Accounting Test 1 Study Guide

False

Adjusting entries are made after the preparation of financial statements

False

Debit means increase and credit means decrease for all accounts

Revenue 4 C

Incoming money

Revenues - Expenses = Net Income

Income Statement Equation

Retained Earnings

+Net Income -Dividends

E

A company's list of accounts and the identification numbers assigned to each account is called a: A. Journal B. General Journal C. Source Document D. Trial Balance E. Chart of Accounts

True

Adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account

Asset 1 D

Anything of value that is owned

True

Asset accounts normally have debit balances and revenue accounts normally have credit balances

Assets = Liabilities + Equity

Balance Sheet Equation

True

External users of financial statements include lenders, shareholders, customers, and regulators

E

Identify the statement below that is correct A. Accrued liabilities include accounts receivable B. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business C. When a future expense paid in advance, the payment is normally recorded in a liability account called Prepaid Expense D. Increases and decreases in cash are always recorded in the common stock account E. Promises of future payment by the customer are called accounts receivable

B

If a company is considering the purchase of a parcel of land that was originally acquired by the seller for $85,000, is offered for sale at $150,000 is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000 and is purchased for $137,000 the land should be recorded in the purchaser's books at: A. $140,000 B. $137,000 C. $95,000 D. $150,000 E. $138,500

C

K. Canopy, the stockholder of Canopy Services, Inc., The company paid $5,700 cash in dividends to the owner (sole stockholder). The entry to close the dividends account at the end of the year is: A. Debit Dividends $5,700; credit Retained Earnings $5,700 B. Debit Income Summary $5,700; credit Retained Earnings $5,700 C. Debit Retained Earnings $5,700; credit Dividends $5,700 D. Debit Dividends $5,700; credit Cash $5,700 E. Debit Retained Earnings $5,700; credit Salary Expense $5,700

Liability 2 C

Something you owe to someone else

D

Tara Westmont, the stockholder of Tiptoe Shoes, Inc., had annual revenues of $185,000, expenses of $103,700, and the company paid $18,000 cash in dividends to the owner (sole stockholder). The retained earnings account before closing had a balance of $297,000. The ending retained earnings balance after closing is: A. $378,300 B. $185,000 C. $63,300 D. $360,300 E. $81,300

D

The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is: A. Revenue Recognition Principle B. Going-Concern Assumption C. Time-Period Assumption D. Objectivity Principle E. Business Unity Assumption

A

The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the: A. FASB B. SEC C. APB D. AICPA E. AAA

C

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: A. Balance Column Account B. Nominal Account C. Income Summary Account (Only for closing) D. Contra Account E. Closing Account

D

The trial balance prepared after all closing entries have been journalized and posted is called the: A. General Legder B. Unadjusted trial Balance C. Adjusted Trial Balance D. Post-Closing Trial Balance E. Work Sheet

D

Unearned revenues are generally: A. Increases to stockholders equity B. Revenues that have been earned but not yet collected in cash C. Revenues that have been earned and received in cash D. Liabilities created when a customer pays in advance for products for services before the revenue is earned E. Recorded as an asset in the accounting records

Asset

Where do "Prepaid" accounts go?

Liability

Where do "Unearned" accounts go?

Equity 3 C

something that the owners have

Expense 6 D

the cost of goods or services used to operate a business