Accounting test one
proprietorship
A _____________ is a business entity owned by one person
decreasing Accounts Receivable, $400. increasing Cash, $400.
A customer of Landen Consulting Company makes a $400 payment of cash on a bill for services provided last month. Record this transaction into the accounting equation of Landen Consulting by:
external
A(n) _______ user of accounting information does not directly run the organization
Receivable Revenue
ABC Co. performs $200 of services for a customer, but does not get paid right away. Demonstrate how ABC Co. would record this transaction in the accounting equation by completing the following sentence. ABC Co. would increase the accounts _____________ account and increase the _________ account in the accounting equation.
objectives elements recognition and measurements qualitative characteristics
All of the following are part of the FASB conceptual framework:
Pressure
An employee that has unpaid bills might exhibit the following fraud factor:
Matching Principle
Another name for the expense recognition principle is:
resources controlled by the business resources with expected future benefits an amount owned
Asset:
4.5% 5,000,000 / 110,000,000
Boaz Company had beginning of year assets of $100 million and end of year assets of $120 million. Boaz's net income is $5 million. Calculate Boaz Company's return on assets.
Payable Cash
Bob's Bakery is making a partial payment of $70 for baking supplies it purchased in a previous month. Record this transaction in the accounting equation of Bob's Bakery by decreasing the Accounts __________ account and decreasing the ________ account.
A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction.
Choose the statement below that correctly explains a general journal..
Income statement Statement of retained earnings Balance sheet Statement of Cash flows
Describe the order in which a company prepares financial statements
True
Dividends are resources paid to the stockholders
cash increasing
Dividends of $60 cash are paid to the corporation's stockholders. You would record this transaction in the accounting equation by decreasing the _____ account and ________ the dividends account
decreasing Cash, $200. decreasing Accounts Payable, $200.
During September, Sally's Hair Salon purchased $900 of supplies on account. In October, Sally's wants to make a payment of $200 on this bill. Record the October transaction into Sally's accounting equation by:
asset left increased
Equipment is an ______ account. It is reported on the ______ side of the accounting equation and is _______ when equipment is purchased.
Equity refers to the claims of the owners on the assets of a business.
Equity:
beliefs that distinguish right from wrong accepted standards of good and bad behavior
Ethics are defined as:
A company's obligation to provide assets, products or services to others.
From the following statements, identify the correct definition of a liability
A company's obligation to provide assets, products, or serves to others
From the following statements, identify the correct definition of a liability
wages payable accounts payable notes payable taxes payable
Given the following list of accounts, identify which are classified as liabilities.
Cash, building, supplies, accounts receivable
Given the following lists of accounts, choose the one that contains only assets
Equipment Retained Earnings, 12/31 Accounts payable Cash Supplies
Given the list of accounts below, identify which of them would appear on a balance sheet.
Stock issuances
Given the statements below, choose the most accurate definition of owner investments.
an asset is something of value that a business owns or controls
Identify the correct definition of an asset
Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses
Identify the expanded accounting equation from the options below.
retained earnings and dividends
Identify which of the following lists of accounts would belong on the statement of retained earnings.
increasing Cash and decreasing Accounts Receivable
If a customer makes a partial payment of $100 on a service for which you have already billed him, you would record this transaction into the accounting equation by:
decreasing cash; increasing equipment
Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:
increasing cash; increasing revenues
Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:
Equity will be decreased Salaries expense will be increased
Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation?
Rent Expense will be increased
Melton's Door Company pays rent on the building facilities of $5,000 on May 1. Show how to record this transaction in the accounting equation of Melton's Door Company.
Revenues - Expenses = Net income
Net income is calculated using the following formula:
asset
Notes receivable is considered a(n) _______
On 6/25, supplies costing $1,000 were purchased, but only $400 of this amount was paid on 6/25. The remainder of the bill went on account. To record this transaction on 6/25: Supplies would be increased by $*1,000*; Cash would be decreased by $*400* and Accounts Payable would be increased by $*600*
On 6/25, supplies costing $1,000 were purchased, but only $400 of this amount was paid on 6/25. The remainder of the bill went on account. To record this transaction on 6/25: Supplies would be increased by $________; Cash would be decreased by $________ and Accounts Payable would be increased by $__________.
increasing Supplies, and increasing Accounts Payable
On 8/1, supplies costing $500 were purchased on credit. Record this transaction in the accounting equation by:
increasing Accounts Receivable and increasing Revenue
On May 1, Mary's Morsels Company provided catering services at a wedding. The bride is billed $4,000 and will pay during the following month. Record this transaction on May 1 in the accounting equation of Mary's Morsels by:
Identify ethical concerns Analyze options Make ethical decision
Place the following ethical decision making steps in the correct order
increase right
Revenues cause equity to _______ and they are increased on the ______ side of the T account.
Increasing cash; increasing common stock
Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by:
Cash
Select the account that would be decreased if Hillary's Hair Salon decides to pay $40 cash dividends to its shareholders.
Total dollar amount of debits must equal the total dollar amount of credits. Credited accounts should be indented. Leave one blank line between each completed journal entry.
Select the statements below that are correct in regards to entering transactions in a journal.
Decrease cash; increase supplies
Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?
A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.
T-account:
measurement
The FASB conceptual framework consists of all of the following except:
measurement
The _____ principle states that accounting information is based on actual cost.
business entity
The accounting assumption related to separating business transactions from the owner's transactions is called the:
time period
The accounting assumption that presumes the life of a company can be divided into time periods is called the:
going-concern
The accounting assumption which presumes that a business will continue operating is called the:
liability
The accounts payable is a _______ account
assets, liabilities and the ending retained earnings balance
The balance sheet reports:
Expenses would be increased, so equity is decreased.
The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business?
cost-benefit
The constraint that states that information disclosed by the entity must have benefits to the user which are greater than the costs of providing it is called:
The statement reports the financial position of a company at a point in time. The statement reports assets, liabilities and equity at a point in time. The statement reports the equality of the accounting equation at any point in time.
The correct definition of a balance sheet includes which of the following statements?
The statement describes a business's revenues and expenses over a period of time.
The correct definition of an income statement includes which of the following?
increase equity
The correct definition of revenues is: Revenues _______ _________ and are earned from the sale of products and services
Expenses decrease equity. Expenses are the costs of providing products and services to customers.
The definition of expenses includes which of the following statements?
Full Disclosure Principle
The principle that states that a company should report the details behind the financial statements which would impact users' decisions is called the
Expense Recognition Principle
The principle which states that a company should record expenses it incurred in the same period as the revenue it generated is known as the
goods or services are provided to customers
The revenue recognition principle states that revenue is recognized when:
dividends
The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time.
True
True or false: By definition, owner investments increase equity and are called stock issuances.
True
True or false: Dividends are resources paid to the stockholders
False Net Income divided by Average total assets
True or false: Return on assets is computed as Net Income divided by Total Assets.
internal and external
Users of accounting information can be divided into two main groups. These groups include:
the concepts and rules that govern financial accounting practice
What are generally accepted accounting principles
After recording the transaction, total assets will always equal total liabilities plus equity. The accounting equation must always remain in balance
When recording transactions into the accounting equation, which of the following statements are correct?
Common stock, equipment, accounts payable
Which list of accounts below, identifies only accounts that would appear on a balance sheet.
The unexpired portion of prepaid accounts are treated as assets. The expired portion of prepaid accounts is reported on the income statement as an expense. Over time, the expired portion of prepaid accounts is removed from the account and reported as an expense
Which of the following are accurate statements regarding how to report or treat prepaid accounts?
Prepaid insurance Prepaid rent
Which of the following are examples of prepaid (expense) accounts?
Assets = Liabilities + Equity
Which of the following correctly depicts the accounting equation?
balance sheet
Which of the following financial statements reports the financial position of a business at a point in time?
Coin money orders checks
Which of the following items would be considered "cash" and reflected in a company's Cash account?
prepaid rent, prepaid insurance
Which of the following lists of items contain only examples of prepaid (expense) accounts?
The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.
Which of the following statements below lists the rules of entering transactions into the accounting equation
Expenses cause equity to decrease
Which of the following statements describes the effect of expenses on equity?
The equation applies to all transactions. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation states that Assets = Liabilities + Equity. The relation of assets, liabilities and equity is reflected in the equation.
Which of the following statements explain(s) how the accounting equation applies to businesses?
A journal is used to record business transactions. In a journal, both the debit and credit side of the transaction can be seen. Transactions are generally entered in chronological order.
Which of the following statements is (are) correct regarding a journal?
Notes payable is a formal promise to pay a certain sum of money on a specified future date. Notes payable is a liability account Notes payable is reported on the balance sheet
Which of the following statements is (are) correct regarding the Notes payable account?
The report date includes a single calendar day. It reports the financial position at a point in time. It depicts the equality of the accounting equation.
Which of the following statements is (are) true regarding the balance sheet?
Owner investments cause equity to increase
Which of the following statements is correct regarding owner investments?
Revenues cause equity to increase
Which of the following statements is correct regarding revenues?
A creditor is an individual or organization that has a right to receive payments from a business
Which of the following statements is the correct definition of a creditor?
SEC
Which organization has the legal authority to create Generally Accepted Accounting Principles?
claims of the owner(s) on the assets of the business equity is equal to assets minus liabilities
Which statements below define equity?
Accounting records business transactions and communicates financial information
Why does a business need accounting information?
loans money or other resources to a business
a lender (creditor):
A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item
account:
a human resource manager a user who is directly involved in managing and operating an organization a marketing manager
an internal user of accounting information is:
A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.
building account:
It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account
chart of accounts
It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account
chart of accounts:
It is a collection of all accounts with their activity and balances that exist in a business
general ledger
It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred
journal
increase
owner investments cause a ________ in equity
footnotes to the statements
the details behind the financial statement are often disclosed in the
It is a list of each account and its balance at any given time and is used to verify that debits = credits
trial balance
an owner of a corporation
what is a shareholder?
a liability has been incurred the accounts payable account will be increased the business will pay for the supplies at a later time
when supplies are purchased on credit it means that:
What a business owns will always equal what it owes to creditors and owners.
which of the statements correctly represents the accounting equation?
