ACCTING

from an accounting viewpoint, when is a business considered as an entity separate from its owners? a. a business is always considered as an accounting entity separate from the activities of the owners b. only when organized as a partnership c. only when organized as a corporation d. only when organized as a sole proprietorship

a. a business is always considered as an accounting entity separate from the activities of the owners

accumulated depreciation is: a. a contra-asset account b. a revenue account c. an asset account d. an expense account

a. a contra-asset account

adjusting entries: a. are needed whenever revenue transactions affect more than one period b. are generally made daily c. generally fall into one of two categories d. assign revenues to the period in which they are received

a. are needed whenever revenue transactions affect more than one period

the valuation of assets in the balance sheet is based primarily upon: a. cost, because cost is usually factual and verifiable b. cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost c. what it would cost to replace the assets d. current fair market value as established by independent appraisers

a. cost, because cost is usually factual and verifiable

the accounting cycle begins with: a. initial recording of business transactions b. formation of a business c. preparation of a trial balance d. posting of journal entries to ledger accounts

a. initial recording of business transactions

WHICH OF THE FOLLOWING DESCRIBES THE PROPER FORM OF A BALACNE SHEET? a. liabilities are listed before owners equity b. a subtotal for total assets plus total liabilities is shown c. owners equity is always the first section listed because it is the most important to external users d. cash is always the first asset listed, followed by permanent assets

a. liabilities are listed before owners equity

an expense is best defined as: a. past, present, or future payments of cash required to generate revenues b. future payments of cash required to generate revenues c. past payments of cash required to generate revenues d. any payment of cash for the benefit of the company

a. past, present, or future payments of cash required to generate revenues

revenues increase owners equity because: a. revenues increase net income, which increases retained earnings b. revenues are recorded by a debit c. the conservatism principle requires revenues by recognized with an increase to owners equity

a. revenues increase net income, which increases retained earnings

a transaction caused an increase in both assets and owners equity. this transaction could have been resulted from the: a. sale of services to a customer b. borrowing money from a bank c. sale of land for cash at a price equal to its cost d. sale of land for a price less than its cost

a. sale of services to a customer

which of the following accounts normally has a credit balance? a. service revenue b. accounts receivable c. utilities expense d. cash

a. service revenue

which of the following is correct when a corporation uses cash to pay for an expense? a. total assets will decrease b. liabilities will increase c. owners equity will increase d. retained earnings will increase

a. total assets will decrease

unearned revenue is: a. income b. a liability c. an expense d. an asset

b. a liability

the financial accounting standards board is: a. primarily concerned with the preparation of the annual federal budget b. a private group that conducts research and determines generally accepted accounting principles c. a government agency with legal authority to approve or disapprove the financial statements of corporations that sell their securities to the public d. responsible for the review and audit of federal income tax returns

b. a private group that conducts research and determines generally accepted accounting principles

the matching principle is best demonstrated by: a. offsetting the cash receipts of the period with the cash payments b. allocating the cost of an asset to expense over the periods during which benefits are derived from the asset c. the equation assets= liabilities + owners equity

b. allocating the cost of an asset to expense over the periods during which benefits are derived from the asset

on the statement of financial position, how are assets and liabilities normally presented? a. assets are presented in their order of permanence; liabilities are presented in the order in which they become due b. assets are presented in order of liquidity; liabilities are presented in order of profitability c. assets are presented in the order in which they become due; liabilities are presented in their order of permanence

b. assets are presented in order of liquidity; liabilities are presented in order of profitability

if during the current year, liabilities of Corbett's store increased by $220,000 and owners equity increased by $160,000 then: a. assets at the end of the year total $380,000 b. assets increased during the year by $380,000 c. assets decreased during the year by $60,000 d. assets at the end of the year total $60,000

b. assets increased during the year by $380,000

davis, inc. a music group entertained at a black tie dinner dance on April 26, and collected the fee in full at the end of the evening. this transaction: a. causes an increase in assets and a decrease in owners equity b. causes an increase in assets and revenue, as well as an increase in owners equity

b. causes an increase in assets and revenue, as well s an increase in owners equity

which of the following is not true regarding the general ledger account for cash? a. each debit entry in the cash account represents a cash receipt b. debit entries are made before credit entries c. the balance of the account indicates the amount of cash owned by the business on a particular date d. credit entries in the cash account represent cash payments

b. debit entries are made before credit entries

the purchase of equipment on credit is recorded by a: a. credit to equipment and a credit to accounts payable b. debit to equipment and a credit to accounts payable c. debit to equipment and a debit to accounts payable d. debit to accounts payable and a credit to equipment

b. debit to equipment and a credit to accounts payable

a strong statement of financial position shows: a. that profits are being generated by operations b. large amounts of liquid assets relative to the liabilities due in the near future c. that cash is being generated by operations

b. large amounts of liquid assets relative to the liabilities due in the near future

financial statements are prepared: a. only for publicly owned business organizations b. primarily for the benefit of persons outside of the business organization c. for corps, but not for sole proprietorships or partnerships

b. primarily for the benefit of persons outside of the business organization

the purpose of adjusting entries is to : a. correct errors made during the accounting period b. record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions c. update the owners equity account for the changes in owners equity that had been recorded in revenue and expense accounts d. prepare the revenue and expense accounts for recording the revenue and expenses of the next accounting period

b. record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions

master equipment has a $17,400 liability to arrow paint co. when master equipment makes a partial payment of $7,600 on this liability, which of the following occurs on masters books? a. the cash account is debited $7,600 b. the accounts payable account is debited $7,600 c. retained earnings are debited $9,800

b. the accounts payable account is debited $7,600

retained earnings is: a. equal to the total assets of a company b. the owners equity that has accumulated as a result of profitable operations c. the net worth of a company d. the positive cash flows of a company

b. the owners equity that has accumulated as a result of profitable operations

double entry accounting is characterized by which of the following? a. the number of debit entries posted to the general ledger equals the number of credit entries b. the total dollar amount of debit entries posted to the general ledger is equal to the dollar amount of credit entries c. the number of general ledger accounts with debit balances is equal to the number with credit balances

b. the total dollar amount of debit entries posted to the general ledger is equal to the dollar amount of the credit entries

the collection of an account receivable is recorded by a debit to cash and a credit to accounts payable. if this error is not corrected: a. owners equity is overstated b. total liabilities are overstated c. total liabilities are understated d. total assets are understated

b. total liabilities are overstated

adjusting entries are needed: a. whenever revenue is not received in cash b. whenever transactions affect the revenue or expenses of more than one accounting period c. only to correct errors in the initial recording of business transactions d. whenever expenses are not paid in cash

b. whenever transactions affect the revenue or expenses of more than one accounting period

if total assets equal $270,000 and total liabilities equal $202,500, the total owners equity must equal: a. $270,000 b. $472,500 c. $67,500 d. cannot be determined from the given info

c. $67,500

black systems sold and delivered modems to white computers for $330,000 to be paid by white in three equal installments over the next three months a. a debit to accounts receivable for $110,000 b. a debit to sales revenue for $330,000 c. a debit to accounts receivable for $330,000

c. a debit to accounts receivable for $330,000

decreases in owners equity are caused by: a. payment of liabilities and unprofitable operations b. purchases of assets and payment of liabilities c. distributions of assets to the owners and unprofitable operations d. purchases of assets and incurrence of liabilities

c. distributions of assets to the owners and unprofitable operations

which of the following statements concerning materiality is true? a. accountants should not waste time and money in recording transactions involving small dollar amounts b. each year the FASB publishes the dollar amount considered "material" for each industry c. immaterial items should be handled in the most expedient manner, even if resulting financial statements are not completely precise d. general accepted accounting principles are violated if estimates are used in end of period adjustments

c. immaterial items should be handled in the most expedient manner, even if resulting financial statements are not completely precise

the change in owners equity due to only revenue and expense transactions is explained by the: a. tax return b. statement of cash flows c. income statement d. statement of financial position

c. income statement

the adjusting entry to record interest that has accrued on a note payable to the bank will cause an immediate: a. decrease in liabilities and reduction in net income b. increase in asserts and increase in net income c. increase in liabilities and reduction in net income d. decrease in assets and reduction in net income

c. increase in liabilities and reduction in net income

the principle that states revenue should be recognized at the tie goods are sold or services rendered is called: a. adequate disclosure b. conservatism c. revenue recognition d. matching

c. revenue recognition

accumulated depreciation is: a. an expense on the income statement b. the remaining book value of an asset c. the depreciation expense recorded on an asset to date d. the depreciation expense taken on an asset during the current period

c. the depreciation expense recorded on an asset to date

which of the following is considered an adjusting entry? a. the entry to pay outstanding bills b. the entry to declare a dividend distribution c. the entry to record depreciation d. the entry to pay salaries

c. the entry to record depreciation

Clinton prepares monthly financial statements. which of the following violates the matching principle? a. expenses for the period exceed revenues b. a portion of the salary payments made this month are not recognized as expense because some of the work was done by employees last month c. the premium on a 6 month insurance policy is charged immediately to expense

c. the premium on a 6 month insurance policy is charged immediately to expense

if a company purchases equipment for $65,000 by issuing a note payable: a. total assets will remain the same b. total assets will decrease by $65,000 c. total assets will increase by $65,000

c. total assets will increase by $65,000

a trial balance consist of: a. two-column financial statement intended or distribution b. a two column schedule of all debit and credit entries posted c. a two column schedule showing the totals of all debits and of all credits d. a two column schedule listing names and balances of all ledger accounts

d. a two column schedule listing names and balances of all ledger accounts

in the phrase "generally accepted accounting principles," the words generally accepted mean that the principles: a. have been adopted by congress or approved by the voters in a general election b. are acceptable to the internal revenue service c. have been approved by a majority of the members of the financial accounting standard board d. are understood and observed by all participants in the financial reporting process

d. are understood and observed by all the participants in the financial reporting process

which of the following assets would most likely be listed last on a statement of financial position? a. equipment b. accounts rec. c. cash d. land

d. land

which of the following activities is not a category into which cash flows are classified? a. investing activities b. operating activities c. financing activities d. marketing activities

d. marketing activities

which of the following is not a step in the accounting cycle? a. prepare financial statements b. prepare an adjusted trial balance c. prepare a trial balance d. prepare a purchase order

d. prepare a purchase order

the journal entry to record a particular business transaction includes a credit to a liability account. this transaction is most likely also to include: a. a cash payment b. a credit to accounts receivable c. issuance of a new capital stock d. the purchase of an asset on account

d. the purchase of an asset on account

which of the following is not an objective of generally accepted accounting principles? a. to enhance the relevance and verifiability of information contained in financial statements b. to ensure that both preparers and users of financial statements understand the concepts and assumptions used in presenting info c. to increase the comparability of financial statements prepared by different companies d. to minimize the amount of income taxes owed

d. to minimize the amount of income taxes owed