Accounting: Comprehensive Study Guide

False

A CMA is a Certified Marketing Auditor.

True

A T account has three parts: the title, the debit side, and the credit side.

A title, a debit side, and a credit side

A T account has which of the following three major parts?

True

A business that makes a product to sell is called a manufacturing business.

Manufacturing business

A business that makes products to sell.

Service business

A business that provides a service.

Merchandising business

A business that purchases a product from another business to sell to customers is called a:

Cash and Notes Payable

A cash payment on a loan affects which of the following accounts?

A professional manager

A corporation is usually managed by:

Is on the right side

A credit

True

A credit increases liabilities and owner's equity.

Entered on the left side

A debit is:

An asset

A debit represents an increase in:

Drawing, expense

A debit to either the ____________ account or a(n) ____________ account will cause a decrease in the owner's equity of a business.

False

A partnership is owned by stockholders or shareholders and is managed by them.

Internal auditor

A person who reviews the operating and accounting control procedures adopted by management to make sure the controls are adequate and are being followed may be referred to as a(n):

True

A public accountant can achieve professional recognition as a Certified Public Accountant by meeting certain educational and experience requirements as determined by each state.

Accounting

A system of gathering financial information about a business and reporting this information to users.

True

A trial balance is a list of all accounts showing the title and balance of each account.

Sole proprietorship

A type of ownership structure in which one person owns the business.

Corporation

A type of ownership structure in which there are many owners who usually employ professional managers.

Partnership

A(n) _________ is owned by two or more people who assume the risks for the business and who assets may be taken to pay creditors.

False

Accountants design accoutning information systems and analyze and interpret information.

Expenses, capital, and revenue

Accounts that affect owner's equity are:

True

An account is a form or record used to keep track of the increases of decreases in the individual assets, liabilities, owner's equity, revenues, and expenses of a business entity.

Debit

An asset account is increased with a ____________.

Advertising

An example of an expense is:

Increase in owner's equity

An increase in an asset account may be offset by a(n):

Increases the Cash

An investment of cash in a business by the owner

Debit balances

Asset and expense accounts normally have:

Summarizing

Bringing the various items of information together to determine a result.

Analyzing the cost effectiveness of products produced and services provided

Cost accountants provide a wide variety of services, including:

False

Cost accounting is used to develop a financial plan for a company.

Interpreting

Deciding the meaning and importance of the information in various reports.

Cost accounting

Determining the cost of producing specific products or providing services and analyzing for cost effectiveness.

Recording

Entering financial information about events affecting the company into the accounting system.

False

Equity accounts normally have debit balances.

Analyzing

Examining a transaction or event to determine its fundamental significance to the business so that the relevant information may be properly processed is called:

Wages

Examples of revenue accounts include all of the following EXCEPT:

True

Expense accounts normally have debit balances.

Increases Cash

Falana receives payment for services performed in the amount of $3,147. This transaction:

Tax accounting

Focusing on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and other governmental agencies.

Are unnecessary when there is only one entry

Footings in T accounts

Are used for accounts with more than one debit or credit

Footings in T accounts

Bookkeeper

Generally supervises the work of accounting clerks, helps with daily accounting work, and summarizes accounting information.

False

If services for the month total $3,300 in cash and $700 on account, the cash account increases $700.

False

If services for the month total $7,000 in cash and $1,500 on account, the revenue account increases $5,500.

Liability account

Increases are entered on the credit side of a(n):

True

Increases in owner's equity are entered as credits.

True

John received $350 for delivery services; this transaction increased Cash and revenue.

False

Liability accounts normally have debit balances.

Credit balances

Liability, owner's capital, and revenue accounts normally have:

False

Mandy withdraws $600 from her business. This transaction increases cash but decreases owner's equity.

Credit

Owner's equity is increased with a ____________.

An expense

Payment of a telephone bill represents an increase in:

Cash

Payment of office rent represents a decrease in:

False

Payment of rent on account decreases the Cash account.

Marketing analysis

Public accountants do NOT offer which of the following services?

False

Revenues decrease owner's equity.

Increase owner's equity

Revenues:

Auditing

Reviewing and testing to be certain that proper accounting policies and practices have been followed.

Internal auditing

Reviewing the operating and accounting control procedures adopted by management to make sure the controls are adequate and being followed; assuring that accurate and timely information is provided.

False

Scooby Doo made a purchase on account of Scooby paper to last for about three months; this transaction increased Supplies and decreased Accounts Payable.

False

Services on account increase a revenue account and increase the cash account.

The language of business

Since financial information is communicated in accounting terms and is the eyes and ears of management, accounting is said to be:

Classifying

Sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events.

Accounting clerk

Specializes in cash, payroll, accounts receivable, accounts payable, inventory, or purchases.

Reporting

Telling the results of the financial information.

True

The Financial Accounting Standards Board develops generally accepted accounting principles to provide some assurance that companies are reporting business activities in a similar manner.

Sorting and grouping similar items together

The accounting function of classifying is:

Debit

The accounts payable account is decreased with a ____________.

True

The balance of a T account is on the side with the larger footing.

Shows that assets equal liabilities plus owner's equity

The balance sheet

Increases when the owner invests money in the business

The capital account:

Balance

The difference between the total debits and credits to an account is called a:

Credit

The drawing account is decreased by entering a ____________.

Amount the owner has taken out of the business.

The drawing account should be used to show the:

Double-entry accounting

The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called:

False

The fact that each transaction has a ual effect on the accounting elements provides the basis for what is called complex-entry accounting.

Credit

The fees earned account is increased with a ____________.

A credit balance

The normal balance of a capital account is:

Credit

The owner's capital account is increased with a ____________.

True

The owner's capital account normally has a credit balance.

Share/stockholder

The owners of a corporation are called:

Debit

The prepaid insurance account is increased by entering a ____________.

False

The principal accounting officer of a company is called a public accountant.

Budgeting

The process in which accountants help managers develop a financial plan.

An increase in owner's equity

The purchase of an asset on account and making a partial payment results in all of the following EXCEPT

True

The purpose of accounting is to provide financial information about the current operations and financial conditions of a business to individuals and organizations.

Generally Accepted Accounting Principles (GAAP)

The rules that businesses must follow when preparing financial statements.

True

The six major steps of the accounting process are analyzing, recording, classifying, summarizing, reporting, and interpreting.

The current date

The standard T account includes all of the following EXCEPT

Shows the current date

The trial balance:

Debit

The wages expense account is increased with a ____________.

Debit

To place an amount on the left-hand side of the T account is to ____________ the account.

Footings

Totals on the debit and credit sides to determine the balance of an account are known as:

True

When debits equal credits for transaction, the accounting equation is in balance.

Proprietorships

Which of the following does NOT use nonprofit accounting guidelines and procedures?

False

Writing or using one of the latest technological advances to enter a transaction in the accounting records is called summarizing.

Financial accounting

________________________ includes preparing various reports and financial statements and analyzing operating, investing, and financing decisions.