Accounting Exam 1

Issuing shares of stocks in exchange for cash is an example of a(n)

Financing activity

All of the following are characteristics of accounting information except

Flexibility

The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the

Going concern assumption

A balance sheet shows

assets, liabilities, and stockholder's equity

Resources owned by a business are referred to as

Assets

Which of the following represents the expanded basic accounting equation?

Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues

An investment by the stockholders in a business increases

Assets and stockholders' equity

Which of the following correctly identifies normal balances of accounts

Assets: Debit Liabilities: Credit Common Stock: Credit Revenues: Credit Expenses: Debit

Which of the following is not a current liability?

Bonds payable

Which of the following statements is true?

Credits decreases assets and increases liabilities

Liabilities are generally classified on a balance sheet as

Current liabilities and long-term liabilities

Current assets divided by current liabilities is known as the

Current ratio

When a company receives a utility bill but will not pay it right away, it should

Debit Utilities Expense and credit Accounts Payable

When a company performs a service but has not yet received payment, it

Debits Accounts Receivable and credits Service Revenue

A company that receives money in advance of performing a service

Debits cash and credits unearned fees

Declaring a cash dividend will

Decrease retained earnings

The payment of a liability

Decreases assets and liabilities

Which of the following is not a principle type of business activity?

Delivering

A credit is not the normal balance for which account listed below?

Dividends account

A measure of profitability is the

Earnings per share

A current asset is

Expected to be converted to cash or used in the business within a relatively short period of time.

Generally accepted accounting principles

Are accounting rules that are recognized as a general guide for financial reporting

A journal provides

A chronological record of transactions

The usual sequence of steps in the recording process is to

Analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts

On a classified balance sheet, companies usually list current assets

In the order in which they are expected to be converted into cash

Which financial statement is prepared first?

Income statement

To show how successfully your business performed during a period of time you would report its revenues and expenses in the

Income statement.

Reporting a net income of $95,000 will

Increase retained earnings

Collection of a $600 Accounts Receivable

Increases an asset $600; decreases an asset $600

The purchase of an asset on credit

Increases assets and liabilities

A ledger:

Is a collection of the entire group of accounts maintained by a company

Relevant accounting information

Is information that is capable of making a difference in a business decision

Posting is performed by transferring information from the

Journal to the ledger

The purchase of an asset for cash

Leaves total assets unchanged

Debt and obligations of a business are referred to as

Liabilities

The relationship between current assets and current liabilities is important in evaluating a company's

Liquidity

An income statement shows

Revenues, expenses, and net income

Net income results when

Revenues>Expenses

A debit is not the normal balance for which account listed below?

Service Revenue

The normal balance of any account is the

Side which increases the account

Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX) of 2002?

The act calls for decreased independence of outside auditors reviewing corporate financial statements.

In recording an accounting transaction in a double-entry systen

The amount of debits must equal the amount of credits

The left side of an account is

The debit side

Which of the following is the most appropriate and modern definition of accounting?

The information system that identifies, records and communicates the economic events of an organization to interested users.

All of the following are advantages for choosing a proprietorship for a business except:

Transfer of ownership is easily achieved through stock sales