Acct 111 Exam 1

Stuart Allen Company manufactures computer hardware. The president of the company bought a new car as a gift for his daughter and paid for it using cash from the business. Since the company paid for the car, it was recorded in its books as an asset. Which of the following concepts or principles of accounting did the company violate?

Business entity assumption.

Which of the following accounts may appear on a post-closing trial balance? A. Cash, Service Revenue, and Salaries Expense B. Cash, Salaries Payable, and Salaries Expense C. Cash, Salaries Payable, and Owner, Capital D. Cash, Salaries Payable, and Service Revenue

C. Cash, Salaries Payable, and Owner, Capital

Under which of the following categories would Accounts Payable appear? A. Long−term assets B. Long−term liabilities C. Current liabilities D. Current assets

C. Current liabilities

Adjusting entries are needed to correctly measure the ________. A. net income (loss) on the balance sheet B. ending balance in the Cash account C. net income (loss) on the income statement D. beginning balance in the Cash account

C. net income (loss) on the income statement

An account that is not closed at the end of the period is called a(n) ________. A. temporary account B. revenue account C. permanent account D. expense account

C. permanent account

Which of the following are temporary accounts that are closed at the end of the year? A. revenues, expenses, and owner's equity B. assets, liabilities, and Owner, Withdrawals C. revenues, expenses, and Owner, Withdrawals D. assets, liabilities, and owner's equity

C. revenues, expenses, and Owner, Withdrawals

Which of the following assumes that the financial statements of a business can be prepared for specific periods? A. matching principle B. revenue recognition principle C. time period concept D. adjusting entry principle

C. time period concept

Generally Accepted Accounting Principles (GAAP) are currently formulated by the

Financial Accounting Standards Board (FASB).

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?

Financial accounting standards board

Balance sheet reports:

Financial position on a specific date

GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to________.

Generally Accepted Accounting Principles

Which type of business organization is owned by only one owner

Sole propiership

The earnings of a sole proprietorship are ________

combined with the personal income of the proprietor

according to the ________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

cost principle

As per the ________, the entity will remain in operation for the foreseeable future.

going concern assumption

Lawton Company records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent?

monetary unit consumption

A debt that a business owes is called ________.

A liability

Which of the following is true of accrual basis accounting and cash basis accounting? A. Accrual accounting records revenue only when it is earned. B. Accrual accounting is not allowed under GAAP. C. Cash basis accounting records all transactions. D. All of the above are true.

A. Accrual accounting records revenue only when it is earned.

Which of the following accounts is not closed? A. Accumulated Depreciation B. Owner, Withdrawals C. Service Revenue D. Depreciation Expense

A. Accumulated Depreciation

A listing of all accounts in numerical order is called a(n) ________. A. Chart of accounts B. Income statement C. Journal D. Ledger

A. Chart of accts

Under which of the following categories would Accounts Receivable appear? A. Current assets B. Long−term liabilities C. Long−term assets D. Current liabilities

A. Current assets

The detailed record of the changes in a particular asset, liability, or owner's equity is called

An account

Notes Payable due within two years are classified as ________. A. current assets B. long−term liabilities C. current liabilities D. long−term assets

B. long−term liabilities

Which of the following statements, regarding International Financial Reporting Standards (IFRS), is correct?

A. International Financial Reporting Standards represent a set of global accounting standards that are generally more specific and based less on principle than U.S. Generally Accepted Accounting Principles. B. The Securities and Exchange Commission is the private organization that oversees the creation and governance of International Financial Reporting Standards. C. International Financial Reporting Standards are issued by the Financial Accounting Standards Board .(D). Companies who are incorporated in or do significant business in another country might be required to publish financial statements using International Financial Reporting Standards.

Which sequence correctly summarizes the accounting process? A. Journalize transactions, prepare a trial balance, post to the accounts B. Journalize transactions, post to the accounts, prepare a trial balance C. Post to the accounts, journalize transactions, prepare a trial balance D. Prepare a trial balance, journalize transactions, post to the accounts

A. Journalize transactions, prepare a trial balance, post to the accounts (B.) Journalize transactions, post to the accounts, prepare a trial balance C. Post to the accounts, journalize transactions, prepare a trial balance D. Prepare a trial balance, journalize transactions, post to the accounts

Which of the following is the record holding all the accounts, the changes in those accounts, and their balances? A. Ledger B. Journal C. Source document D. Trial balance

A. Ledger

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle. A. matching B. comparison C. revenue recognition D. accrual

A. Matching

Which of the following statements is correct? A. Rent Expense is increased with a credit. B. Unearned Revenue is increased with a debit. C. Accounts Payable is increased with a credit. D. Prepaid Expenses are decreased with a debit

A. Rent Expense is increased with a credit. B. Unearned Revenue is increased with a debit. (C). Accounts Payable is increased with a credit. D. Prepaid Expenses are decreased with a debit

A balance sheet that lists the assets above the liabilities and owner's equity sections in a vertical format is a(n) ________ balance sheet. A. report form B. audited form C. account form D. unclassified form

A. Report firm

Which of the following accounts is a liability: A. Service Revenue B. Unearned Revenue C. Accounts Receivable D. Prepaid Rent Expense

A. Service Revenue (B.) Unearned Revenue C. Accounts Receivable D. Prepaid Rent Expense

An expense that has been incurred but not yet paid is called a(n) ________. A. accrued expense B. accrued revenue C. deferred revenue D. deferred expense

A. accrued expense

The revenue recognition principle requires A. revenue to be recorded only after the business has satisfied its performance obligation. B. revenue to be recorded only after the cash is received. C. time to be divided into annual periods to measure revenue properly. D. expenses to be matched with revenue of the period.

A. revenue to be recorded only after the business has satisfied its performance obligation.

A customer's promise to pay in the future for services or goods sold is called a(n) ________. A. Unearned Revenue B. Accounts Receivable C. Accounts Payable D. Notes Payable

B accts recievable

Which of the following statements is true of accrual basis accounting? A. Accrual basis accounting records expenses only when cash has been paid for them. B. Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP). C. Accrual basis accounting always results in greater net income than cash basis accounting. D. Accrual basis accounting records revenue only when cash is received.

B. Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP).

Which of the following accounts decreases with a credit? A. Unearned Revenue B. Cash C. Accounts Payable D. Owner, Capital

B. Cash

To which of the following accounts should the balance in the Income Summary account be closed? A. Service Revenue B. Owner, Capital C. Net Income D. Owner, Withdrawals

B. Owner, capital

Which of the following accounts will be closed by crediting the Income Summary account? A. Depreciation Expense B. Service Revenue C. Accounts Payable D. Accumulated Depreciation

B. Service Revenue

The matching principle states that ________. A. companies should record revenue when it has been earned B. all expenses should be recorded when they are incurred during the period C. financial statements can be prepared for specific periods D. a business's activities can be sliced into small time segments

B. all expenses should be recorded when they are incurred during the period

Which of the following statements is true of expenses? A. Expenses increase equity, so an expense account's normal balance is a debit balance. B. Expenses increase equity, so an expense account's normal balance is a credit balance. C. Expenses decrease equity, so an expense account's normal balance is a debit balance. D. Expenses decrease equity, so an expense account's normal balance is a credit balance.

C. Expenses decrease equity, so an expense account's normal balance is a debit balance.

The net income of Hendley Company for the year is $25,000. Withdrawals during the year were $30,000. No new capital contributions were made during the year. Which of the following statements is true? A. Hendley, Capital account decreases by $25,000. B. Hendley, Capital will remain the same. C. Hendley, Capital account decreases by $5,000. D. Hendley, Capital account increases by $30,000 * 25,000 - 35,000 = 5,000 decrease

C. Hendley, Capital account decreases by $5,000.

Which of the following accounts has an ending balance equal to net income immediately before it is closed? A. Owner, Withdrawals B. Net Income C. Income Summary D. Owner, Capital

C. Income Summary

Which of the following is an example of a deferral (or prepaid) adjusting entry? A. Recording revenue that has been earned but not yet received. B. Recording salaries expense for employees not yet paid. C. Recording the usage of office supplies during the period. D. Recording interest expense incurred on a notes payable not due until next year.

C. Recording the usage of office supplies during the period.

Property, plant, and equipment are ________. A. either tangible or intangible assets B. presented in order of the category name, with Land being presented last C. also called fixed or plant assets D. easily converted to cash

C. also called fixed or plant assets

62. The entries that transfer the revenue, expense, and Owner, Withdrawals balances to the Owner, Capital account to prepare the company's books for the next period are called ________ entries. A. opening B. end of period C. closing D. adjusting

C. closing

Which of the following accounting elements does the matching principle help to match? A. revenues and liabilities B. expenses and liabilities C. expenses and revenues D. expenses and assets

C. expenses and revenues

What do closing entries accomplish? A. Brings the Owner, Capital account to its correct ending balance B. Transfer revenues, expenses, and Owner, Withdrawals to the Owner, Capital account C. Zero out the revenues, expenses, and Owner, Withdrawals D. All of the above

D. All of the above

A shortened form of the ledger is called a ________. A. summary account B. chart of accounts C. working account D. T−account

D. T-acct

A & D Window Cleaning performed $450 of services but has not yet billed customers for the month. If A & D fails to record the adjusting entry, what is the impact on the financial statements? A. balance sheet: assets understated; equity overstated income statement: expense understated B. balance sheet: liabilities overstated; equity understated income statement: revenues understated C. balance sheet: assets overstated, equity understated income statement: expenses understated D. balance sheet: assets understated, equity understated income statement: revenues understated

D. balance sheet: assets understated, equity understated income statement: revenues understated

The owner's claim to the assets of the business is called ________.

Equity

Which of the following requires accounting information to be complete, neutral, and free from material error?

Faithful representation concept

Assume that Global Cleaning Service performed cleaning services for a department store on account/ for credit of $180. How would this transaction affect Global Cleaning Service's accounting equation?

Increase both assets and equity by $180

1. Accounting is the information system that:

Processes info into reports, measures business activities, communicates results to decision makers