Accounting
Lindsey Inc. purchased shoes valued at $1,000 to add to its inventory on February 1, 2019 and will pay the balance owing in 30 days. In order to record the transaction in a perpetual inventory system the journal entry would include:
A debit to Merchandise Inventory
Linden Inc. purchased merchandise inventory valued at $4,000 to add to its inventory on February 1, 2019. It will pay the balance owing in 30 days. The journal entry to record the transaction in a periodic inventory system includes
A debit to Purchases
An adjusted trial balance is
A listing of accounts after adjusting entries have been recorded and posted
A chart of accounts is
A listing of each general ledger account which is assigned a name and a number
Theft of merchandise inventory is recorded as
A or B
An example of a contra account is
Accumulated depreciation
How is a deposit in transit reflected on the bank reconciliation?
Added to the bank statement ending balance
Closing entries are prepared
After financial statements are prepared
Effective internal controls ensure
All of the above
A note receivable is collected by the bank on behalf of a company. This is discovered during the bank reconciliation process and indicates
An understatement of the Cash account in the general ledger
The Accumulated Depreciation account appears on the
Balance Sheet
Ending amounts on the statement of changes in equity are the same as those on the
Balance sheet
A year‐end physical count of inventory is usually necessary when a company uses the
Both a perpetual and a periodic inventory system
What is the effect on the Cash general ledger account if a check written for $350 is recorded as $530?
Cash general ledger account is understated by $180
Which of the following is not a form of business organization?
Charity
Which of the following items would cause the Cash general ledger balance to be understated?
Collection of notes receivable
When a company sells its merchandise, the cost is debited to which of the following accounts
Cost of goods sold
In a perpetual inventory system the Merchandise Inventory account is used to record all the following except for
Costs of deliveries to customers
When a company uses the income statement method to estimate uncollectible accounts receivable, it uses the following to calculate bad debts expense:
Credit sales
The weighted average cost flow method is best used for what type of inventory item?
Crude oil
If there is a net loss there will be a ___________ balance in the Income Summary account before moving the balance to Retained Earnings
Debit
In establishing a petty cash fund, one of the following will be part of the journal entry
Debit to Petty Cash
Double‐entry accounting requires
Debits to equal Credits
Which of the following is a temporary account?
Dividends
Which of the following is not an expense?
Dividends paid
The following does not describe the matching principle
Expenses are reported on the income statement when cash is paid
When costs of purchases are increasing, which cost flow method results in the highest net income?
FIFO
A document that is used to chronologically record a business's debit and credit transactions is called a
General journal
What of the following is a true statement about depreciation?
It is the allocation of the cost of plant or equipment over the time they are expected to be used
Assume a company writes off the account receivable balance of $1,000 from Wally Inc. A few months later it receives a $300 check from Wally Inc. How should this $300 payment be recorded?
It should be recorded as a credit to Allowance for Doubtful accounts
Amounts are posted from the ________ to the ________
Journal, general ledger
Which of the following is not an example of an internal control over cash?
Keeping a large amount of cash on hand
Which of the following is a non‐depreciable asset?
Land
This accumulates information regarding the increases and decreases in a specific asset, liability, or equity item
Ledger account
Debit means
Left side of an account
Debits always decrease which accounts?
Liabilities, Revenue and Common Stock
Credits always increase which accounts?
Liabilities, Revenues and Common Stock
Under US GAAP, inventory is recorded at
Lower of cost and net realizable value
A company purchases supplies and records these as an asset. As they are used, they are expensed. This is an example of:
Matching
An accounting policy requiring a corporation to capitalize any asset over $5,000 in value would be an example of:
Materiality
Arland Inc. has a debit balance in its Allowance for Doubtful Accounts. This means that
More bad debts occurred in this period than were estimated in the previous period
If a customer's account receivable is converted to a short-term notes receivable, what is the effect on the balance sheet?
No effect
What is the effect on the balance sheet when a company writes off a customer's accounts receivable?
No effect
The statement of cash flows is divided into which sections?
Operating, investing, and financing
On a merchandiser's classified multi‐step income statement, interest expense is usually recorded as
Other revenue and expense
On a merchandiser's classified multi‐step income statement, dividends earned from investments is usually recorded in the
Other revenue and expense section
A __________________________ inventory system keeps inventory balances up-to-date on a real-time basis, while a __________________________ inventory system updates inventory at the end of the accounting period.
Perpetual, periodic
Which of the following is not a liability?
Prepaid expense
The final step in the accounting cycle is to:
Prepare a post‐closing trial balance
Cost outlays are recorded as an expense when they are incurred to earn revenue in the _______________ accounting period
Present
Which of the following best describes a trial balance?
Provides a mathematical check before the financial statements are prepared.
The primary qualitative characteristics of accounting information are:
Relevance and faithful representation
Which of the following general ledger accounts is a permanent account?
Retained earnings`
US GAAP is adopted by
SEC
The cost of inventory is not affected by
Sales
Using the retail inventory method, cost of goods sold is restated to its retail value. This means it equals
Sales revenue
Which of the following methods is usually not used to cost inventory that consists of large number of similar, inexpensive items?
Specific identification
Amounts on the income statement are transferred to the
Statement of changes in equity
The formula to calculate straight‐line depreciation is
(Cost - residual value) / useful life
A journal entry would not be required for which type of reconciling item?
A bank error
Which of the following does not describe a partnership?
A business owned by one or more individuals
ABC Company uses a perpetual inventory system. It paid for transportation charges for the purchase of merchandise. The journal entry to record this transaction is
A debit to Inventory and a credit to Cash
A discount given to a customer that orders a large quantity of goods is referred to as
Trade discount
Assuming that ending inventory was overstated in 2019 by $1,500, what is the effect on the 2020 gross profit?
Understated by $1,500
Customer payments receieved in advance of the product or service being provided is recorded in which general ledger account?
Unearned Revenue
Allowance for Doubtful Accounts is recorded in which section of the financial statements?
assets
An example of an asset is:
cash
Credit means
right side of an account
A short‐term note receivable has the following qualities except that
It is a non‐current asset
Which of the following does not describe a proprietorship?
It is a separate legal entity
Credits always decrease which accounts?
Assets and Expenses
Debits always increase which accounts?
Assets, Dividends, Expenses
When sales revenue exceeds cost of goods sold, the difference is called
Gross profit
A business purchases a vehicle for $35,000. Since the vehicle was advertised for $40,000 the company decided to record the asset at $40,000. This is a violation of which accounting principle?
Historical cost
A company purchased land in 1950 for $10,000. Although the land is now worth $300,000 the accounting records are not changed. This is an applcation of which accounting convention?
Historical cost
In a periodic inventory system, the account Purchases appears on which financial statement?
Income Statement
A company purchased a building worth $500,000 by paying $50,000 in cash and acquiring a bank loan for the remainder. The effect on the accounting equation is:
Increase in assets and liabilities by $450,000
In a perpetual inventory system, which of the following accounts is not closed with a credit entry?
Interest Revenue
Which of the following is not a stockholders' equity account?
Investments
Which of the following describes a corporation?
The owners have limited liability
Once a company chooses an inventory costing method, it must be used every accounting period thereafter. What GAAP principle is being followed?
consistency
If there is a net loss there will be a ___________ balance in the Income Summary account after all closing entries have been posted
zero