INTRO TO FINANCIAL ACCOUNTING FINAL

The income statement heading will specify which of the following? A POINT In Time A PERIOD Of Time

A PERIOD Of Time

Large corporations must follow the __________ basis of accounting.

Accrual

Deposit in transit. Add To BOOK Balance Deduct From BOOK Balance Add To BANK Balance Deduct From BANK Balance

Add to BANK Balance

The bank collected a Note Receivable for the company and credited the company's bank account for $1,000. Add To BOOK Balance Deduct From BOOK Balance Add To BANK Balance Deduct From BANK Balance

Add to BOOK Balance

Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________.

Assets

Corporations whose stock is publicly traded must have their financial statements __________ by independent certified public accountants.

Audited

Assets are usually reported on the balance sheet at which amount? Cost Current Market Value Expected Selling Price

Cost

The account Inventory will appear on the balance sheet as a current asset at an amount that often reflects the __________ of the merchandise on hand. Cost Sales Value

Cost

A company recorded its August 15 receipts on its books as $165. However, the receipts were actually $156. The deposit slip for the bank was prepared correctly as $156. What adjustment is needed to the Cash balance per books? Decrease By $9 Increase By $9 None Needed

Decrease by $9

Fee charged by bank for returned check. Add To BOOK Balance Deduct From BOOK Balance Add To BANK Balance Deduct From BANK Balance

Deduct From BOOK Balance

A company wrote a check for $76 and it cleared the bank for $76. However, the company recorded the check in its Cash account as $67. How is the difference of $9 handled on the bank reconciliation? Add To BOOK Balance Deduct From BOOK Balance Add To BANK Balance Deduct From BANK Balance

Deduct from BOOK Balance

The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Cost Economic Entity Monetary Unit

Economic Entity

The bookkeeping or accounting equation is Assets = Liabilities + Owner's __________.

Equity

The statement of cash flows explains the changes in cash and cash __________ during the specified time interval.

Equivalents

A company in the computer industry is experiencing continuously lower costs. Which cost flow assumption will result in less income tax expense for this company? FIFO LIFO Average

FIFO

The inventory cost flow assumption where the cost of the most recent purchases are likely to remain in inventory FIFO LIFO Average

FIFO

An asset's useful life is the same as its physical life? True False

False

Both Land and Land Improvements will generally be depreciated. True False

False

Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True False

False

The purpose of depreciation is to have the balance sheet report the current value of an asset. True False

False

A company's receipts from September 30 that get deposited to the company's bank account on October 1st are referred to as deposits __________ as of September 30.

In Transit

The accounts shown in the chart of accounts can be broadly classified into two categories: balance sheet accounts and __________ accounts.

Income Statement

The financial statement that reports the portion of change in owner's equity resulting from revenues and expenses during a specified time interval is the __________.

Income Statement

A company recorded its check #2754 in its accounting records as $98. However, check #2754 was actually written for $89 and it cleared the bank as $89. What adjustment is needed to the Cash balance per books? Decrease By $9 Increase By $9 None Needed

Increase by $9

If a company is experiencing continuous cost increases for the merchandise that it purchases, which cost flow assumption will result in the least amount of profit and the least amount of income tax expense? FIFO LIFO Average

LIFO

The inventory cost flow assumption where the cost of the most recent purchase is matched first against sales revenues is FIFO LIFO Average

LIFO

The inventory cost flow assumption where the oldest cost of inventory items is likely to remain on the balance sheet is FIFO LIFO Average

LIFO

Asset, __________, and stockholders' equity accounts are known as balance sheet accounts.

Liability

The combination of Selling Expenses and Administrative Expenses is referred to as General Expenses Operating Expenses Total Expenses

Operating Expenses

The inventory system that does NOT update the Inventory account automatically at the time of each purchase or sales is the _______________ method/system. Periodic Perpetual

Periodic

Which of the following will cause owner's equity to increase? Expenses Owner Draws Revenue

Revenue

Amounts earned by a company in its main operating activities are Revenues Gains

Revenues

SEC is the acronym for __________.

Securities and Exchange Commission

Accumulated Depreciation will appear as a deduction within the section of the balance sheet labeled as Property, Plant and Equipment. True False

True

Depreciation Expense reflects an allocation of an asset's original cost rather than an allocation based on the economic value that is being consumed. True False

True

One company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right. True False

True

Some accounting software will classify some accounts as "income" accounts, while accountants might refer to these accounts as "revenue" accounts. True False

True

Accounting entries involve a minimum of how many accounts? One Two Three

Two

Every transaction will affect how many accounts? Only One Only Two Two Or More

Two or More

Financial statements report the fair market value of a company. True False

False

The chart of accounts is a listing of the accounts presently having balances in the general ledger. True False

False

Revenues minus Expenses equals ______.

Net Income

Which of the following will cause owner's equity to decrease? Net Income Net Loss Revenue

Net Loss

For each of the following items, indicate which part will be affected. 1. Depreciation Expense. 2. Proceeds from the sale of equipment used in the business. 3. The Loss on the Sale of Equipment in Question #2. 4. Declaration and payment of dividends on company's stock. 5. Gain on the Sale of Automobile formerly used in the business. 6. The proceeds from the sale of the automobile in Item #5. 7. An increase in the balance in a retailer's Merchandise Inventory. 8. An increase in the balance in Accounts Payable. 9. Retirement of long-term Bonds Payable. 10. Purchase of Treasury Stock (company's own stock). 11. The purchase of a new delivery truck to be used in the business. 12. A decrease in the balance of Accounts Receivable. 13. An increase in Bonds Payable (a long-term liability). 14. A decrease in the current asset account Prepaid Insurance. 15. A decrease in the current liability Income Taxes Payable. 16. The proceeds from issuing additional Common Stock. 17. The amortization of the cost of an intangible asset. 18. The exchange/conversion of long-term bonds into common stock.

1. Operating 2. Investing 3. Operating 4. Financing 5. Operating 6. Investing 7. Operating 8. Operating 9. Financing 10. Financing 11. Investing 12. Operating 13. Financing 14. Operating 15. Operating 16. Financing 17. Operating 18. Supplemental

A company receives $500 of cash as an additional investment in the company by its owner, Mary Smith. The company's Cash account is increased and Mary Smith, Capital is increased. 1. Should the $500 entry to the Cash account be a debit? Yes No 2. Should the $500 entry to Mary Smith, Capital be a debit? Yes No

1. Yes 2. No

For each of the transactions indicate the two (or more) effects on the accounting equation of the business or company. 2. The owner invests personal cash in the business. Assets: Increase, Decrease, No Effect Liabilities: Increase, Decrease, No Effect Owner's (or Stockholders') Equity: Increase, Decrease, No Effect 3. The owner withdraws cash from the business for personal use. Assets: Increase, Decrease, No Effect Liabilities: Increase, Decrease, No Effect Owner's (or Stockholders') Equity: Increase, Decrease, No Effect

2. Assets- Increase Liabilities- No Effect Owner's Equity- Increase 3. Assets- Decrease Liabilities- No Effect Owner's Equity- Decrease

A company using the accrual method of accounting performed services on account in August. The services were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the company in September. 3. Assuming that the company prepares monthly income statements, what will be the account debited for $2,000 in August? Cash Accounts Receivable Service Revenue 4. Which account should the company credit for $2,000 in August? Cash Accounts Receivable Service Revenue 5. In September when the company receives the $2,000 from the customer, which account should the company debit? Cash Accounts Receivable Service Revenue 6. In September when the company receives the $2,000 from the customer, which account should the company credit? Cash Accounts Receivable Service Revenue

3. Accounts Receivable 4. Service Revenue 5. Cash 6. Accounts Receivable

The two main methods of bookkeeping and accounting are 1) the cash method, and 2) the __________ method.

Accrual

Which of the following is a contra account? Accumulated Depreciation Mary Smith, Capital

Accumulated Depreciation

Interest credited to the bank account: Add to BOOK Balance Deduct from BOOK Balance Add to BANK Balance Deduct from BANK Balance

Add to BOOK Balance

Deferred revenues likely involve cash amounts that have __________ been received. Already Not Yet

Already

The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the: Balance Sheet Income Statement Statement of Cash Flows

Balance Sheet

The financial statement with a structure that is similar to the accounting equation is the __________.

Balance Sheet

When a company changes its book depreciation from an accelerated method to the straight-line method, it is considered to be a(n) Discontinued Operation Extraordinary Item Change In Accounting Principle

Change in Accounting Principle

The listing of accounts that are available for posting transactions is the __________ of accounts.

Chart

The listing of all of the accounts available for use in a company's accounting system is known as the __________.

Chart of Accounts

A balance sheet which reports percentages of total assets instead of dollar amounts is referred to as a __________-__________ balance sheet

Common-Size

The separation of duties is part of the internal __________ for safeguarding assets.

Controls

Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount? Cost Economic Entity Monetary Unit

Cost

A contra-asset account such as Accumulated Depreciation will likely have which balance? Debit Credit

Credit

Liability and Revenue accounts will normally have __________ balances.

Credit

What will usually cause the liability account Accounts Payable to increase? Debit Credit

Credit

Which term is associated with "right" or "right-side"? Debit Credit

Credit

To increase the balance in the following accounts, would you debit the account or would you credit the account? Accounts Payable Debit Credit Cash Debit Credit Land Debit Credit Notes Payable Debit Credit Accounts Receivable Debit Credit Mary Smith, Capital Debit Credit Supplies Debit Credit Supplies Expense Debit Credit Prepaid Insurance Debit Credit Service Revenue Debit Credit Mary Smith, Drawing Debit Credit Equipment Debit Credit Unearned Revenue Debit Credit

Credit Debit Debit Credit Debit Credit Debit Debit Debit Credit Debit Debit Credit

What is the normal balance for the following accounts? Accounts Payable Debit Credit Cash Debit Credit Land Debit Credit Notes Payable Debit Credit Accounts Receivable Debit Credit Mary Smith, Capital Debit Credit Supplies Debit Credit Supplies Expense Debit Credit Prepaid Insurance Debit Credit Service Revenue Debit Credit Mary Smith, Drawing Debit Credit Equipment Debit Credit Unearned Revenue Debit Credit

Credit Debit Debit Credit Debit Credit Debit Debit Debit Credit Debit Debit Credit

Generally when revenues are involved in a transaction, a revenue account will be: Debited Credited

Credited

When a check is written, a cash account should be __________.

Credited

When a company pays a bill, the account Cash will be Debited Credited

Credited

Entries to revenues accounts such as Service Revenues are usually Debits Credits

Credits

Cash and Accounts Receivable are two examples of accounts that are reported on the classified balance sheet under the heading __________ assets.

Current

Current assets DIVIDED BY current liabilities is the Current Ratio Net Worth Ratio Working Capital

Current Ratio

Notes Payable could not appear as a line on the balance sheet in which classification? Current Assets Current Liabilities Long-term Liabilities

Currents Assets

A __________ amount will appear on the left side of a T-account.

Debit

A contra-liability account such as Discount on Notes Payable will likely have which balance? Debit Credit

Debit

What will usually cause an asset account to increase? Debit Credit

Debit

Which term is associated with "left" or "left-side"? Debit Credit

Debit

Generally when an expense is involved in a transaction, an expense will be: Debited Credited

Debited

When cash is received, the account Cash will be Debited Credited

Debited

Entries to expenses such as Rent Expense are usually Debits Credits

Debits

Outstanding checks. Add To BOOK Balance Deduct From BOOK Balance Add To BANK Balance Deduct From BANK Balance

Deduct From BANK Balance

Bank service charge. Add To BOOK Balance Deduct From BOOK Balance Add To BANK Balance Deduct From BANK Balance

Deduct from BOOK Balance

A corporation's quarterly __________ will cause a reduction in the corporation's retained earnings, which in turn reduces the corporation's stockholders' equity. However, this will not reduce the corporation's net income.

Dividends

__________-entry bookkeeping means that every transaction will affect two or more accounts.

Double

Under the accrual basis of accounting, expenses are reported in the accounting period when the: Cash is Paid Expense Matches The Revenues Or Is Used Up

Expense Matches The Revenues Or Is Used Up

Financial accounting is focused on the __________ financial statements of a company. External Internal

External

Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements? Conservatism Economic Entity Full Disclosure

Full Disclosure

A company disposes of equipment that it no longer uses in its business. The amount received by the company is more than the amount the asset is carried at in the accounting records. The company will report a(n) Expense Gain Loss Revenue

Gain

GAAP is the acronym for __________.

Generally Accepted Accounting Prinicples

Which principle/guideline is associated with the assumption that the company will continue on long enough to carry out its objectives and commitments? Economic Entity Going Concern Time Period

Going Concern

Net Sales minus the Cost of Goods Sold equals Gross Profit Income From Operations Net Income

Gross Profit

The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the: Balance Sheet Income Statement Statement of Cash Flows

Income Statement

A general guide for reconciling the bank statement is "Put it where it __________".

Isn't

The book of original entry is the definition of a __________. Journal Ledger

Journal

Which of the following would not be a current asset? Accounts Receivable Land Prepaid Insurance Supplies

Land

Obligations (amounts owed) are reported on the balance sheet and are referred to as __________.

Liabilities

Which of the following is a category or element of the balance sheet? Expenses Gains Liabilities Losses

Liabilities

Unearned Revenues is what type of account? Asset Liability Stockholders' (Owner's) Equity

Liability

Which principle/guideline directs a company to show all the expenses related to its revenues of a specified period even if the expenses were not paid in that period? Cost Matching Monetary Unit

Matching

A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which accounting principle/guideline justifies not reporting the amounts to the penny? Full Disclosure Materiality Monetary Unit

Materiality

Which principle/guideline justifies a company violating an accounting principle because the amounts are immaterial? Conservatism Full Disclosure Materiality

Materiality

Which principle/guideline allows a company to ignore the change in the purchasing power of the dollar over time? Cost Economic Entity Monetary Unit

Monetary Unit

Interest earned on investments would appear in which section of a retailer's multiple-step income statement? Non-operating Operating Would Not Appear

Non-operating

Accrued expenses are likely to pertain to transactions that have __________ been paid. Already Not Yet

Not Yet

The first section of the statement of cash flows is the __________ activities.

Operating

Gross Profit minus Operating Expenses is best defined as Net Income Net Sales Operating Income

Operating Income

Checks that have been written by a company but have not yet been charged to the company's checking account are referred to as __________ checks.

Outstanding

Liabilities often have the word __________ in their account title.

Payable

The balance sheet heading will specify a Period Of Time Point In Time

Point in Time

Matching, cost, and full disclosure are examples of the fundamental or basic accounting __________.

Principles

When a sale is made on credit, the seller will debit the asset account Accounts __________.

Receivable

The difference between the balance in a company's cash account and its bank statement is documented in the __________ of the bank statement.

Reconciliation

A corporation's net income is eventually recorded in the following stockholders' equity account: __________.

Retained Earnings

Large corporations should report revenues on their income statements when the __________. Cash Is Received Revenues Are Earned

Revenues are Earned

A __________ entry typically removes an accrual-type adjusting entry that had been recorded in the preceding accounting period.

Reversing

Under the accrual basis of accounting, revenues are reported in the accounting period when the: Cash is Received Service Or Goods Have Been Delivered

Service Or Goods Have Been Delivered

Another name for the balance sheet is: Statement Of Operations Statement Of Financial Position

Statement of Financial Position

Assets minus liabilities equals __________.

Stockholders' (Owner's) Equity

A listing of the balances in the accounts in order to determine whether debits are equal to credits is a __________ balance

Trial

A supplier of goods or services is known as a __________. Debtor Vendor

Vendor

Current asset MINUS current liabilities is the Current Ratio Net Worth Working Capital

Working Capital