Accounting Final exam Pt 1

A customer may receive a sales discount for goods that are damaged or defective

False

A worksheet can be used as a basis for posting the adjustments to the ledger

False

An account will have a credit balance if the total debit amounts exceeds the total credit amounts

False

An expense paid with cash would result in an equal decrease in liabilities and owners equity

False

An important purpose of closing entries is to set permanent account balance to zero in order to begin the next period

False

Assets are increased by debits and liabilities are decreased by credits

False

Certified Public Accountants are only permitted to prepare audit reports and tax returns

False

Collection of an accounts receivable will increase both cash and accounts receivable

False

Cost less accumulated depreciation is a measurement of the current value of an asset such as equipment or a building

False

Gross profit is equal to net sales minus operating expenses

False

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future

False

In a single-step income statement, gross profit and operating income are shown on the income statement

False

In posting, one should enter "J2" in the post. Ref Column on Page two of the journal

False

In preparing a worksheet for a merchandising firm, all income statement column debits represent expenses

False

Income from operations is determined by subtracting other expenses and losses from gross profit

False

Intangible assets are not listed on the balance sheet because they do not have physical substance

False

Liabilities represent the ownership claim on total assets

False

Monthly and quarterly time periods are commonly referred to as fiscal periods

False

Returns of merchandise increase the liability of a creditor

False

Sales discounts is classified as a contra asset account

False

Short term receivables are reported in the balance sheet immediately below cash

False

The adjusting entry for unearned revenues result in a debit to an asset account and a credit to revenue account

False

The allowance method for uncollectible accounts violates the expense recognition principle

False

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique

False

The content of the owner's equity section of a proprietorship is the same as the content of the owners equity section of a corporation

False

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset

False

The cost of goods sold is determined only at the end of the accounting period under a perpetual inventory system

False

The entry to record the cost of inventory sold includes a credit to cost of goods sold

False

The entry to record the purchase of inventory on account in a perpetual inventory system includes a credit to accounts receivable

False

The maturity date of a 60 day note dated December 1 is January 31

False

The number and types of accounts used by different business enterprises are the same if generally accepted accounting principles are being followed by the enterprises

False

The owner's drawing account is closed to the income summary account in order to properly determine net income (or loss) for the period

False

The preparation of reversing entries is a required step in the accounting cycle

False

The principle amount of a 9%, 3 year, note receivable is $300,000 and is date January 1, 2012. The interest revenue to be recognized on December 31, 2012 is $9,000

False

The revenue recognition principle requires that companies recognize revenue in the period in which cash was received rather than when it was earned

False

Under the perpetual inventory system, the purchase of merchandise is recorded with a debit to the purchase account

False

When accrual-basis accounting is applied, adjusting entries are not necessary

False

When the columns of the trial balance equal each other, it proves no errors occurred in recording and posting

False

current assets are resources that can be converted into cash, but are not expected to be converted within one year

False

long term liabilities such as bank notes payable, mortgages payable, and bonds payable are expected to be paid from existing current assets

False

A Contra asset account is an account whose balance is deducted from a related asses in the financial statements

True

Accounting communicates financial information about a business enterprise to both internal and external users

True

Accounting is the information system that identifies, records, and communicates the economic events of an organization to interested users

True

Adjustments are journalized and posted only at the end of an accounting period, whereas correcting entries are journalized and posted whenever an error is discovered

True

Adjustments for accrued expenses are necessary to record the obligations that exist at the balance sheet date and to recognize the expenses that are applicable to the current accounting period

True

After closing entries have been Journalized and posted, all temporary accounts in the ledger should have zero balances

True

An aging schedule shows a required balance in Allowance for Doubtful Accounts of $8,600 is there a credit balance in the allowance account of $2,000 prior to adjustment, the adjustment amount is $6,600

True

Assets=Liabilities+owners Capital-Drawing+Revenues-Expenses

True

Bookkeeping deals with the record-keeping process and is only one aspect of accounting

True

Cost of goods sold is credited during the closing process

True

Depreciation is the process of allocating the cost of an asset to expense over its useful life in a rational and systematic manner

True

E commerce creates its own risk such as stolen credit card numbers, computer viruses and trojan horses

True

Financing charges added to a customer's credit card balance with a retailer are recorded as a debit to accounts receivable and a credit to interest revenue

True

If a worksheet is used, financial statements can be prepared before adjusting entries are journalized

True

In a manual system, processing includes journalizing transactions, posting the accounts, and preparing financial statements

True

In the balance sheet, inventory is reported as a current asset immediately below accounts receivable

True

In the closing entry process, the sales returns and allowances account is credited

True

Internal control is the organizational plan and all the related measures that an entity adopts to safeguard assets, encourage adherence to company policies, promote operational efficiency and ensure accurate and reliable accounting records

True

Measuring net income for a merchandising company is conceptually the same as for a service company

True

Merchandising companies report non operating activities in the income statement immediately after the company's primary operating activities

True

Net Income is the excess of revenues over expenses for the accounting period

True

Operating expenses are divided into administrative expenses and selling expenses on the income statement

True

Outputs are the reports used for decision making

True

Payments of expenses that will benefit more than one accounting period are referred to as prepaid expenses

True

Receivables are classified as accounts, notes, or other

True

Sale of a receivables to a factor may result in a debit to Service Charge Expense at the time of sale

True

Sales discounts is a contra revenue account and has a debit balance

True

Since companies find it desirable and necessary to report the results of their own activities frequently, the time period assumption assumes that the economic life of a business can be divided into artificial time periods

True

The AICPA code of professional conduct and the standards of ethical conduct for management accountants set the minimum standards of conduct for members of the AICPA and IMA

True

The accounts payable account in the general ledger controls the accounts payable subsidiary ledger

True

The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was initially recorded as an asset or an expense

True

The balance of accumulated depreciation will appear in the credit side of the worksheet's balance sheet column

True

The balance of the depreciation expense account will appear in the income statement debit column of a worksheet

True

The basic steps in the recording process are: -analyze each transaction -Enter the transaction in a journal -Transfer the journal entry to the appropriate ledger accounts

True

The double-Entry system helps ensure the accuracy of the recorded amounts and helps to detect errors

True

The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities

True

The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities

True

The entry to record the purchase of inventory on account in a perpetual inventory system includes a debit to the inventory account

True

The ledger is the entire group of accounts maintained by a company

True

The maturity value of a $5,000 note is $5,300. If $180 of interest has been accrued prior to maturity, the entry to record the honoring of the note at maturity should include a credit to interest revenue for $120

True

The person to whom a check is drawn is referred to as the payee

True

The relationship between current assets and current liabilities is important in evaluating a company's liquidity

True

Transferring journal entries to the ledger is called posting and should be performed in chronological order

True

internal users are those who manage the business

True

the financial accounting standards board is the primary accounting standard-setting body in the United States

True

the owners capital account is increased by credits

True