Accounting 1 mid-term study set

The quality of information that occurs when independent observers, using the same methods, obtain similar results A) Verifiable B) Understandability C) Accrual-basis accounting D) Accrued expenses

A) Verifiable

Alternative adjusting entries do not apply to A) accrued revenues and accrued expenses B) prepaid expenses C) unearned revenues D) prepaid expenses and unearned revenues

A) accrued revenues and accrued expenses

The steps in the preparation of a worksheet do not include A) analyzing documentary evidence B) preparing a trial balance on the worksheet C) entering the adjustments in the adjustment columns D) entering adjusted balances in the adjusted trial balance columns

A) analyzing documentary evidence

A chart of accounts usually starts with A) asset accounts B) expense accounts C) liability accounts D) revenue accounts

A) asset accounts

An area of accounting in which the accountant offers expert service to the general public A) Statement of cash flows B) Public accounting C) International Financial Reporting Standards (IFRS) D) Partnership

B) Public accounting

Classifying economic events A) Communicates B) Records C) Identifies

B) Records

Keeping a systematic chronological diary of events A) Communicates B) Records C) Identifies

B) Records

Measuring events in dollars and cents A) Communicates B) Records C) Identifies

B) Records

Summarizing economic events A) Communicates B) Records C) Identifies

B) Records

The increases in assets or decreases in liabilities resulting from the sale of goods or the performance of services in the normal course of business A) Net income B) Revenues C) Securities and Exchange Commission (SEC) D) Expenses

B) Revenues

Luong performed consulting services for a client in December 2022. On December 31, it had not billed the client for services provided of $1,200 A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

C) Accrued revenue

Luong performs services for customers but has not yet received cash or recorded the transaction A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

C) Accrued revenue

Revenues for services performed but not yet received in cash or recorded A) Consistency B) Book value C) Accrued revenues D) Understandability

C) Accrued revenues

Law passed by Congress intended to reduce unethical corporate behavior A) Income statement B) Managerial accounting C) Sarbanes-Oxley Act (SOX) D) Expenses

C) Sarbanes-Oxley Act (SOX)

A journal entry that involves only two accounts A) Chart of accounts B) Ledger C) Simple entry D) General journal

C) Simple entry

A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock A) Ethics B) Net income C) Financial Accounting Standards Board (FASB) D) Corporation

D) Corporation

The assumption that the unit of measure remains sufficiently constant over time is part of the A) economic entity assumption B) cost principle C) historical cost priniciple D) monetary unit assumption

D) monetary unit assumption

Cash-basis accounting is in accordance with A) GAAP but not IFRS B) IFRS but not GAAP C) both IFRS and GAAP D) neither IFRS nor GAAP

D) neither IFRS nor GAAP

The classified balance sheet is A) required under GAAP but not under IFRS B) required under IFRS in the same format as under GAAP C) required under IFRS but not under GAAP D) required under IFRS with certain variations in format as compared to GAAP

D) required under IFRS with certain variations in format as compared to GAAP

What accounts increase with a credit?

Liabilities, owner's capital, & revenue accounts

Accounts payable A) Liability B) Asset C) Owner's Equity

Liability

Luong received cash for future services and recorded a liability until the service was performed A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

A) Unearned revenue

An accounting standard-setting body that issues standards adopted by many countries outside of the United States A) International Accounting Standards Board (IASB) B) Managerial accounting C) Corporation D) Accounting

A) International Accounting Standards Board (IASB)

An accounting record in which transactions are initially recorded in chronological order A) Journal B) Ledger C) Three-column form of account D) Double-entry system

A) Journal

Which of the following is an external user of accounting information? A) Labor unions. B) Finance directors. C) Company officers D) Managers

A) Labor unions

Notes payable A) Liability B) Asset C) Owner's Equity

A) Liability

Salaries and wages payable A) Liability B) Asset C) Owner's Equity

A) Liability

An assumption stating that companies include in the accounting records only transaction data that can be expressed in terms of money A) Monetary unit assumption B) Financial accounting C) Statement of cash flows D) Economic entity assumption

A) Monetary unit assumption

The average time that it takes to purchase inventory, sell it on account, and then collect cash from customers A) Operating cycle B) Current assets C) Worksheet D) Long-term liabilities

A) Operating cycle

The length of service of a long-lived asset A) Useful life B) Book value C) Unearned revenues D) Accrued revenues

A) Useful life

Expenses paid in cash before they are used or consumed A) Prepaid expenses (prepayments) B) Faithful representation C) Deferrals D) Calendar year

A) Prepaid expenses (prepayments)

A financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time A) Statement of cash flows B) Income statement C) Financial accounting D) Balance sheet

A) Statement of cash flows

The ownership claim of shareholders on total assets. It is to a corporation what owner's equity is to a proprietorship A) Stockholders' equity B) Permanent (real) accounts C) Correcting entries D) Temporary (nominal) accounts

A) Stockholders' equity

An area of public accounting involving tax advice, tax planning, preparing tax returns, and representing clients before governmental agencies A) Taxation B) Ethics C) Forensic accounting D) Proprietorship

A) Taxation

A form with columns for debit, credit, and balance amounts in an account A) Three-column form of account B) Posting C) T-account D) Credit

A) Three-column form of account

A simple form of an account consisting of just the account title, the left side, and the right side, is called a T-account A) True B) False

A) True

Accounting time periods are generally a month, a quarter, or a year A) True B) False

A) True

Adjusting entries would not be necessary if a company's life were not divided into artificial time periods A) True B) False

A) True

The IRS requires companies to file annual tax returns A) True B) False

A) True

Luong collects $1,300 from a customer in 2022 for services to be performed in 2023 A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

A) Unearned revenue

SWC Bus Charter signed a four-month note payable in the amount of $30,000 on September 1. The note requires interest at an annual rate of 5%. The amount of interest to be accrued at the end of September is A) $125 B) $200 C) $500 D) $1,500

A) $125

The Dulce Company has five plants nationwide that cost a total of $200 million. The current fair value of the plants is $600 million. The plants will be recorded and reported as assets at A) $200 million B) $600 million C) $400 million D) $800 million

A) $200 million

At October 1, 2020, Medina Co. had an accounts payable balance of $50,000. During the month, the company made purchases on account of $35,000 and made payments on account of $48,000. At October 31, 2020, the accounts payable balance is A) $37,000 B) $33,000 C) $63,000 D) $133,000

A) $37,000

As of June 30, 2020, Little Giantz Company has assets of $100,000 and owner's equity of $60,000. What are the liabilities for Little Giantz Company as of June 30, 2020? A) $40,000 B) $60,000 C) $100,000 D) $160,000

A) $40,000

At January 31, 2020, the balance in Bigelow Inc.'s supplies account was $780. During February, Bigelow purchased supplies of $900 and used supplies of $1,150. At the end of February, the balance in the supplies account should be A) $530 debit B) $1,030 debit C) $530 credit D) $830 debit

A) $530 debit

The information system that identifies, records, and communicates the economic events of an organization to interested users A) Accounting B) Net loss C) Balance sheet D) International Accounting Standards Board (IASB)

A) Accounting

The system of collecting and processing transaction data and communicating financial information to decisionmakers A) Accounting information system B) Corporation C) Expanded accounting equation D) Fair value principle

A) Accounting information system

Entries made at the end of an accounting period to ensure that companies follow the revenue recognition and expense recognition principles A) Adjusting entries B) Faithful representation C) Timely D) Accrued expenses

A) Adjusting entries

Resources a business owns A) Assets B) Statement of cash flows C) Owner's equity statement D) Net income

A) Assets

Accounting basis in which companies record revenue when they receive cash and an expense when they pay out cash A) Cash-basis accounting B) Deferrals C) Accrual-basis accounting D) Fiscal year

A) Cash-basis accounting

A balance sheet that contains standard classifications or sections. A) Classified balance sheet B) Long-term investments C) Liquidity D) Long-term liabilities

A) Classified balance sheet

Analyzing and interpreting information A) Communicates B) Records C) Identifies

A) Communicates

Explaining uses, meaning, and limitations of data A) Communicates B) Records C) Identifies

A) Communicates

Preparing accounting reports A) Communicates B) Records C) Identifies

A) Communicates

Reporting information in a standard format A) Communicates B) Records C) Identifies

A) Communicates

Adjusting entries for either prepaid expenses or unearned revenues A) Deferrals B) Accruals C) Full disclosure principle D) Prepaid expenses

A) Deferrals

An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities A) Economic entity assumption B) Owner's equity statement C) Accounting information system D) Liabilities

A) Economic entity assumption

The cost of assets consumed or services used in the process of earning revenue A) Expenses B) Basic accounting equation C) Auditing

A) Expenses

Customers A) External users B) Internal users

A) External users

International Revenue Service A) External users B) Internal users

A) External users

Labor unions A) External users B) Internal users

A) External users

Securities and Echange Commission (SEC) A) External users B) Internal users

A) External users

Suppliers A) External users B) Internal users

A) External users

The primary accounting standard-setting body in the United States is the A) Financial Accounting Standards Board B) International Accounting Standards Board C) Internal Revenue Service D) Securities and Exchange Commission

A) Financial Accounting Standards Board

Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users A) Full disclosure principle B) Deferrals C) Monetary unit assumption D) Accrued revenues

A) Full disclosure principle

International accounting standards are referred to as A) IFRS B) GAAP C) IASB D) FASB

A) IFRS

Billed customers for services performed A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

A) Increase in assets and increase in owner's equity

Made cash investment to start business A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

A) Increase in assets and increase in owner's equity

Received cash from customers when service was performed A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

A) Increase in assets and increase in owner's equity

Monthly or quarterly accounting time periods A) Interim periods B) Cost constraint C) Depreciation D) Revenue recognition principle

A) Interim periods

The usual ordering of accounts in the general ledger is A) assets, liabilities, owner's capital, drawings, revenues, and expenses B) assets, liabilities, drawings, owner's capital, expenses, and revenues C) liabilities, assets, owner's capital, revenues, expenses, and drawings. D) owner's capital, assets, liabilities, drawings, expenses, and revenues.

A) assets, liabilities, owner's capital, drawings, revenues, and expenses

A financial statement that reports the assets, liabilities, and owner's equity at a specific date A) balance sheet B) Financial accounting C) Accounting D) Managerial accounting

A) balance sheet

The first step in posting involves A) entering in the appropriate ledger account, the date, journal page, and debit amount shown in the journal. B) writing in the journal the account number to which the debit amount was posted. C) writing in the journal the account number to which the credit amount was posted. D) entering in the appropriate ledger account the date, journal page, and credit amount shown in the journal.

A) entering in the appropriate ledger account, the date, journal page, and debit amount shown in the journal.

Under IFRS, the trial balance A) follows the same format as under GAAP B) shows credits on the left and debits on the right C) includes less accounts than under GAAP D) includes more accounts than under GAAP

A) follows the same format as under GAAP

The double-entry system requires that each transaction must be recorded A) in at least two different accounts B) in two sets of books C) in a journal and in a ledger D) first as a revenue and then as an expense

A) in at least two different accounts

A double rule applied to accounts in the ledger during the closing process implies that A) the account is a temporary account B) the account is a balance sheet account C) the account balance is not zero D) a mistake has been made, since double ruling is prescribed

A) the account is a temporary account

The balance in the income summary account before it is closed will be equal to A) the net income or loss on the income statement B) the beginning balance in the owner's capital account C) the ending balance in the owner's capital account D) zero

A) the net income or loss on the income statement

The double-entry accounting system is the basis of accounting systems A) worldwide B) worldwide, except for the U.S. C) in the U.S. only D) neither internationally nor in the U.S.

A) worldwide

What accounts increase with a debit?

Assets, drawings, & Expenses

What is the accounting equation?

Assets= liabilities + owner's equity

At October 1, Flambo Company reported owner's equity of $68,000. During October, the owner made additional investments of $10,000 and the company posted a net loss of $4,000. If owner's equity at October 31 totals $70,000, what amount of owner drawings were made during the month? A) $0 B) $4,000 C) $6,000 D) $10,000

B) $4,000

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording? A) A debit balance in the owner's drawings account. B) A credit balance in an expense account C) A credit balance in a liabilities account D) A credit balance in a revenue account

B) A credit balance in an expense account

Luong borrowed $12,000 on October 1, 2022, signing an 8% one-year note payable. Both the interest and the not will be paid in 1 year A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

B) Accrued expense

Luong incurs utility expense which is not yet paid in cash or recorded A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

B) Accrued expense

Luong's employees worked 3 days in 2022 but will not be paid until 2023 A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

B) Accrued expense

A list of accounts and their balances after the company has made all adjustments A) Useful life B) Adjusted trial balance C) Understandability D) Relevance

B) Adjusted trial balance

Accounts Receivable A) Liability B) Asset C) Owner's Equity

B) Asset

Cash A) Liability B) Asset C) Owner's Equity

B) Asset

Equipment A) Liability B) Asset C) Owner's Equity

B) Asset

Supplies A) Liability B) Asset C) Owner's Equity

B) Asset

An accounting period that extends from January 1 to December 31 A) Depreciation B) Calendar year C) Useful life D) Cost constraint

B) Calendar year

Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner's equity account, Owner's Capital A) Operating cycle B) Closing entries C) Intangible assets D) Current liabilities

B) Closing entries

Assets that a company expects to convert to cash or use up within one year or its operating cycle, whichever is longer A) Liquidity B) Current assets C) Long-term liabilities D) Property, plant, and equipment

B) Current assets

Obligations that a company expects to pay within the coming year or its operating cycle, whichever is longer A) Classified balance sheet B) Current liabilities C) Property, plant, and equipment D) Operating cycle

B) Current liabilities

The left side of an account A) Three-column form of account B) Debit C) Chart of accounts D) Account

B) Debit

Which of the following rules is incorrect? A) Credits decrease the owner's drawings account. B) Debits increase the owner's capital account. C) Credits increase revenue accounts. D) Debits decrease liability accounts.

B) Debits increase the owner's capital account.

Paid monthly rent A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

B) Decrease in assets and decrease in owner's equity

Withdrew cash for owner's personal use A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

B) Decrease in assets and decrease in owner's equity

The process of allocating the cost of an asset to expense over its useful life A) Useful life B) Depreciation C) Accrual-basis accounting D) Accrued revenues

B) Depreciation

A system that records in appropriate accounts the dual effect of each transaction A) Posting B) Double-entry system C) Credit D) Ledger

B) Double-entry system

Assets = Liabilities + Owner's capital − Owner's drawings + Revenues − Expenses A) Corporation B) Expanded accounting equation C) Expenses D) Convergence

B) Expanded accounting equation

Numbers and descriptions match what really existed or happened—they are factual A) Net loss B) Faithful representation C) Owner's equity statement D) Owner's equity

B) Faithful representation

A time period lasting one year is called an interim period A) True B) False

B) False

Accountants divide the economic life of a business into artificial time periods, but all transactions affect only one of these periods A) True B) False

B) False

All fiscal years are calendar years, but not all calendar years are fiscal years A) True B) False

B) False

An account has a left, or credit side, and a right, or debit side A) True B) False

B) False

An account is an accounting record of either a specific asset or a specific liability A) True B) False

B) False

An account shows only increases, not decreases, in the item it relates to A) True B) False

B) False

Some items, such as Cash and Accounts Receivable, are combined into one account A) True B) False

B) False

A private organization that establishes generally accepted accounting principles (GAAP) in the United States A) Owner's equity statement B) Financial Accounting Standards Board (FASB) C) Net income D) Public accounting

B) Financial Accounting Standards Board (FASB)

An area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud A) Historical cost principle B) Forensic accounting C) Management consulting D) Revenues

B) Forensic accounting

A ledger that contains all asset, liability, and owner's equity accounts A) Normal balance B) General ledger C) Posting D) Trial balance

B) General ledger

An accounting principle that states that companies should record assets at their cost A) International Financial Reporting Standards (IFRS) B) Historical cost principle C) Owner's equity D) Monetary unit assumption

B) Historical cost principle

A temporary account used in closing revenue and expense accounts A) Correcting entries B) Income Summary C) Classified balance sheet D) Stockholders' equity

B) Income Summary

Incurred advertising expense on account A) Increase in assets and increase in owner's equity B) Increase in liabilities and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

B) Increase in liabilities and decrease in owner's equity

Marketing manager A) External users B) Internal users

B) Internal users

Production supervisor A) External users B) Internal users

B) Internal users

Store manager A) External users B) Internal users

B) Internal users

Vice president of finance A) External users B) Internal users

B) Internal users

International accounting standards set by the International Accounting Standards Board (IASB) A) Accounting B) International Financial Reporting Standards (IFRS) C) Faithful representation D) Historical cost principle

B) International Financial Reporting Standards (IFRS)

Generally, (1) investments in stocks and bonds of other companies that companies normally hold for many years; (2) long-term assets, such as land and buildings, not currently being used in operating activities; and (3) long-term notes receivable A) Post-closing trial balance B) Long-term investments C) Current assets D) Closing entries

B) Long-term investments

Obligations that a company expects to pay after one year A) Correcting entries B) Long-term liabilities C) Reversing entry D) Property, plant, and equipment

B) Long-term liabilities

An area of public accounting ranging from development of accounting and computer systems to support services for marketing projects and merger and acquisition activities. A) International Accounting Standards Board (IASB) B) Management consulting C) Sarbanes-Oxley Act (SOX) D) Proprietorship

B) Management consulting

The amount by which expenses exceed revenues A) Relevance B) Net loss C) Accounting D) Revenues

B) Net loss

An account balance on the side where an increase in the account is recorded A) Account B) Normal balance C) Debit D) Three-column form of account

B) Normal balance

The ownership claim on total assets A) Securities and Exchange Commission (SEC) B) Owner's equity C) Monetary unit assumption D) Management consulting

B) Owner's equity

A financial statement that summarizes the changes in owner's equity for a specific period of time. A) Revenues B) Owner's equity statement C) Financial Accounting Standards Board (FASB) D) Owner's equity

B) Owner's equity statement

The procedure of transferring journal entries to the ledger accounts A) Journalizing B) Posting C) Simple entry D) General journal

B) Posting

A business owned by one person A) Net income B) Proprietorship C) Liabilities D) Investment by owner

B) Proprietorship

A governmental agency that oversees U.S. financial markets and accounting standard-setting bodies A) Economic entity assumption B) Securities and Exchange Commission (SEC) C) Forensic accounting D) Assets

B) Securities and Exchange Commission (SEC)

The basic form of an account, consisting of (1) a title, (2) a left or debit side, and (3) a right or credit side A) Chart of accounts B) T-account C) Normal balance D) General ledger

B) T-account

Accounts that relate only to a given accounting period. Consist of all income statement accounts and owner's drawings account. All temporary accounts are closed at end of the accounting period A) Liquidity B) Temporary (nominal) accounts C) Post-closing trial balance D) Permanent (real) accounts

B) Temporary (nominal) accounts

Information that is available to decision-makers before it loses its capacity to influence decisions A) Time period assumption B) Timely C) Contra asset account D) Accrual-basis accounting

B) Timely

A list of accounts and their balances at a given time A) General ledger B) Trial balance C) Ledger D) Debit

B) Trial balance

A liability recorded for cash received before services are performed A) Deferrals B) Unearned revenues C) Accrued expenses D) Historical cost principle

B) Unearned revenues

Expenses incurred but not yet paid or recorded are called A) prepaid expenses B) accrued expenses C) interim expenses D) unearned expenses

B) accrued expenses

The balances that appear on the post-closing trial balance will match the A) income statement account balances after adjustments B) balance sheet account balances after closing entries C) incomes statement account balances after closing entries D) balance sheet account balances after adjustments

B) balance sheet account balances after closing entries

The post-closing trial balance contains only A) income statement accounts B) balance sheet accounts C) balance sheet and income statement accounts D) income statement, balance sheet, and owner's equity statement accounts

B) balance sheet accounts

Juggernaut Company buys a $29,000 van on credit. The transaction will affect the A) income statement only B) balance sheet only C) income statement and owner's equity statement only D) income statement, owner's equity statement, and balance sheet

B) balance sheet only

Another name for a journal is A) listing B) book of original entry C) book of accountants D) book of source documents

B) book of original entry

An adjusted trial balance A) is prepared after the financial statements are completed B) proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made C) is a required financial statement under generally accepted accounting principles D) cannot be used to prepare financial statements

B) proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made

Financial information that is capable of making a difference in a decision is? A) faithfully representative. B) relevant C) convergent D) generally accepted

B) relevant

If errors occur in the recording process, they A) should be corrected as adjustments at the end of the period B) should be corrected as soon as they are discovered C) should be corrected when preparing closing entries D) cannot be corrected until the next accounting period

B) should be corrected as soon as they are discovered

After closing entries are posted, the balance in the owner's capital account in the ledger will be equal to A) the beginning owner's capital reported on the owner's equity statement B) the amount of the owner's capital reported on the balance sheet C) zero D) the net income for the period

B) the amount of the owner's capital reported on the balance sheet

The time period assumption states A) the business will remain in operation for the foreseeable future B) the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared C) every economic entity can be separately identified and accounted for D) only those things that can be expressed in money are included in the accounting records

B) the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared

The revenue recognition principle dictates that revenue should be recognized in the accounting records A) when cash is received B) when the performance obligation is satisfied C) at the end of the month D) in the period that income taxes are paid

B) when the performance obligation is satisfied

On January 1, 2019, Murphy Inc. purchased equipment for $38,400. The company is depreciating the equipment at the rate of $800 per month. At January 31, 2020, the balance in Accumulated Depreciation is A) $800 B) $9,600 C) $10,400 D) $28,000

C) $10,400

Ultramega Company collected $19,600 in May of 2020 for 5 months of service which would take place from October of 2020 through February of 2021. The revenue reported from this transaction during 2020 would be A) 0 B) $3,920 C) $11,760 D) $19,600

C) $11,760

Eli's Electronic Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $400,000 in electronic repair revenues, $300,000 in expenses, and Eli withdrew $50,000. Eli's Owner's Capital balance at the end of the year was: A) $200,000 B) $100,000 C) $150,000 D) $350,000

C) $150,000

Accounting basis in which companies record transactions that change a company's financial statements in the periods in which the events occur A) Verifiable B) Contra asset account C) Accrual-basis accounting D) Book value

C) Accrual-basis accounting

Adjusting entries for either accrued revenues or accrued expenses A) Adjusted trial balance B) Time period assumption C) Accruals D) Cash-basis accounting

C) Accruals

Expenses incurred but not yet paid in cash or recorded A) Useful life B) Materiality C) Accrued expenses D) Depreciation

C) Accrued expenses

If an individual asset is increased, then a possibility for the other effect of the transaction is A) An equal decrease in a specific liability B) An equal decrease in owner's equity C) An equal decrease in another asset D) All of these answer choices are possible

C) An equal decrease in another asset

A list of accounts and the account numbers that identify their location in the ledger A) Debit B) Journal C) Chart of accounts D) Double-entry system

C) Chart of accounts

Ability to compare the accounting information of different companies because they use the same accounting principles A) Fiscal year B) Accruals C) Comparability D) Cost constraint

C) Comparability

An account offset against an asset account on the balance sheet A) Economic entity assumption B) Book value C) Contra asset account D) Calendar year

C) Contra asset account

Entries to correct errors made in recording transactions A) Income Summary B) Property, plant, and equipment C) Correcting entries D) Post-closing trial balance

C) Correcting entries

The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair A) Expenses B) Balance sheet C) Ethics D) Partnership

C) Ethics

The principle that companies recognize expense in the period in which they make efforts (consume assets or incur liabilities) to generate revenue A) Monetary unit assumption B) Book value C) Expense recognition principle (matching principle) D) Calendar year

C) Expense recognition principle (matching principle)

The field of accounting that provides economic and financial information for investors, creditors, and other external users A) Statement of cash flows B) Owner's equity statement C) Financial accounting D) Taxation

C) Financial accounting

Which of the following is not part of the accounting process? A) recording B) identifying C) Financial decision making D) communicating

C) Financial decision making

The most basic form of journal A) Chart of accounts B) Account C) General journal D) Three-column form of account

C) General journal

Common standards that indicate how to report economic events A) Fair value principle B) Managerial accounting C) Generally accepted accounting principles (GAAP) D) Expanded accounting equation

C) Generally accepted accounting principles (GAAP)

The assumption that the company will continue in operation for the foreseeable future A) Useful life B) Prepaid expenses (prepayments) C) Going concern assumption D) Consistency

C) Going concern assumption

Selecting economic activities relevant to the company A) Communicates B) Records C) Identifies

C) Identifies

Purchased equipment on account A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

C) Increase in assets and increase in liabilities

The assets an owner puts into the business A) Expanded accounting equation B) Historical cost principle C) Investments by owner D) Corporation

C) Investments by owner

The entering of transaction data in the journal A) T-account B) Three-column form of account C) Journalizing D) Posting

C) Journalizing

Creditor claims against total assets A) Net income B) Balance sheet C) Liabilities D) Financial accounting

C) Liabilities

The ability of a company to pay obligations expected to be due within the next year A) Property, plant, and equipment B) Classified balance sheet C) Liquidity D) Intangible assets

C) Liquidity

The field of accounting that provides internal reports to help users make decisions about their companies A) Owner's equity statement B) Net income C) Managerial accounting D) Generally accepted accounting principles (GAAP)

C) Managerial accounting

A company-specific aspect of relevance. An item is material when its size makes it likely to influence the decision of an investor or creditor A) Depreciation B) Accrued revenues C) Materiality D) Adjusted trial balance

C) Materiality

A bakery shop makes a large sale for $1,400 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The bakery shop follows GAAP and applies the revenue recognition principle. When is the $1,400 considered to be recognized? A) December 5 B) December 10 C) November 30 D) December 1

C) November 30

A company spends $20 million dollars for an office building. Over what period should the cost be written off? A) When the $20 million is expended in cash B) All in the first year C) Over the useful life of the building D) After $20 million in revenue is recognized

C) Over the useful life of the building

Owner's capital A) Liability B) Asset C) Owner's Equity

C) Owner's Equity

Accounts that relate to one or more future accounting periods. Consist of all balance sheet accounts. Balances are carried forward to the next accounting period A) Stockholders' equity B) Liquidity C) Permanent (real) accounts D) Correcting entries

C) Permanent (real) accounts

Net income results when A) Assets > Liabilities B) Revenues = Expenses C) Revenues > Expenses D) Revenues < Expenses

C) Revenues > Expenses

Which of the following is a true statement about closing the books of a proprietorship? A) Expenses are closed to the Expense Summary account B) Only revenues are closed to the Income Summary account C) Revenues and expenses are closed to the Income Summary account D) Revenues, expenses, and the owner's drawings account are closed to the Income Summary account

C) Revenues and expenses are closed to the Income Summary account

An entry, made at the beginning of the next accounting period that is the exact opposite of the adjusting entry made in the previous period A) Closing entries B) Current liabilities C) Reversing entry D) Long-term liabilities

C) Reversing entry

When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should these additional accounts be shown on the worksheet? A) They should be inserted in alphabetical order into the trial balance accounts already given B) They should be inserted in chart of account order into the trial balance already given C) They should be inserted on the lines immediately below the trial balance totals D) They should not be inserted on the trial balance until the next accounting period

C) They should be inserted on the lines immediately below the trial balance totals

An assumption that accountants can divide the economic life of a business into artificial time periods A) Adjusted trial balance B) Historical cost principle C) Time period assumption D) Going concern assumption

C) Time period assumption

Information presented in a clear and concise fashion so that users can interpret it and comprehend its meaning. A) Useful life B) Contra asset account C) Understandability D) Materiality

C) Understandability

Which of the following is not an advantage of the corporate form of business organization? A) Limited liability of stockholders B) Transferability of ownership C) Unlimited personal liability for stockholders D) Unlimited life

C) Unlimited personal liability for stockholders

On July 7, 2020, Rancho Realty Co. performed cash services of $1,900. The entry to record this transaction would include A) a debit to Service Revenue of $1,900 B) a credit to Accounts Receivable of $1,900 C) a debit to Cash of $1,900 D) a credit to Accounts Payable of $1,900

C) a debit to Cash of $1,900

The final step in the accounting cycle is to prepare A) closing entries B) financial statements C) a post-closing trial balance D) adjusting entries

C) a post-closing trial balance

An adjusting entry A) affects two balance sheet accounts B) affects two income statement accounts C) affects a balance sheet account and an income statement account D) is always a compound entry

C) affects a balance sheet account and an income statement account

Euqene Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated? A) comparability B) relevance C) faithful representation D) consistency

C) faithful representation

On a classified balance sheet, current assets are customarily listed A) in alphabetical order B) with the largest dollar amounts first C) in the order of liquidity D) in the order of acquisition

C) in the order of liquidity

Accrued expenses are A) paid and recorded in an asset before they are used or consumed B) paid and recorded in an asset account after they are used or consumed C) incurred but not yet paid or recorded D) incurred and already paid or recorded

C) incurred but not yet paid or recorded

Financial accounting has a primary purpose pf providing economic and financial information for all of the following except A) creditors B) investors C) managers D) other external users

C) managers

Mellon Company purchases $1,500 of equipment from Office Equipment Inc. for cash. The effect on the components of the basic accounting equation of Mellon Company is A) an increase in assets and liabilities B) a decrease in assets and liabilities C) no change in total assets D) an increase in assets and a decrease in liabilities

C) no change in total assets

IFRS, compared to GAAP tends to be more A) detailed B) rules-based C) principles-based D) full of disclosure requirements

C) principles-based

The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that A) they are both governmental agencies B) the SEC is a private organization of accountants. C) the SEC often mandates guidelines when no accounting principles exist. D) the SEC and FASB rarely cooperate in developing accounting standards.

C) the SEC often mandates guidelines when no accounting principles exist.

In recording an accounting transaction in a double-entry system A) the number of debit accounts must equal the number of credit accounts B) there must always be entries made on both sides of the accounting equation C) the amount of the debits must equal the amount of the credits D) there must only be two accounts affected by any transaction

C) the amount of the debits must equal the amount of the credits

What is the order of liquidity?

Cash, accounts receivable, supplies

A record of increases and decreases in specific asset, liability, or owner's equity items A) Normal balance B) General ledger C) Credit D) Account

D) Account

The examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation A) Convergence B) Historical cost principle C) Accounting D) Auditing

D) Auditing

Assets = Liabilities + Owner's equity A) Bookkeeping B) Fair value principle C) International Accounting Standards Board (IASB) D) Basic accounting equation

D) Basic accounting equation

The difference between the cost of a depreciable asset and its related accumulated depreciation A) Understandability B) Going concern assumption C) Cash-basic assumption D) Book value

D) Book value

A part of the accounting process that involves only the recording of economic events A) Corporation B) Financial Accounting Standards Board (FASB) C) Proprietorship D) Bookkeeping

D) Bookkeeping

A journal entry that involves three or more accounts A) Credit B) Journal C) Ledger D) Compound entry

D) Compound entry

Use of the same accounting principles and methods from year to year within a company A) Cash-basis accounting B) Time period assumption C) Adjusting entries D) Consistency

D) Consistency

The process of reducing the differences between U.S. GAAP and IFRS A) Owner's equity B) Economic entity assumption C) Monetary unit assumption D) Convergence

D) Convergence

Constraint that weighs the cost that companies will incur to provide the information against the benefit that financial statement users will gain from having the information available A) Interim periods B) Book value C) Calendar year D) Cost constraint

D) Cost constraint

The right side of an account A) Compound entry B) T-account C) Account D) Credit

D) Credit

Withdrawal of cash or other assets from an unincorporated business for the personal use of the owner(s) A) Accounting B) Generally accepted accounting principles (GAAP) C) Liabilities D) Drawings

D) Drawings

An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability) A) International Accounting Standards Board (IASB) B) Taxation C) Proprietorship D) Fair value principle

D) Fair value principle

An accounting period that is one year in length A) Comparability B) Deferrals C) Economic entity assumption D) Fiscal year

D) Fiscal year

A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time A) Management consulting B) Owner's equity C) Corporation D) Income statement

D) Income statement

Purchased additional equipment for cash A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

D) Increase in assets and decrease in assets

Received cash from customers billed A) Increase in assets and increase in owner's equity B) Decrease in assets and decrease in owner's equity C) Increase in assets and increase in liabilities D) Increase in assets and decrease in assets

D) Increase in assets and decrease in assets

Long-lived assets that do not have physical substance A) Long-term investments B) Property, plant, and equipment C) Closing entries D) Intangible assets

D) Intangible assets

The entire group of accounts maintained by a company A) Account B) Compound entry C) Journal D) Ledger

D) Ledger

The amount by which revenues exceed expenses A) Faithful representation B) Expenses C) Relevance D) Net income

D) Net income

A business owned by two or more persons associated as partners A) Basic accounting equation B) Financial accounting C) Historical cost principle D) Partnership

D) Partnership

A list of permanent accounts and their balances after a company has journalized and posted closing entries A) Correcting entries B) Income Summary C) Permanent (real) accounts D) Post-closing trial balance

D) Post-closing trial balance

Luong paid $2,800 rent on December 1 for the 4 months starting December 1 A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

D) Prepaid expense

Luong paid cash for an expense and recorded an asset until the item was used up A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

D) Prepaid expense

Luong purchased $900 of supplies in 2022; at year-end, $400 of supplies remain unused A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

D) Prepaid expense

Luong purchased equipment on January 1, 2022; the equipment will be used for 5 years A) Unearned revenue B) Accrued expense C) Accrued revenue D) Prepaid expense

D) Prepaid expense

Assets with relatively long useful lives and currently being used in operations A) Stockholders' equity B) Intangible assets C) Temporary (nominal) accounts D) Property, plant, and equipment

D) Property, plant, and equipment

Financial information that is capable of making a difference in a decision A) Sarbanes-Oxley Act (SOX) B) Financial accounting C) Forensic accounting D) Relevance

D) Relevance

The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied A) Book value B) Comparability C) Relevance D) Revenue recognition principle

D) Revenue recognition principle

The economic events of a business that are recorded by accountants A) Expenses B) Liabilities C) Revenues D) Transactions

D) Transactions

A multiple-column form that may be used in making adjustments and in preparing financial statements A) Stockholders' equity B) Post-closing trial balance C) closing entries D) Worksheet

D) Worksheet

A journal provides A) the balances for each account. B) information about a transaction in several different places. C) a list of all accounts used in the business. D) a chronological record of transactions.

D) a chronological record of transactions.

Transactions in a journal are initially recorded in A) account number order B) dollar amount order C) alphabetical order D) chronological order

D) chronological order

On May 25, Mt. Hood Company received a $370 check from Douglas Fir for services to be performed in the future. The bookkeeper for Mt. Wood Company incorrectly debited Cash for $370 and credited Accounts Receivable for $370. The amounts have been posted to the ledger. To correct this entry, the bookkeeper should: A) debit Cash $370 and credit Unearned Service Revenue $370 B) debit Accounts Receivable $370 and credit Service Revenue $370 C) debit Accounts Receivable $370 and credit Cash $370 D) debit Accounts Receivable $370 and credit Unearned Service Revenue $370

D) debit Accounts Receivable $370 and credit Unearned Service Revenue $370

All of the following are characteristics of accounting information except A) faithful representation B) comparability C) relevancec D) flexibility

D) flexibility

Adjustments would not be necessary if financial statements were prepared to reflect net income from A) monthly operations B) fiscal year operations C) interim operations D) lifetime operations

D) lifetime operations

What accounts are assets?

accounts receivable, cash, supplies, investments, buildings and equipment

What accounts are liabilities?

loans, accounts payable, salaries