ACCT 200 Test 1

Journal

A tabular record in which business transactions are analyzed in debit and credit terms and recorded in chronological order

Partnership

A voluntary association of two or more persons for the purpose of conducting business

Which one of the following is not an internal user of financial information? Select one: A. Creditors B. The Marketing Department C. Senior company management D. The Finance Department

A. Creditors

Principal

AS it relates to debt financing, the amount is initially borrowed from the creditor

debt financing

A source of financing for a company involving the use of debit, such as a bank loan or the issuance of bonds

Deferrals

Adjustments that allocate various assets and revenues received in advance to the proper accounting periods as expenses and revenues

Sales returns and allowances

an account used by a seller to record either the return of merchandise by a buyer or an allowance given to the buyer in lieu of a return

Which of the four basic financial statements would contain a line item for expenses? Select one: A. Statement of cash flows B. Income statement C. Balance sheet D. Statement of retained earnings

B. Income statement

Which of the following is an example of a liability? Select one: A. Supplies B. Accounts receivable C. Wages owed to employees for work already performed D. Prepaid advertising E. None of the above

C. Wages owed to employees for work already performed

Calendar Year

Calendar year. A fiscal year that ends on December 31

Which of the following is not an example of a closing entry? 1.) Close each expense account to the Retained Earnings account 2.)Close each revenue account to the Retained Earnings account 3.) Close the Unearned Revenue account to the Retained Earnings account 4.) Close the Dividends account to the Retained Earnings account

Close the Unearned Revenue account to the Retained Earnings account

Which of the following increases stockholders' equity? Select one: A. Receiving payment in advance from a client for service to be performed in the future B. Purchasing supplies for cash C. Collecting an amount owed by a client on account D. Providing services to clients with payment received immediately

D. Providing services to clients with payment received immediately

Adjusting Entries

Entries made at the end of an accounting period under accrual accounting to ensure the proper matching of expenses incurred with revenues earned for the period

The three types of business activities undertaken by all enterprises are: Select one: 1.) Financing, investing, and operating 2.) Sales, servicing, and delivery 3.)Purchasing, receiving and selling 4.) Manufacturing, marketing, and sales

Financing, investing, and operating

Net sales less cost of goods sold equals: Select one: A. Gross profit B. Net profit margin C. Gross profit percentage D. Net income

Gross Profit

Temporary accounts: 1.) Include accounts on both the balance sheet and the income statement 2.) Have balances that are transferred to a permanent stockholders' equity account at the end of the accounting period 3.)Have balances that are carried forward to the next accounting period 4.) None of the above

Have balances that are transferred to a permanent stockholders' equity account at the end of the accounting period

Cash collected on accounts receivable would produce what effect on the balance sheet? A. Increase liabilities and decrease equity B. Decrease liabilities and increase equity C. Decrease assets and decrease liabilities D. Increase assets and decrease assets

Increase assets and decrease assets

Which statement is true of the statement of stockholders' equity? Select one: A. It reports a company's cash flows from operating activities, investing activities, and financing activities. B. It reports a company's revenue and expenses for a period. C. It shows a company's stock issuances and dividends paid to shareholders. D. It reports a company's assets, liabilities, and equities.

It shows a company's stock issuances and dividends paid to shareholders.

Current Liabilities

Liabilities that must be settled within the normal operating cycle or one year

Assets are recorded in the balance sheet in order of: A. Liquidity B. Market value C. Maturity D. Historic value

Liquidity

Accrued Revenue

Revenue earned but not yet billed or received; recognized with an adjusting entry

Fiscal Year

The annual accounting period used by a business

Financial accounting

The area of accounting dealing with the preparation of financial statements showing a business's results of operations, financial position and cash flow

Normal Operating Cycle

The average period of time between the use of cash to buy goods for resale or to provide services and the subsequent collection of cash from customers

Ratio Analysis

The process of expressing the relationship of one accounting number to another accounting number through the process of division

Return on Sales (ROS) Ratio (profit margin)

The ratio of net income divided by net sales, representing the net profit earned on each dollar of net sales

Normal Balance

The side on which increases to the account are recorded

Net Sales

The total revenue generated by a company through merchandise sales less the revenue given up through sales returns and allowances and less the revenue given up through sales discounts

If a company paid off $200,000 of its accounts payable, the effect of this transaction as reflected in the accounting equation are: Select one: A. Total assets decrease and total liabilities increase B. Total assets and total liabilities decrease C. Total assets and total liabilities increase D. Total assets, total liabilities and stockholders' equity are all unchanged

Total assets and total liabilities decrease

The accounting equation requires that: 1.)Total assets equal total noncurrent liabilities plus stockholders' equity 2.)Stockholders' equity equal total liabilities minus total assets 3.)Total assets equal total liabilities plus stockholders' equity 4.) Current assets equal current liabilities plus stockholders' equity

Total assets equal total liabilities plus stockholders' equity

Which one of the following is not a current liability? Select one: A. Wage expense B. Wages payable C. Taxes payable D. Accounts payable

Wage Expense

unearned revenue

a liability representing revenues received in advance; also called deferred revenue

Chart of accounts

a list of all the general ledger account titles and their numerical code

Accruals

adjustments that reflect revenues earned but not received or recorded and expenses incurred but not paid or recorded

sales discounts

an account used by a seller to record cash discounts taken by a buyer when payment is made during the allowed discount period

Multi-step income statement (classified income statement)

an income statement in which items are classified into subgroups to facilitate financial analysis and management decision making. buildings. equipment, vehicles, furniture and fixtures that a firm uses in its operations; often referred to as PP & E

International Financial Reporting standards (IFRS)

an international set of accounting standards

Current Assets

cash of other assets that will be converted into cash or consumed within one year.

Long-Term Liabilities (Noncurrent liabilities)

debt obligations not due to be repaid within the normal operating cycle or one year. Whichever is longer

Adjusting journal entries

entries made in the general journal to record revenues that have been earned but not recorded and expenses that have been incurred but not recorded.

statement of stockholders' equity

is a financial statement that shows how and why each equity account in the company's balance sheet changed from one year to the next.

Jerry's Window Service received $14,000 from a client on February 20. This payment was an advance payment for 7 months of window cleaning starting March 1. The window cleaning services are provided equally over the 7 months. At May 31, calculate the balance in the unearned revenue account assuming that all adjusting entries have been properly recorded. Select one: 1.) $14,000 2.) $ 8,000 3.) $ 6,000 4.) $10,000

$ 8,000 ($14,000/7 months) x 4 months

Mountain Company has Beginning retained earnings of $450,000, earns a net income of $112,500, and has an Ending retained earnings balance of $552,000 during the period. The amount which Mountain paid in dividends must have been: Select one: A. $112,500 B. $10,500 C. $6,000 D. $102,000

$10,500

On December 1, Optima Corp. paid $6,000 for rent expense covering December, January and February rent. On December 31, after all adjusting entries, Optima Inc. will report Prepaid Rent of: Select one: 1.) $6,000 2.) $0 3.) $4,000 4.) $2,000

$4,000

Beginning and ending Cash account balances of Crossbow, Inc. were $19,000 and $8,000, respectively. If total cash received during the period was $37,000, what amount of cash was paid out during the period? Select one: A. $30,000 B. $48,000 C. $53,000 D. $46,000

$48,000

The Williams Model Aircraft Repair Shop started the year with total assets of $180,000, total liabilities of $120,000, and retained earnings of $54,000. During the year, the business recorded $300,000 in repair revenues, $210,000 in expenses, and the company paid dividends of $45,000.The net income reported by The Williams Model Aircraft Repair Shop for the year was: A. $ 90,000 B. $540,000 C. $120,000 D. $150,000 E. None of the above

$90,000

A company has net income of $5,000, current assets of $10,000, total assets of $40,000, and current liabilities of $8,000. What is the company's current ratio? 1.) 1.25 2.) 0.125 3.) 0.500 4.) 0.625

1.25

A company has current liabilities of $5,000, long-term liabilities of $10,000, and stockholders' equity of $15,000. What is the company's debt-to-total assets ratio? 1.) 33.3 percent 2.) 50.0 percent 3.) 100 percent 4.) 75.0 percent

50.0 percent ($5,000 + $10,000)/($5,000 + $10,000 + $15,000)

Classified Balance Sheet

A balance sheet in which items are classified into subgroups to facilitate financial analysis and management decision making

Forensic Accounting

A branch of accounting that involves investigations that result from actual or anticipated disputes such as criminal activity

A journal entry that contains more than just two accounts is called? Select one: 1.)A compound journal entry 2.)A complex journal entry 3.)An adjusting journal entry 4.) A closing journal entry

A compound journal entry

Accounting Transaction

An economic event that requires accounting recognition; an event that affects any of the elements of the accounting equation. Assets, liabilities or stockholder's equity

Sole Proprietorship

A form of business organization in which one person owns the business

Account Form

A format of the classified balance sheet in which assets are displayed on the left side and liabilities and stockholders' equity are displayed on the right side

General Ledger

A grouping of all a business's accounts that are used to prepare the basic financial statements

Posting

A grouping of all a business's accounts that are used to prepare the basic financial statements

compound journal entry

A journal entry containing more than one debit and one credit

Corportation

A legal entity created under the laws of a state or the federal government. The owners of a corporation receive shares of stock as evidence of their ownership in the company

Deferred Revenue

A liability representing revenues received in advance; also called unearned revenue

Unearned Revenue

A liability representing revenues received in advanced. Also called deferred revenue

Trial Balance

A list of the account titles in the general ledger, their respective debit o credit balances, and the totals of the debit and credit balances

Return on assets (ROA)

A measure of profitability; defined as net income divided by average total assets (or period-end assets)

Trend Analysis

A process in which an analyst or investor compares companies results

Certified Public Accountants

A professional designation give not an accountant who has fulfilled stringiest licensing requirements

account

A record of the additions, deductions and balances of individual assets, liabilities, stockholder's equity, dividends, revenues and expenses

Accounting cycle

A sequence of activities undertaken by company accountants to accumulate and report the financial information of a business

Posting Reference

A series of abbreviations used in posting to indicate to where or from where a journal entry is posted

Generally Accepted Accounting Principles (GAAP)

A set of standards and procedures that guide the preparation of financial statements

Single- Step income statement

a simple format of the income statement where net income is computed in a single step; subtracting total expenses from total revenue

T account

An abbreviated form of the formal account in the shape of a T

General Journal

An accounting record with enough flexibility so that any type of business transaction may be recorded in it; a diary of a business's accounting transactions

Intangible Assets

An asset lacking a physical presence; examples of intangible assets include patents

Debit

An entry on the left side( or in the debit column) of an account

credit

An entry on the right side (or in the credit column) of an account

Accrued Expense

An expense incurred but not yet paid; recognized with an adjusting entry

Creditors

An individual or financial institution that lends money or services to a company with the exception of receiving repayment in the future

Worksheet

An informal accounting document used to facilitate the preparation of financial statements

Journal Entry

Any written document or computer record evidencing an accounting transaction, such as a bank check, deposit slip, sales invoice or cash register tape

equity financing

a source of financing for a company involving the sale of shares of common stock

benchmarking analysis

a technique where the analyst or investor compares a firms performance

temporary accounts

First, revenue, expense, and dividend accounts, meaning that they accumulate balances only for the current period.

An accrual of wages expense would produce what effect on the balance sheet? A. Increase assets and increase liabilities B. Increase liabilities and decrease equity C. Decrease liabilities and increase equity D. Decrease assets and decrease liabilities

Increase liabilities and decrease equity

Which of the following is not reported on a classified balance sheet? 1.) Current Assets 2.) Stockholder's Equity 3.) Net Income 4.) Long-Term Liabilities

Net income

Which of the following represents a key financial statement linkage? 1.) The income statement links the beginning and ending increase in cash. 2.)None of these represents a key financial statement linkage. 3.)The balance sheet links the beginning and ending net income in thestatement of cash flows. 4.)The statement of cash flows links the beginning and ending retained earningsin the statement of retained earnings.

None of these represents a key financial statement linkage.

Which of the following is not a category for classifying cash flows in a statement of cash flows? Select one: A. Nonoperating activities B. Financing activities C. Investing activities D. Operating activities

Nonoperating activities

Smith & Sons purchased supplies on account. This transaction will affect: Select one: 1.) Only the balance sheet 2.) Only the income statement 3.) Both the balance sheet and the income statement 4.)Only the statement of stockholders' equity

Only the balance sheet

The expense recognition (matching) principle is best described as: Select one: 1.) The notion that the company will operate in the future 2.)Record an expense in the same time period that the corresponding revenue is recorded 3.) When in doubt, understate assets and sales revenue and overstate liabilitiesand expenses 4.)Recording only those items on the financial statements that can be expressedin monetary terms

Record an expense in the same time period that the corresponding revenue is recorded

Didwania Company had a transaction that caused a $40,000 decrease in both assets and liabilities. This transaction could have been a(n): Select one: A. Purchase of office equipment for $40,000 cash B. Purchase of office equipment for $54,000, paying $14,000 cash and issuing a note payable for the balance C. Investment of $40,000 cash in the business by the stockholders D. Repayment of a $40,000 bank loan

Repayment of a $40,000 bank loan

Which of the following activities is an example of an operating activity? Select one: A. Selling merchandise online B. Issuing shares of stock in exchange for cash C. Receiving a loan from a bank D. Purchasing a delivery truck

Selling merchandise online

Closing entries are: A. Required to bring all temporary accounts to a zero balance prior to starting a new accounting cycle B. Required to bring all permanent accounts to a zero balance at the end of the accounting period C. Generally taken from the financial statements rather than from the work sheet or the accounts themselves D. Not required to be posted

Required to bring all temporary accounts to a zero balance prior to starting a new accounting cycle

Earning Quality

The degree to which reported financial results reflect the actual financial condition and performance of the reporting company

Book Value

The dollar amount carried in the accounts for a particular asset. The book value of a depreciable asset is derived by deducting the contra account accumulated depreciation from the balance in the depreciable asset account

Adjusted Trial Balance

a list of general ledger accounts and their balanced prepared after all adjustments have been made

Solvency

a measure of a company's ability to repay its debts in the long term

Current ratio

a measure of a firms liquidity

Debt-to-total assets ratio

a measure of a firms solvency

double entry accounting

a method of accounting that results in the recording of equal amounts of debits and credits

Closing entries

made in the journal and posted to the ledger, eliminate the balances in all temporary accounts and transfer those balances to the Retained Earnings account.

accrual basis of accounting

records revenues when they are earned and records expenses when they are incurred.

Managerial accounting

the accounting activities carried out by a firms accounting staff primarily to provide management with accounting data for decisions related to a firm's operations

Gross Profit (Gross margin)

the difference between net sales and cost of goods sold; also called gross margin

Depreciation

the process of allocating the cost of buildings, equipment and vehicles to expense over the time periods benefiting from their use

closing process

the process of transferring all revenue, expense, and dividend account balances to the Retained Earnings account.