Accounting Exam Theory MC

Which one of the following is an accurate description of Allowance for Doubtful Accounts? (contra account, liability account, revenue account, expense account)

contra account

Assets classified as property, plant and equipment are reported at...

each asset's original cost less depreciation

The cost of goods sold is

goods available for sale - ending inventory

Which one of the following items would be added to the balance per books in a bank reconciliation? (outstanding checks, deposit in transit, service charges, interest on a customer note)

interest on a customer note

What is the accounting equation?

assets=liabilities + stockholder's equity

The record used to accumulate monetary information for each individual asset, liability, SE, revenue, and expense is...

Account

The record in which transactions are initially recorded in chronological order as they occur is a...

General Journal

What is the attribute used to measure many assets that are recognized on a balance sheet because it is more objective and verifiable?

Historical cost

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?

In contra accounts to the Purchases account

The natural progression in items from one statement to another and preparation of financial statements is...

Income statement>statement of retained earnings>balance sheet and statement of cash flows

What is the distinguishing characteristic between accounts receivable and notes receivable?

Notes receivable result from a written promise to pay within a specified amount of time

An accountant describes the effects of an economic event on an entity by recording the transaction and reporting the amount on the financial statements. What is this called?

Recognition

Which of the following statements best describes the term revenues? (Revenues represent an outflow of assets resulting from the sale of goods or services, revenues represent assets received from the sale of products or services, revenues represent assets used or consumed in the sale of products or services, revenues represent the dollar amount of bonds sold to the public)

Revenues represent assets received from the sale of products or services

Liquidity relates to a company's ability to do what?

The ability to pay its financial obligations as they become due

Why do businesses invest in short-term investments?

They are investing excess cash to meet future business operation or investment needs

What is the primary objective of financial reporting?

To provide useful information for decision making

A list of all accounts and their balances which is used to prove the equality of debits and credits as of a specific date is a

Trial balance

The correct term for an entry made to the left side of an account is...

debit

Which one of the following items would be subtracted from the balance per bank statement in a bank reconciliation? (outstanding checks, deposit in transit, service charges, interest on a customer note)

outstanding checks

Which one of the following would not appear on a bank statement (service charges, interest earned, outstanding checks, deposits)

outstanding checks

The three forms of business entities are

sole proprietorships, partnerships, and corporations

Relevan information can be quantitative or qualitative. In deciding whether to go to college part-time or full-time, which of the following is a qualitative factor for a student? (the cost of tuition, the opportunity to make friends, the price of football tickets, "good student" discounts on auto insurance rates)

the opportunity to make friends

At the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of

the seller

Expenses can be matched against revenue...

through allocation to the accounting periods in which the benefits are recognized