Accounting

1. The primary function(s) of financial accounting is (are) to: a) Measure business activities of a company. b) Communicate information about business activities to outside users. c) Compute the company's taxes owed to the government. d) Answers a. and b. are correct.

D) Answers a. and b. are correct.

7. The financial statement that shows the financial position of a company at a specific point in time is called the: a) Balance Sheet. b) Income Statement. c) Statement of Stockholders' Equity. d) Statement of Cash Flows.

a) Balance Sheet.

5. Amounts owed to creditors are reported as: a) Liabilities. b) Assets. c) Stockholders' equity. d) Revenues.

a) Liabilities.

9. Who ultimately is responsible for properly applying GAAP? The company's: a) Management. b) Auditors. c) Stockholders. d) Creditors.

a) Management.

24. 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? a) November 1. b) November 15. c) One-half on each date. d) Neither.

a) November 1.

22. The process of transferring debit and credit information from the general journal to the general ledger is known as: a) Posting. b) Charting. c) Journalizing. d) Processing.

a) Posting.

12. Which of the following transactions increases total assets? a) Provide services to customers on account. b) Purchase supplies for cash. c) Collect cash from customer for services provided on account last month. d) Pay dividends to current stockholders.

a) Provide services to customers on account.

20. Providing services to customers for cash would be recorded with a: a) Credit to Cash. b) Credit to Service Revenue. c) Debit to Service Expense. d) Debit to Accounts Receivable.

b) Credit to Service Revenue.

16. A debit to Salaries Expense will: a) Increase stockholders' equity. b) Decrease stockholders' equity. c) Increase liabilities. d) Decrease assets.

b) Decrease stockholders' equity.

6. In which financial statement does a company report its revenues and expenses? a) Balance Sheet. b) Income Statement. c) Statement of Stockholders' Equity. d) Statement of Cash Flows.

b) Income Statement.

30. Closing entries are: a) Optional. b) Made to transfer the balances of temporary accounts to retained earnings. c) Made to record events that occurred during the period but have not yet been recorded. d) Made to transfer the balances of permanent accounts to retained earnings.

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

26. Which of the following is an example of a prepaid expense? a) Utilities have been incurred but not yet paid. b) Rent has been purchased in advance. c) Service was provided to a customer but not yet billed. d) Interest is incurred through the passage of time.

b) Rent has been purchased in advance.

23. Which of the following correctly describes a list of accounts and their balances, showing that debits equal credits? a) General ledger. b) Trial balance. c) Journal. d) Chart of accounts.

b) Trial balance.

25. Recording salaries owed to employees that will not be paid by the company until the following accounting period is an example of a(n): a) Prepaid expense. b) Unearned revenue. c) Accrued expense. d) Accrued revenue.

c) Accrued expense.

4. Revenues are the: a) Amounts received from investors. b) Amounts received from selling the company's long-term resources. c) Amounts earned from selling products or services to customers. d) Cost of providing products or services.

c) Amounts earned from selling products or services to customers.

2. Which of the following represents a resource of the company? a) Expense. b) Dividend. c) Asset. d) Liability.

c) Asset.

21. Paying dividends to stockholders would be recorded with a: a) Credit to Dividends. b) Credit to Common Stock. c) Debit to Dividends. d) Debit to Salaries Expense.

c) Debit to Dividends.

27. The adjusting entry to record supplies used during the period includes a: a) Debit to Supplies. b) Credit to Service Revenue. c) Debit to Supplies Expense. d) Credit to Cash.

c) Debit to Supplies Expense.

17. A credit to Cash will: a) Increase assets. b) Decrease liabilities. c) Decrease assets. d) Decrease stockholders' equity.

c) Decrease assets.

10. The primary objective of financial accounting is to: a) Provide information to employees. b) Provide information to governmental units. c) Provide information to investors and creditors. d) Provide information to suppliers and customers.

c) Provide information to investors and creditors.

15. Which of the following accounts normally has a debit balance? a) Accounts Payable. b) Common Stock. c) Supplies. d) Service Revenue.

c) Supplies.

3. Which of the following equations correctly represents the fundamental accounting equation? a) Assets + Stockholders' Equity = Liabilities. b) Liabilities - Assets = Stockholders' Equity. c) Assets + Liabilities = Stockholders' Equity. d) Assets = Liabilities + Stockholders' Equity.

d) Assets = Liabilities + Stockholders' Equity.

28. The adjusting entry to record interest earned during the period includes a: a) Credit to Cash. b) Debit to Cash. c) Debit to Interest Expense. d) Credit to Interest Revenue.

d) Credit to Interest Revenue.

19. The purchase of supplies on account would be recorded with a: a) Debit to Supplies Payable. b) Credit to Supplies Expense. c) Debit to Cash. d) Debit to Supplies.

d) Debit to Supplies.

11. The term GAAP stands for: a) Generally Accepted Auditing Principles. b) General Accounting and Audit Principles. c) General Accounting Accountability Principles. d) Generally Accepted Accounting Principles.

d) Generally Accepted Accounting Principles.

29. Which of the following is an example of an accrued revenue? a) Prepaying insurance coverage for the next 12 months. b) Delaying the payment of interest on an outstanding loan until next year. c) Receiving cash in advance of a service to be provided to a customer. d) Providing services to a customer without having yet collected the cash.

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

13. Which of the following transactions increases total liabilities? a) Pay for rent in the current period. b) Purchase equipment with cash. c) Pay dividends to stockholders. d) Purchase office supplies on account.

d) Purchase office supplies on account.

14. Which of the following accounts normally has a credit balance? a) Cash. b) Accounts Receivable. c) Dividends. d) Service Revenue.

d) Service Revenue.

8. The balance in retained earnings represents: a) Income earned during the current period. b) Income earned during the current period minus dividends distributed to stockholders' during the current period. c) The amount of income earned by the company over its life. d) The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.

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

18. Which of the following shows a chronological (by date) record of all transactions? a) The general ledger. b) The chart of accounts. c) The trial balance. d) The general journal.

d) The general journal.