accounting equation. 3. Assess whether the transaction results in a debit or a credit to account balances. 4. Record the transaction in the general journal using debits and credits. 5. Post the transaction to the general ledger. 6. Prepare a trial balance.
What are steps 7 - 9 of accounting cycle?
7. Record and post adjusting journal entries and prepare an adjusted trial balance. 8. Prepare financial statements. 9. Record and post closing entries and prepare a post-closing trial balance.
An adjusting entry related to a prepaid expense includes: A A credit to an asset or contra-asset B A debit to a liability C A credit to an expense D None of the above
A A credit to an asset or contra-asset
Which of the following are classified as assets on the balance sheet? A Accounts receivable B Retained earnings C Stockholders' Equity D All of the above are assets on the balance sheet
A Accounts receivable
A business that receives cash from a customer will: A Debit cash B Credit cash
A Debit cash
Prepaid expenses is a Real Account A True B False
A True
Revenue can be recognized before cash is collected from a customer A True B False
A True
nd adjusting entry to record accrued expenses will include a credit to a liability account A True B False
A True
A trial balance is the same thing as a balance sheet A True B False
B False
Every transaction must affect at least two of the three components of the accounting (balance sheet) equation - that is assets, liabilities and stockholders' equity A True B False
B False
The balance in the dividends account is closed to retained earnings by debiting dividends A True B False
B False
Unearned revenue is a temporary account A True B False
B False
Which of the following would you find on a post closing trial balance? A Dividends B Retained earnings C Rent expense D Service Revenue E All of the above
B Retained earnings
When using accrual accounting. which statement best describes when expenses should be recorded? A When paid in cash B When the cost is incurred to produce revenue
B When the cost is incurred to produce revenue
Deferred Revenue (where is it found?)
Balance sheet - Liability
accounts payable (where is it found?)
Balance sheet - Liability
notes payable (where is it found?)
Balance sheet - Liability
Accounts Receivable (where is it found?)
Balance sheet - asset
Equipment (where is it found?)
Balance sheet - asset
prepaid insurance (where is it found?)
Balance sheet - asset
prepaid rent (where is it found?)
Balance sheet - asset
supplies (where is it found?)
Balance sheet - asset
common stock (where is it found?)
Balance sheet - owner's equity
retained earnings (where is it found?)
Balance sheet - owner's equity
An adjusting entry related to a prepaid expense includes: A A debit to an asset or contra asset B A debit to a liability C A debit to an expense D A credit to an expense
C A debit to an expense
Debits: A Increase both assets and liabilities B Decrease both assets and liabilities C Increase assets and decrease liabilities D Decrease assets and increase liabilities
C Increase assets and decrease liabilities
What item flows form the income statement to the statement of stockholders' equity? A Cash B Retained earnings C Net income or loss D Dividends E Two of the above
C Net income or loss
Which of the following are not objectives of financial reporting according to FASB? (check all which apply) Select one or more: a. To prevent competitors from offering a similar product. b. To provide information about the businesses resources and claims against those resources. c. To guarantee that a business will be profitable. d. To minimize the amount of income tax the business must pay to the U.S. government. e. To provide information which is useful to investors and creditors. f. To provide information which helps users predict the business' future cash flows.
C. To guarantee that a business will be profitable., A. To prevent competitors from offering a similar product., D. To minimize the amount of income tax the business must pay to the U.S. government.
Common stock (Credit or Debit?)
Credit
Deferred Revenue (Credit or Debit?)
Credit
Notes Payable (Credit or Debit?)
Credit
Service Revenue (Credit or Debit?)
Credit
Accounts that normally have a debit balance are: A Assets, expenses and revenues B Assets, expenses and stockholders equity C Assets, liabilities and dividends D Assets, dividends and expenses
D Assets, dividends and expenses
Accounts Receivable (Credit or Debit?)
Debit
Cash (Credit or Debit?)
Debit
Dividends (Credit or Debit?)
Debit
Land (Credit or Debit?)
Debit
Prepaid Insurance (Credit or Debit?)
Debit
Supplies Expense (Credit or Debit?)
Debit
A credit will decrease: A Assets B Liabilities C Revenues D Expenses E Two of the above are decreased by credits
E Two of the above are decreased by credits
Dividends are reported on which statement(s)? A The balance sheet only B The cash flow statement only C The income statement only D The stockholders' Equity statement only E Two of the financial statements F Three of the financial statements
E Two of the financial statements
True or False: Account balances are always increased with debits.
False
True or False: The cost constraint suggests that, even when the cost of providing accounting information exceeds its benefit, the financial accounting information should always be provided.
False
True or False: When preparing a journal entry for a transaction that affects retained earnings, the "Retained Earnings" account should be debited or credited directly rather than debiting or crediting the account which will ultimately cause retained earnings to change.
False
True or False: When total debits equal total credits on a trial balance, we can be assured that no errors of any sort occurred during the preceding steps in the accounting cycle.
False
True or False: Dividends return back to the owners of a corporation a portion of their original contributions.
False
True or False:Adjusting entries typically include an adjustment to only income statement accounts.
False
True or False:Assuming a company has been in business several years, the retained earnings balance which should appear on its adjusted trial balance will be the ending retained earnings balance as opposed to the beginning retained earnings balance.
False
True or False: In practice, most companies list accounts on their trial balance in alphabetical order.
False (Feedback: Most companies list them in the following order: Assets Liabilities Stockholders' Equity Dividends Revenues, and Expenses)
Salaries Expense (where is it found?)
Income Statement
rent expense (where is it found?)
Income Statement
service revenue (where is it found?)
Income Statement
supplies expense (where is it found?)
Income Statement
utilities expense (where is it found?)
Income Statement
When preparing financial statements, what is the correct order they should be prepared in? Balance sheet Income Statement Statement of Stockholders' Equity (or Statement of Retained Earnings)
Income statement, Statement of SE, Balance sheet
Balance Sheet (period or point in time)
Reports balances at a point in time
Income Statement (period or point in time)
Reports balances for a period of time
Statement of Stockholders' Equity (period or point in time)
Reports balances for a period of time
Journal entries are written in a certain format in the general journal. When writing a journal entry, which of the following is/are true? (check all that apply) Select one or more: a. The account to be debited is listed first starting with the debited account name followed by the amount being debited. b. In the United States, amounts written in the debit and credit columns represent dollar amounts. c. A reference, often a date, should be written along with the journal entry. d. The account to be credited is listed below and indented to the right of the debited account.
They ALL Apply / ALL True
The primary overriding objective of financial reporting is to provide decision-useful information to investors and creditors. Select one: True False
True
True or False: An amount is considered to be material if its omission from or misstatement in a company's financial statements could influence a user's decision about a company.
True
True or False: Revenues are the amounts recognized from the sale of products or services to customers.
True
True or False:A classified balance sheet is one which separates assets and liabilities into current and long-term categories.
True
True or False:Under the accrual-basis of accounting, costs incurred to help generate revenues should be recorded as expenses in the same accounting period as those revenues.
True
Below are two T-accounts into which a single transaction was just posted . Based on these T-accounts, what journal entry must have been recorded? Select one: a. Accounts Receivable was debited and Service Revenue was credited. b. Both accounts were credited. c. Both accounts were debited. d. Accounts Receivable was credited and Service Revenue was debited.
a. Accounts Receivable was debited and Service Revenue was credited.
Which of the following is the most liquid? Select one: a. Cash b. Prepaid Rent c. Accounts Receivable d. Land
a. Cash
A company purchased supplies for $600 cash; however, when the transaction was journalized, the accountant accidentally debited Cash and credited Supplies for $600 each. Assuming the above error is not corrected and there were no other errors, which of the following statements is/are true? (check all that apply) Select one or more: a. The account balances for cash and supplies will be incorrect. b. The balance sheet equation will be in balance. c. Total debits and total credits on the trial balance will still be equal. d. The balance sheet equation will not be in balance. e. The account balances for cash and supplies will still be correct. f. Total debits and total credits on the trial balance will not be equal.
a. The account balances for cash and supplies will be incorrect. b. The balance sheet equation will be in balance. c. Total debits and total credits on the trial balance will still be equal.
The Securities and Exchange Commission (SEC) requires publicly traded companies to have their financial statements verified by: Select one: a. an independent outside auditor. b. the SEC. c. the company's management. d. the internal revenue service. e. the company's stockholders.
a. an independent outside auditor.
When determining the account balance for a particular account (ex. Accounts Receivable) in order to prepare a trial balance, the best place to find the balance would be in the company's _____. Select one: a. general ledger b. general journal
a. general ledger
The set of accounting standards and rules that many U.S. corporations follow when preparing their financial statements are called: Select one: a. generally accepted accounting principles (GAAP). b. income tax laws. c. international financial reporting standards.
a. generally accepted accounting principles (GAAP).
Complete the following sentence: The revenue recognition principle states that a company should record revenue: Select one: a. in the accounting period in which it provides goods and/or services to a customer. b. in the accounting period in which it collects cash from a customer.
a. in the accounting period in which it provides goods and/or services to a customer.
The "Dividends" account balance is reported on which financial statement? Select one: a. statement of stockholders' equity (or statement of retained earnings) b. income statement c. balance sheet
a. statement of stockholders' equity (or statement of retained earnings)
In accounting, expenses are defined as: Select one: a. the costs of providing products and services and other business activities during the current period. b. the costs of purchasing new assets. c. cash payments to stockholders.
a. the costs of providing products and services and other business activities during the current period.
When an expense has been incurred for which cash has not yet been paid, the company should record a(an)________
accrued expense
When revenue has been earned but cash has not yet been received, the company should record________
accrued revenue
accounts receivable on balance sheet
asset section
cash on balance sheet
asset section
land on balance sheet
asset section
supplies on balance sheet
asset section
Which of the following statements best describes what "accounting" is? Select one: a. Accounting is a math course. b. Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers.
b. Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers.
Which of the following is the best definition of a trial balance? Select one: a. It is a listing of only balance sheet accounts and their respective balances at a particular date. b. It is a listing of all accounts and their respective balances at a particular date. c. It is a listing of only income statement accounts and their respective balances at a particular date.
b. It is a listing of all accounts and their respective balances at a particular date.
At the end of 20X1, Potter Corp. recorded accrued salaries expense of $4,000 when the amount accrued should have been only $1,000. As a result of this error, which of the following is true regarding its financial statements for 20X1? (check all that apply) Select one or more: a. Assets are too high (overstated). b. Liabilities are too high (overstated). c. Net income is too high (overstated). d. Net income is too low (understated) e. Assets are too low (understated). f. Liabilities are too low (understated).
b. Liabilities are too high (overstated). d. Net income is too low (understated)
Which of the following types of accounts should find its account balance reported on a company's income statement? (check all that apply) Select one or more: a. Liability accounts b. Revenue accounts c. Expense accounts d. Stock accounts (ex. Common Stock) e. Dividend accounts f. Asset accounts
b. Revenue accounts c. Expense accounts
Assume a company has been in business for several years. Which "Retained Earnings" account balance should appear on its post-closing trial balance? Select one: a. the Retained Earnings account balance at the beginning of the year b. the Retained Earnings account balance at the end of the year
b. the Retained Earnings account balance at the end of the year
All else being equal, as a company's dividends increase, what will the eventual effect on the company's net income? Select one: a. Net income will decrease. b. Net income will increase. c. Net income will not change.
c. Net income will not change.
Measuring a company's business transactions and communicating those measurements for decision-making purposes in the form of financial statements are two key functions of financial accounting. The full set of procedures used to accomplish both of these key functions is called the: Select one: a. sales cycle. b. operating cycle. c. accounting cycle. d. auditing cycle. e. tax cycle.
c. accounting cycle
In accounting, to "close" an account means to: Select one: a. double the account balance. b. rename the account. c. adjust the account balance to zero.
c. adjust the account balance to zero.
Which assumption which underlies GAAP divides the economic life of a company into artificial time periods for financial reporting purposes? Select one: a. economic entity assumption b. going concern assumption c. periodicity assumption d. monetary unit assumption
c. periodicity assumption
The accuracy and reliability of information presented in a company's annual report, including its financial statements and their accompanying notes, is primarily the responsibility of: Select one: a. the company's creditors. b. the company's stockholders. c. the company's management. d. the Financial Accounting Standards Board (FASB). e. the Internal Revenue Service (IRS). f. the Securities and Exchange Commission (SEC). g. the company's outside auditors.
c. the company's management.
Information is said to possess the enhancing qualitative characteristic of ______ when different measurers can reach a consensus on the measurement of the activity. Select one: a. timeliness b. comparability c. verifiability d. consistency e. understandability
c. verifiability
Supplies Expense (indicate the manner in which the account should be closed at year end.)
closed with a credit
dividends (indicate the manner in which the account should be closed at year end.)
closed with a credit
Service Revenue (indicate the manner in which the account should be closed at year end.)
closed with a debit
Below is one of the t-accounts ABC Inc. has. Question: What is the account's balance? Answer: It has a ______ account balance of _$_________.
credit, $1075
Which of the following statements is the best definition of the operating cycle? Select one: a. The average time between when a company receives a bill for a cost incurred (ex. utilities) and the time it pays the bill. b. The average time between when a company receives cash from a stockholder and the time it pays the stockholder a dividend. c. The average time between when a company takes out a loan from the bank and the time it pays back the loan. d. The average time between when a company provides a service or sells a product to a customer and the time it collects the cash from the customer.
d. The average time between when a company provides a service or sells a product to a customer and the time it collects the cash from the customer.
When cash is received before the related revenue has been earned, the company should record_________
deferred revenue
In accounting courses (ex. Acc 210), T-accounts are often used to represent a more simplified version of the: Select one: a. trial balance. b. general journal. c. balance sheet. d. income statement. e. general ledger.
e. general ledger.
The group attempting to develop a single set of high-quality, understandable global accounting standards is: Select one: a. the Financial Accounting Standards Board (FASB). b. the Internal Revenue Service (IRS). c. the company's outside auditors. d. the Securities and Exchange Commission (SEC). e. the International Accounting Standards Board (IASB). f. the U.S. Congress.
e. the International Accounting Standards Board (IASB).
A company borrows $40,000 from its local bank. (O, F, or I)
financing activity
A company pays a dividend to its stockholders. (O, F, or I)
financing activity
A company receives $10,000 cash from each of its owners to get started as a business. (O, F, or I)
financing activity
A company pays cash for the purchase of equipment to be used in its business. The equipment will be used for ten years. (O, F, or I)
investing activity
Accounts Payable on balance sheet
liability section
notes payable on balance sheet
liability section
A company pays its employees their weekly wages. (O, F, or I)
operating activity
A company pays the utilities costs to run its facilities. (O, F, or I)
operating activity
A company receives cash for services performed to customers. (O, F, or I)
operating activity
common stock on balance sheet
owners' equity section
retained earnings on balance sheet
owners' equity section
When cash is paid before the related expense has been incurred, the company should record a(an) ________
prepaid expense
Deferred/Unearned revenue (indicate the manner in which the account should be closed at year end.)
should not be closed
Prepaid insurance (indicate the manner in which the account should be closed at year end.)
should not be closed
Retained earnings (indicate the manner in which the account should be closed at year end.)
should not be closed
accounts payable (indicate the manner in which the account should be closed at year end.)
should not be closed
accounts receivables (indicate the manner in which the account should be closed at year end.)
should not be closed
