Exam 1

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) A business paid $2,500 on account. The journal entry would: A) debit Accounts Receivable for $2,500 and credit Revenue for $2,500. B) debit Accounts Payable for $2,500 and credit Cash for $2,500. C) debit Cash for $2,500 and credit Retained Earnings for $2,500. D) debit Cash for $2,500 and credit Accounts Payable for $2,500.

) A business paid $50,000 cash to purchase equipment. The business would: A) debit Equipment for $50,000 and credit Accounts Payable for $50,000. B) debit Equipment for $50,000 and credit Cash for $50,000. C) debit Cash for $50,000 and credit Notes Payable for $50,000. D) debit Accounts Payable for $50,000 and credit Cash for $50,000.

) A company borrowed $15,000 from the bank by signing a long-term note. How does this transaction affect the accounting equation? A) Add $15,000 to Cash and add $15,000 to Accounts Payable. B) Add $15,000 to Cash and add $15,000 to Notes Payable. C) Add $15,000 to Cash and add $15,000 to Retained Earnings. D) Add $15,000 to Accounts Receivable and add $15,000 to Accounts Payable.

) A company had credit sales of $40,000 and cash sales of $14,000 during the month of May. Also during May, the company paid wages of $13,000 and utilities of $2,800. It also received payments from customers on account totaling $8,000. At the beginning of May, the company had a cash balance of $25,000. What is the company's cash balance at the end of May? A) $23,200 B) $31,200 C) $39,000 D) $47,000

) A company has a policy that all checks over $5,000 need to have the signature of the owner in addition to the signature of the bookkeeper. This is an example of: A) limited access. B) proper approvals. C) adequate records. D) encryption.

) A company purchased supplies during the year totaling $21,000. At the end of the year, they made an adjusting entry to record $16,000 of supplies that had been used during the year. The ending balance in the Supplies account after the adjustment was $12,000. The beginning balance in the Supplies account was: A) $5,000. B) $7,000. C) $9,000. D) $12,000.

) A company's interest expense for the period is reported on the: A) balance sheet. B) income statement. C) statement of cash flows. D) statement of retained earnings.

) A fidelity bond is a(n): A) employment contract for a specified period of time. B) insurance policy that reimburses a company for any losses due to employee theft. C) contract prohibiting former employees from working for a competitor. D) promise by a company to safeguard customers' personal information.

) A measure of a company's ability to pay current liabilities with current assets is the: A) liability ratio. B) current ratio. C) debt ratio. D) asset ratio.

) A potential investor, interested in predicting the earnings of a company in the future, should examine the: A) Balance Sheet only. B) Income Statement only. C) Statement of Retained Earnings. D) Statement of Retained Earnings and Balance Sheet.

) After approving an invoice for payment: A) the receiving department should examine the payment packet to make sure all the documents agree. B) payment is made and the payment packet should then be stamped "paid" by the person in the treasurer's department who has authorized the disbursement. C) checks should be returned to and then mailed by the department who prepared them. D) the person who ordered the goods should examine the payment package to make sure all the documents agree.

) An accountant failed to record the adjusting entry for accrued revenues. How does this error affect the balance sheet? A) The assets at the end of the period will be overstated. B) The assets at the end of the period will be understated. C) The liabilities at the end of the period will be overstated. D) The liabilities at the end of the period will be understated.

) An expense occurred in 2018, and it is not paid until 2019. Using cash-basis accounting, the expense should appear on: A) the 2018 income statement. B) the 2019 income statement. C) whichever income statement the business prefers. D) both the 2018 and 2019 income statements.

) An owner makes an investment of cash into the business and receives shares of stock. This transaction is recorded as a: A) debit to Common Stock and a credit to Cash. B) debit to Cash and a credit to Common Stock. C) debit to Cash and a credit to Retained Earnings. D) debit to Cash and a credit to Stockholder Revenue.

) Beck Company had the following accounts and balances at the end of the year. What is net income or net loss for the year? Cash $79,000 Accounts Payable $12,000 Common Stock $21,000 Dividends $12,000 Operating Expenses $15,000 Accounts Receivable $50,000 Inventory $45,000 Long-term Notes Payable $33,000 Revenues $94,000 Salaries Payable $28,000 A) net income of $94,000 B) net income of $79,000 C) net loss of $10,000 D) net income of $5,000

) Closing entries: A) are made at the beginning of each accounting period. B) prepare the accounts for the next period's transactions. C) brings all asset account balances to zero. D) are the same as adjusting entries.

) Company Z sells land for cash for the same amount it paid for it three years ago. When the company records this transaction: A) assets and stockholders' equity are increased. B) one asset is increased and another asset is decreased. C) one liability is increased and another liability is decreased. D) assets are increased and liabilities are decreased.

) Creating bogus websites for the purpose of stealing unauthorized data is a(n): A) encryption device. B) phishing expedition. C) computer virus. D) Trojan horse.

) Dividends declared are reported on the: A) Income Statement. B) Statement of Retained Earnings. C) Balance Sheet. D) Statement of Assets.

) Every journal entry: A) must increase at least one account and decrease at least one account. B) must debit at least one account and credit at least one account. C) is recorded in either the journal or the ledger. D) affects both an income statement account and a balance sheet account.

) For companies that are too small to hire enough employees to properly separate duties, the key to good internal control is getting the owner to perform which of the following duties: A) approving all small transactions. B) reconciling the monthly bank account or making bank deposits. C) reconciling the monthly bank account and making bank deposits. D) The owner should not perform any of the above duties.

) If a company buys inventory on account: A) cash decreases. B) accounts payable increases. C) net income increases. D) total assets remain the same.

) If a company prepares its financial statements three years after the end of its accounting period, it has violated the qualitative characteristic of: A) understandability. B) timeliness. C) verifiability. D) materiality.

) Information for the trial balance is obtained from the: A) journal. B) ledger. C) balance sheet. D) income statement.

) On January 1, 2019, total assets for Wininger Technologies were $136,000; on December 31, 2019, total assets were $157,000. On January 1, 2019, total liabilities were $110,000; on December 31, 2019, total liabilities were $118,000. What is the amount of the change and the direction of the change in Wininger Technologies' stockholders' equity for 2019? A) decrease of $13,000 B) increase of $13,000 C) increase of $29,000 D) decrease of $29,000

) On May 1, a company provided legal services for a new client. The legal fee was $2,000 and the client paid, by check, before leaving the office that day. How does this transaction affect the accounting equation? A) Add $2,000 to Cash and subtract $2,000 from Service Revenue. B) Add $2,000 to Cash and add $2,000 to Retained Earnings. C) Add $2,000 to Cash and subtract $2,000 from Accounts Receivable. D) Add $2,000 to Cash and subtract $2,000 from Accounts Payable.

) On a multistep income statement, "Other income (expenses), net": A) includes sales returns and depreciation expense. B) includes interest income and other investment income. C) is seldom used because investors do not understand what is included. D) includes dividend expense

) On a multistep income statement, a common subtotal is: A) Income from Nonoperating Activities. B) Gross Profit. C) Interest Expense minus Interest Income. D) none of the above.

) Receiving a payment from a customer on account: A) increases stockholders' equity. B) has no effect on total assets. C) decreases stockholders' equity. D) decreases liabilities.

) The Trial Balance Worksheet does NOT have columns for: A) adjusting journal entries. B) closing journal entries. C) unadjusted trial balance. D) adjusted trial balance.

) The accounting equation can be stated as: A) Assets + Stockholders' Equity = Liabilities. B) Assets -Liabilities = Stockholders' Equity. C) Assets = Liabilities - Stockholders' Equity. D) Assets - Stockholders' Equity + Liabilities = Zero.

) The adjusted trial balance is used to prepare: A) the balance sheet and the income statement only. B) balance sheet, income statement, and statement of retained earnings. C) the balance sheet only. D) the income statement only.

) The cost of products sold: A) is considered a selling expense. B) is the direct cost of the products sold. C) is classified as revenue on the income statement. D) is the same as total revenues.

) The current portion of a long-term note payable is classified on the balance sheet as a: A) current asset. B) current liability. C) long-term asset. D) long-term liability.

) The financial statements are prepared from which columns of the trial balance worksheet? A) unadjusted trial balance columns. B) adjusted trial balance columns. C) adjustment columns. D) closing entries columns.

) The normal balance of an account: A) falls on the side where decreases are recorded. B) falls on the side where increases are recorded. C) must be computed after every transaction. D) cannot be computed in a manual accounting system.

) The portion of net income that the company has kept over a period of years and not used for dividends is called: A) common stock. B) retained earnings. C) revenue. D) gross profit.

) The process of copying the information from the journal to the trial balance is: A) called posting. B) not part of the accounting process. C) called journalizing. D) used to prepare the financial statements.

) The trial balance is used to determine if: A) total assets equal total liabilities. B) total debits of all the accounts equal total credits of all the accounts. C) total debits of the income statement accounts equal the total credits of the income statement accounts. D) total debits of the balance sheet accounts equal the total credits of the balance sheet accounts

) The type of fraud committed by company managers, who make false and misleading entries in the books in order to improve a company's financial statements, is called: A) misappropriation of assets. B) fraudulent financial reporting. C) embezzlement. D) collusion.

) To be useful, accounting information must have the fundamental qualitative characteristics of: A) comparability and relevance. B) relevance and faithful representation. C) materiality and understandability. D) faithful representation and timeliness

) To help keep debt ratios within normal limits, companies might adopt the following strategy: A) decrease revenues. B) sell stock. C) choose to borrow more money. D) increase costs.

) Under accrual accounting, revenue is recorded: A) when the cash is received, regardless of when the services are performed. B) when the services are performed, regardless of when the cash is received. C) at the end of every month. D) only if the cash is received at the same time the services are performed.

) What is an account payable? A) It is a liability for goods or services purchased on credit and supported by a written agreement. B) It is a liability for goods or services purchased on credit and supported by the credit standing of the purchaser. C) It is an amount of money to be received from a supplier. D) It is an asset arising from the sale of goods or services on credit.

) What is the proper order for the different categories of cash flows reported on the statement of cash flows? A) financing activities, investing activities, and operating activities B) operating activities, investing activities, and financing activities C) operating activities, financing activities, and investing activities D) investing activities, financing activities, and operating activities

) When an expense account is increased: A) an amount is entered on the credit side of the expense account. B) an amount is entered on the debit side of the expense account. C) cash must always be credited. D) stockholders' equity is not affected.

) When analyzing a company's income statement, a fact to remember is that: A) the cost of products sold is another term for gross profit. B) operating expenses are the costs of everyday operations such as selling expenses. C) companies are not allowed to offset items such as interest income and interest expense against each other. D) all expenses will have the word expense after their titles.

) When computing the normal balance of an account: A) salaries expense should have a credit balance. B) accounts payable should have a credit balance. C) equipment should have a credit balance. D) notes payable should have a debit balance.

) Which financial statement answers the following question: How well did the company perform during the year? A) statement of cash flows B) income statement C) statement of retained earnings D) balance sheet

) Which financial statement must be prepared before the others? A) statement of cash flows B) income statement C) balance sheet D) statement of retained earnings

) Which of the following combinations of ratios is preferable? A) a low current ratio and a high debt ratio B) a high current ratio and a low debt ratio C) a low current ratio and a low debt ratio D) a high current ratio and a high debt ratio

) Which of the following increases retained earnings? A) net loss B) net income C) expenses D) dividends

) Which of the following is a CORRECT statement about long-term assets? A) Accumulated depreciation increases the cost of fixed assets on the balance sheet. B) Intangible assets are long-term assets with no physical substance. C) Long-term investments can never be sold by the company. D) Other long-term assets include supplies.

) Which of the following is a business transaction? A) A company signs a contract for services to be provided during the first quarter of the next fiscal year. B) A company pays its employees a year-end bonus. C) A company hires a new marketing manager. D) A company applies for a mortgage that will be used to purchase a new office building.

) Which of the following statements is TRUE for a limited liability company? A) Members have unlimited liability for the debts of the business. B) Members have limited liability for debts only up to the extent of their investment in the LLC. C) Only the limited partners have limited liability for the debts of the business. D) Members are not taxed like members of a partnership.

) Which of the following transactions will increase stockholders' equity? A) The company pays a dividend to its shareholders. B) The company issues common stock to new shareholders. C) The company purchases equipment. D) The company makes a payment on account.

) Which statement about the statement of cash flows is FALSE? A) Operating activities should be the company's main source of cash. B) Purchases and sales of long-term assets are financing cash flows. C) The payment of a dividend is a financing cash flow. D) The payment of a note payable is a financing activity.

) Winter Company earned revenues of $150,000 in cash and $200,000 on account during 2018. Of the $200,000 on account, $63,000 was collected in cash in 2018 and the rest in 2019. The company incurred expenses of $115,000 in 2018 and made payments of $70,000 towards the expenses in 2018. What is net income in 2018 under accrual accounting? A) $85,000 B) $235,000 C) $280,000 D) $350,000

A bookkeeper forgot to post a credit to Accounts Receivable, but did post the debit part of the journal entry correctly. Then: A) the trial balance would still balance. B) total debits would exceed total credits on the trial balance. C) total credits would exceed total debits on the trial balance. D) total debits and total credits would both be incorrect on the trial balance.

A business purchased office supplies of $23,000 by signing a note. The business would: A) debit Supplies for $23,000 and credit Accounts Payable for $23,000. B) debit Supplies for $23,000 and credit Notes Payable for $23,000. C) debit Notes Receivable for $23,000 and credit Supplies for $23,000. D) debit Notes Payable for $23,000 and credit Supplies Expense for $23,000.

A company had credit sales of $33,000 and cash sales of $25,000 during the month of May. Also during May, the company paid wages of $22,000 and utilities of $8,000. It also received payments from customers on account totaling $5,800. What was the company's net income for the month? A) $25,000 B) $28,000 C) $58,000 D) $88,000

A company purchased medical equipment for $130,000 on January 1, 2018. The company determined that the yearly depreciation expense is $13,000. What will be the ending balance in the Accumulated Depreciation—Medical Equipment at December 31, 2020? A) $13,000 B) $39,000 C) $78,000 D) $130,000

A company's debt ratio is increasing every year and currently stands at 90%. This indicates: A) an improving financial position. B) an increase in financial risk. C) a greater ability to pay current and long-term liabilities. D) a company that is going bankrupt.

A construction company purchased a new bulldozer for $108,000 on January 1, 2019. The company estimates that the bulldozer will have a useful life of nine years and then be worthless. Using the straight-line depreciation method, yearly depreciation expense will be: A) $0. B) $12,000. C) $54,000. D) $108,000.

A doctor performed surgery in April and did not receive cash payment from the patient until August. Under cash-basis accounting, the doctor recognizes revenue: A) in April. B) in August. C) in April or August. D) at a time that cannot be determined from the facts.

A petty cash fund: A) is established to pay large nonrecurring expenses. B) is established to pay for minor purchases. C) should have a least two custodians. D) should issue checks for certain purchases.

A receiving report: A) identifies the need for merchandise and begins the purchasing process. B) identifies that the merchandise has been received and ends the purchasing process. C) is sent by the purchasing department to the customer who purchases the item. D) includes the invoice, receiving report, purchase order and purchase request.

After the closing entries are prepared and posted: A) all asset accounts will have a zero balance. B) the Retained Earnings account will have the correct ending balance. C) the temporary accounts will have debit balances. D) all liability accounts will have a zero balance.

All of the following accounts would be considered assets EXCEPT for: A) Cash. B) Retained Earnings. C) Prepaid Expenses. D) Notes Receivable.

An account will have a debit balance if: A) the amount of the credits exceeds the amount of the debits. B) the amount of the debits exceeds the amount of the credits. C) the account has more debit entries than credit entries. D) it is a liability account.

An important factor to consider when determining how to organize a business is that: A) members of an LLC have unlimited liability and are taxed like members of a partnership. B) for accounting purposes, a proprietorship is a distinct entity, separate from the proprietor. C) partnerships are subject to double taxation. D) a corporation is not legally distinct from its owners.

An imprest petty cash fund of $700 was established for minor disbursements. At the end of the month, the fund included petty cash tickets for the purchase of $202 in supplies, $77 for meals, $82 for fuel, and $71 for taxi fare. How much cash should be left in the fund? A) $339 B) $268 C) $1,132 D) $700

Cash dividends declared: A) decrease revenue on the income statement. B) decrease retained earnings on the statement of retained earnings. C) increase expenses on the income statement. D) decrease operating activities on the statement of cash flows.

Dooley Company had current assets of $1,552, current liabilities of $1,413, total assets of $1,742, and long-term liabilities of $1,210. If Dooley acquires inventory by executing a six-month note for $1,550, what is the new current ratio? (Round your final answer to two decimal places.) A) 1.10 B) 1.05 C) 0.96 D) 2.20

Enron Corporation committed fraudulent financial reporting by: A) reporting expenses as plant assets. B) overstating profits through bogus sales of nonexistent assets with inflated values. C) bribing employees of the Securities and Exchange Commission. D) all of the above

Entries are listed in the journal: A) alphabetically. B) chronologically. C) with income statement accounts first and then balance sheet accounts. D) in order of importance.

Flanders Company has total assets of $400,000 and total liabilities of $280,000. The company collects an account receivable of $20,000. After this transaction, the company's debt ratio will be: (Round your final answer to two decimal places.) A) 0.67. B) 0.70. C) 0.65. D) 1.43.

Gerald Company has the following account balances at the end of the first year of operations: Revenues $100,000 Salaries Expense $13,000 Dividends $9,000 Utilities Expense $11,000 Advertising Expense $9,000 Cash $38,000 Land $53,000 Common Stock $56,000 What are total assets at the end of the first year? A) $38,000 B) $91,000 C) $114,000 D) $214,000

If a bookkeeper mistakenly records a disbursement as $69 instead of the correct amount of $96, the error should be shown on the bank reconciliation as a: A) $27 addition to the balance per books. B) $27 deduction from the balance per books. C) $165 addition to the balance per books. D) $165 deduction from the balance per books.

In a bank reconciliation, items recorded by the bank, but not yet recorded by the company, include: A) deposits in transit. B) bank collections of accounts receivable. C) outstanding checks. D) both deposits in transit and outstanding checks.

In lieu of using the Trial Balance Worksheet to prepare the financial statements, an accountant can use the: A) journal. B) ledger. C) prior period financial statements. D) prior period audit report.

In what order are the financial statements generally prepared? A) balance sheet, income statement, and statement of retained earnings B) income statement, statement of retained earnings, and balance sheet C) income statement, balance sheet, and statement of retained earnings D) statement of retained earnings, balance sheet, and income statement

Internal controls: A) can never be beat. B) can be circumvented. C) are not subject to collusion. D) are never affected by fatigue and negligence.

Jenkins Company began business in June when stockholders invested $85,000 in the business, which in turn issued its common stock to them. Jenkins Company then purchased a building for $43,000 cash and inventory for $24,000 cash, performed services for clients for $15,000 cash, purchased supplies for $7,000 cash, and paid utilities of $4,000 cash. What is the amount of cash at the end of June? A) $18,000 B) $22,000 C) $33,000 D) $46,000

Johnny Company deposited $25,000 in its bank on the same day as, but after the bank prepared Johnny Company's bank statement. The deposit should appear on the bank reconciliation as a(n) ________ and is called a(n): A) addition to the bank balance; outstanding deposit B) addition to the bank balance; deposit in transit C) subtraction from the bank balance; deposit in transit D) subtraction from the bank balance; outstanding deposit

Lori's Company has the following items: cash in a checking account, $7,000; cash in a savings account, $10,000; high-grade government securities due in one month (purchased last month), $3,586; accounts receivable, $3,000. How much should appear as Cash and Cash Equivalents on the balance sheet? A) $10,000 B) $20,586 C) $23,586 D) $23,786

Net working capital: A) represents the company's ability to pay its long-term debts. B) is computed by subtracting total current liabilities from total current assets. C) should be a negative number to ensure the profitability of the company. D) should be the same for all companies.

On December 1 of the current year, Prepaid Rent was debited $10,200 for three months of rent, to cover the period December 1 to February 28. The amount of the adjusting entry on December 31 is: A) $0. B) $3,400. C) $6,800. D) $10,200.

On December 1, 2019, Carrie's Day Care receives $4,200 in advance for an agreement to care for Susan's children for the months of December, January, and February. Carrie's Day Care will make an adjusting entry on December 31, 2019 to: A) credit Revenue for $4,200. B) debit Unearned Revenue for $1,400. C) credit Revenue for $2,800. D) credit Prepaid Revenue for $2,800.

On December 15, 2019, a company receives an order from a customer for services to be performed on December 28, 2019. Due to a backlog of orders, the company does not perform the services until January 3, 2020. The customer pays for the services on January 6, 2020. The revenue principle requires the revenue to be recorded by the company on: A) December 15, 2019. B) January 3, 2020. C) December 28, 2019. D) January 6, 2020.

On October 1 of the current year, a company received $9,600 for services to be performed evenly over the next six months. If no adjusting entry was made on December 31 of the current year: A) net income would be understated by $9,600. B) net income would be understated by $4,800. C) net income would be overstated by $2,400. D) net income would be overstated by $4,800.

On a bank reconciliation, electronic fund transfers are: A) additions or subtractions to the bank balance. B) additions or subtractions to the book balance. C) not put on the bank reconciliation. D) only used for journal entries.

Operating income reflects: A) income from a company's main and secondary business activities. B) earnings from a company's core business activities. C) earnings from a company 's core business activities which includes interest income. D) an important measure that investors to use to evaluate the liquidity of the business.

Seidner Store sells expensive watches. An inventory at the beginning of the day showed 47 watches in the store. 9 new watches were added to the inventory during the day. The point-of-sale terminal recorded 5 watches sold. An inventory taken at the end of the day should show how many watches still in the store? A) 56 B) 51 C) 47 D) Cannot be determined from the data

The CEO of Clarkson Company owns a vacation home in Hawaii. Clarkson Company owns a factory in Detroit where it is headquartered. Which of these properties is considered to be asset(s) of the business? A) only the vacation home in Hawaii B) only the factory in Detroit C) both the vacation home in Hawaii and the factory in Detroit D) neither the vacation home in Hawaii nor the factory in Detroit

The Houston Mavericks basketball team receives $6,500 for season tickets on August 1. By December 31, $3,900 of the revenue has been earned. The adjusting entry to be made on December 31 includes a: A) credit to Unearned Revenue of $3,900. B) debit to Unearned Revenue of $3,900. C) debit to Ticket Revenue of $3,900. D) credit to Prepaid Revenue of $2,600.

The ________ basis of accounting records revenues ONLY when cash is received. A) deferral B) cash C) accrual D) hybrid

The adjustment for an accrued expense: A) increases expenses and decreases assets. B) increases expenses and increases liabilities. C) decreases expenses and increases liabilities. D) decreases expenses and increases assets.

The book side of a bank reconciliation includes: A) deposits in transit, bank collections and NSF checks. B) NSF checks, bank collections of notes receivable and interest earned on the checking account. C) outstanding checks and deposits in transit. D) outstanding checks, NSF checks and cost of printed checks.

The dollar amounts listed on the trial balance are obtained from the: A) beginning balances in the ledger accounts. B) ending balances in the ledger accounts. C) last period's balance sheet and income statement. D) this period's balance sheet and income statement.

The ending balance of cash and cash equivalents is found on the Statement of Cash Flows and the: A) Statement of Retained Earnings. B) Balance Sheet. C) Income Statement. D) Statement of Stockholders' Equity.

The entry to close Service Revenue includes a debit to: A) Retained Earnings and a credit to Service Revenue. B) Service Revenue and a credit to Retained Earnings. C) Service Revenue and a credit to Stockholders' Equity. D) Service Revenue and a credit to Net Income.

The entry to close expense account(s) includes a: A) debit to the expense accounts. B) credit to the expense accounts. C) credit to Retained Earnings. D) debit to the revenue accounts.

The entry to record the purchase of supplies on account includes a credit to: A) Supplies. B) Accounts Payable. C) Supplies Expense. D) Cash.

The final step when receiving cash by mail is for the ________ to compare to two different records for the day. A) treasurer B) controller C) purchasing agent D) receiving agent

The net income or loss is calculated on which financial statement? A) statement of retained earnings B) income statement C) balance sheet D) dividends statement

The owners' equity of a business is equal to: A) revenues minus expenses. B) assets minus liabilities. C) assets plus liabilities. D) paid-in capital plus assets.

The two types of accounting are: A) profit and nonprofit. B) financial and managerial. C) internal and external. D) bookkeeping and decision-oriented.

To compute the ending balance of retained earnings: A) the beginning balance in retained earnings will be negative for a new business. B) net loss for the period is subtracted from the beginning balance of retained earnings. C) dividends are added to the beginning balance of retained earnings. D) common stock sold during the period is added to the beginning balance of retained earnings.

When a company repays cash that is borrowed from the bank: A) total assets remain the same. B) liabilities are decreased. C) retained earnings is decreased. D) total liabilities remain the same.

When listing the accounts on the trial balance, where is the dividends account listed? A) It is not listed on the trial balance. B) After Retained Earnings. C) After Service Revenue or Sales Revenue. D) As part of the expense accounts.

When preparing the financial statements for a company: A) the report format of the income statement lists liabilities before assets. B) the account format for the balance sheet lists the assets on the left and liabilities and stockholders' equity on the right. C) the multistep balance sheet lists assets in order of their liquidity. D) the single-step income statement reports more subtotals than a multistep income statement

When preparing the financial statements of a company: A) liabilities are not classified on the balance sheet. B) current assets are the most liquid assets. C) the balance sheet must be prepared using the account format. D) the income statement can be prepared using the multistep or report format.

When total expenses exceed total revenues, the result is: A) a net profit. B) a net loss. C) a dividend. D) an increase to retained earnings.

Which of the following accounts are considered permanent accounts? A) Inventory and Cost of Goods Sold B) Land and Accounts Receivable C) Accounts Payable and Service Revenue D) Common Stock and Salary Expense

Which of the following is a CORRECT statement about the petty cash fund? A) To set up the petty cash fund, a check is issued to the chief financial officer. B) The custodian of the fund has sole responsibility for accounting for the fund. C) The cash in the fund must always equal the opening balance of the fund. D) The petty cash fund must be maintained at a bank.

Which of the following is a TRUE statement regarding expenses? A) Expenses represent future benefit to the company. B) The expense recognition principle recognizes expenses in the same period in which the related revenues are earned. C) Expenses will never result in the creation of a liability account. D) The critical event for recording salary expense is the payment of cash.

Which of the following items can be added to or subtracted from the bank balance when preparing the bank reconciliation? A) book errors B) bank errors C) EFT payments by bank D) EFT receipts by bank

Which of the following lists the accounts in order of liquidity? A) Cash, Inventory, Accounts Receivable, Furniture B) Cash, Accounts Receivable, Inventory, Furniture C) Furniture, Cash, Accounts Receivable, Inventory D) Furniture, Cash, Inventory, Accounts Receivable

Which of the following statements is TRUE for a proprietorship? A) Legally, a proprietorship is separate from the proprietor. B) For accounting purposes, a proprietorship is separate from the proprietor. C) The business records include the proprietor's personal finances. D) All statements are correct.

Which of the following statements is TRUE? A) Dividends are expenses of a business. B) Dividends reduce retained earnings. C) Dividends increase retained earnings. D) Dividends reduce net income.

Which of the following transactions includes a credit to cash? A) the purchase of supplies on account B) the payment of an accounts payable C) the collection of cash from an accounts receivable D) receipt of cash from a customer when service is provided

Which statement is FALSE? A) International Financial Reporting Standards are used by most countries around the world. B) U.S. Generally Accepted Accounting Principles are used by many countries around the world. C) The most commonly used accounting practices are essentially the same under both U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. D) For many years, U.S. Generally Accepted Accounting Principles were considered to be the strongest single set of accounting standards in the world.

With regard to cash dividends: A) they must be paid on a yearly basis. B) the Board of Directors of the corporation determines if a dividend will be paid. C) developmental-stage companies will pay large dividends to their shareholders. D) a corporation must have enough additional paid-in capital and cash to pay dividends

________ is the element in the fraud triangle that results from weak internal controls. A) Motive B) Opportunity C) Rationalization D) Reasoning

________ is the most common fraud, but ________ is the most expensive fraud. A) Fraudulent financial reporting; misappropriation of assets B) Misappropriation of assets; fraudulent financial reporting C) Misappropriation of assets; cooking the books D) Cooking the books; misappropriation of assets

) A check received from a customer for which there are not sufficient funds in the bank to cover the amount of the check is a(n): A) service charge. B) error. C) nonsufficient funds check. D) blank check.

) A company has $800 in Prepaid Advertising before any adjustments. At the end of the year, an adjusting entry is made to debit Advertising Expense for $60. The ending balance in the Prepaid Advertising account will be: A) $0. B) $60. C) $740. D) $800

) A company has current assets of $77,000, long-term assets of $150,000, current liabilities of $44,000, and long-term liabilities of $35,000. The current ratio is: A) 0.81. B) 3.46. C) 1.75. D) 2.20.

) A company performs services for a client on account. When the company receives the cash from the customer one month later: A) a revenue account is increased. B) a liability account is decreased. C) there is no change in total assets. D) an expense account is decreased.

) A company posted a $8,000 debit to Cash as $800. The credit of $8,000 to Service Revenue in the entry was posted correctly. Is the trial balance out of balance? A) No. B) Yes, by $800. C) Yes, by $7,200. D) Yes, by $8,000.

) A company reports the purchase of equipment for $1,000,000 in cash. On a statement of cash flows, this is a(n) example of: A) cash outflow from financing activity. B) cash outflow from operating activity. C) cash outflow from investing activity. D) noncash activity.

) A company started the year with $200 of supplies. During the year, the company purchased an additional $1,400 of supplies. There were $600 of supplies on hand at the end of the year. An adjusting entry prepared at the end of the accounting period includes a: A) debit to Supplies for $1,200. B) debit to Supplies for $600. C) debit to Supplies Expense for $1,000. D) debit to Supplies Expense for $400.

) A company's balance sheet: A) is dated for a period of time. B) has three main categories of assets. C) has two main categories of liabilities. D) lists liabilities before assets.

) A company's current ratio is decreasing every year and currently stands at 1.00. This indicates: A) an improving financial position. B) an improving liquidity position. C) a declining ability to pay current liabilities. D) an increase in profitability.

) A journal entry contains a debit to a liability account and a credit to a revenue account. This is an example of a(n): A) accrued expense. B) deferred expense. C) unearned revenue. D) accrued revenue.

) A net loss occurs when: A) not enough cash exists. B) total revenues exceed total expenses. C) total expenses and losses exceed total revenues and gains. D) total revenues and dividends exceed total expenses and losses.

) A transaction that includes a debit to an expense and a credit to a liability indicates that: A) revenues increased. B) expenses decreased. C) liabilities increased. D) liabilities decreased.

) Accounts with normal debit balances include: A) Cash, Accounts Receivable, and Accounts Payable. B) Cash, Supplies, and Accounts Payable. C) Cash, Accounts Receivable, and Supplies. D) Cash, Supplies, and Notes Payable.

) All of the following are true statements about the entity assumption EXCEPT for: A) a sharp boundary is drawn around each entity. B) the transactions of the business cannot be combined with the transactions of the owner. C) business operations cannot be divided into segments. D) the entity is any organization that stands apart as a separate economic unit.

) All of the following would be considered investing activities on the statement of cash flows EXCEPT for: A) purchase of land for cash. B) the sale of equipment for cash. C) the payment of cash dividends. D) the purchase of equipment for cash.

) As a practical matter most companies prepare financial statements: A) after every transaction. B) only when both the balance sheet and income statement are affected. C) at the end of the accounting period. D) at the close of every business day.

) Cash-basis accounting does NOT record: A) receipt of cash from interest earned on note receivable. B) payment of salaries to employees. C) expiration of prepaid rent. D) borrowing money from the local bank.

) Decreases in stockholders' equity that result from the cost of operating the business are: A) assets. B) revenues. C) expenses. D) liabilities.

) Expenses of a business include: A) sales and cash equivalents. B) common stock and rent expense. C) cost of products and services sold and salaries expense. D) retained earnings and utilities expense.

) For a new business, the beginning balance of retained earnings equals: A) cash invested by the stockholders. B) beginning balance of the common stock account. C) zero. D) budgeted net income for the first year.

) Fraudulent financial reporting is also called: A) the fraud triangle. B) a misappropriation of assets. C) cooking the books. D) investigative reporting.

) Historical cost: A) is used in the U.S. to value all business assets. B) is equal to the amount of cash paid minus the dollar value of all noncash considerations also given in the exchange. C) is a verifiable measure that is relatively free from bias. D) is the amount that the business could sell an asset for.

) If a Trial Balance Worksheet is prepared, which columns are used to prepare the financial statements? A) unadjusted trial balance columns B) adjustments columns C) adjusted trial balance columns D) none of the above

) If a posting error has occurred whereby a debit is treated as a credit, then the out-of-balance amount on the trial balance will be evenly divisible by: A) 11. B) 9. C) 2. D) 5.

) In a bank reconciliation, a NSF check is: A) added to the bank balance. B) added to the book balance. C) subtracted from the book balance. D) subtracted from the bank balance.

) In order to see a complete transaction in one place, you would need to look at the: A) trial balance. B) ledger. C) journal. D) financial statements.

) Internal control is a plan of organization and system of procedures, implemented by company ________ and the ________, designed to accomplish five objectives. A) internal auditors, employees B) external auditors, management C) management, board of directors D) external auditors, board of directors

) Internal controls to safeguard assets means the company must safeguard assets against all EXCEPT: A) waste. B) inefficiency. C) audits. D) fraud.

) Malware is short for: A) malicious device. B) phishing expedition. C) malicious software. D) phishing software.

) Net income is computed as: A) revenues - expenses - dividends. B) revenues + expenses. C) revenues - expenses. D) revenues - expenses + dividends.

) Net income: A) is calculated by subtracting total expenses and total dividends from total revenues. B) occurs when total revenues are less than total expenses. C) is often referred to as the "bottom line" on an income statement. D) decreases total stockholders' equity.

) On August 15, a customer paid $5,000 for services provided a month earlier. The customer was billed on August 1. How does this transaction affect the accounting equation? A) Add $5,000 to Cash and add $5,000 to Service Revenue. B) Add $5,000 to Cash and add $5,000 to Retained Earnings. C) Add $5,000 to Cash and subtract $5,000 from Accounts Receivable. D) Add $5,000 to Accounts Payable and add $5,000 to Cash.

) On July 25, Henry Company's accountant prepared a check to prepay for the August through December monthly rent payments. Henry Company mailed the check on July 27 to the landlord. The landlord received the check on July 31 and cashed it on August 2. When should Henry Company record the rent expense for August associated with this transaction? Henry Company uses accrual accounting. A) July 25 B) July 27 C) August 31 D) August 2

) On May 1, a business provided legal services to a client and billed the client $4,000. The client promised to pay the business in one month. Which journal entry should the business record on May 1? A) Debit Cash for $4,000 and credit Service Revenue for $4,000. B) Debit Cash for $4,000 and credit Retained Earnings for $4,000. C) Debit Accounts Receivable for $4,000 and credit Service Revenue for $4,000. D) Debit Accounts Payable for $4,000 and credit Service Revenue for $4,000.

) On October 1, 2018, Golde Company paid $22,200 for one year of insurance for the period, October 1, 2018 through September 30, 2019. Which of the following will be part of the adjusting entry on December 31, 2018? A) Debit Prepaid Insurance for $5,550 B) Debit Prepaid Insurance for $16,650 C) Debit Insurance Expense for $5,550 D) Debit Insurance Expense for $16,650

) On October 1, McReady Company paid six months' insurance in advance totaling $3,600. The policy begins on October 1. An adjusted trial balance prepared on December 31 would include a balance in the Prepaid Insurance account of: A) $0. B) $1,200. C) $1,800. D) $3,600.

) Once the company receives newly purchased inventory, it prepares a(n) ________ to list the goods received. A) invoice B) purchase approval form C) receiving report D) EFT transfer

) Posting is: A) copying the information from the journal to the trial balance. B) entering the data into the journal. C) copying the information from the journal to the ledger. D) copying the information from the ledger to the financial statements.

) Purchasing supplies on account would: A) increase total assets and decrease total liabilities. B) increase total liabilities and decrease total assets. C) increase total assets and increase total liabilities. D) increase total liabilities and increase stockholders' equity.

) Revenues were $150,000, expenses were $144,000, and cash dividends declared and paid were $3,000. What were the net income and the change in retained earnings for the period? A) Net income was $6,000; the change in retained earnings was $6,000. B) Net income was $150,000; the change in retained earnings was $9,000. C) Net income was $6,000; the change in retained earnings was $3,000. D) Net income was $150,000; the change in retained earnings was $147,000.

) Rosewood Company had current assets of $612, current liabilities of $393, total assets of $722, and long-term liabilities of $200. What is Rosewood's debt ratio? (Round your final answer to two decimal places.) A) 0.54 B) 1.56 C) 0.82 D) 0.28

) Seidner Company had the following account balances at the end of the first year of operations: Revenues $103,000 Salaries Expense $16,000 Dividends $11,000 Utilities Expense $15,000 Advertising Expense $9,000 Short-term Investments $20,000 Cash $37,000 Land $50,000 Common Stock $50,000 What is the amount of net income or net loss for the year? A) $22,000 B) $31,000 C) $63,000 D) $72,000

) The Balance Sheet is used to prepare the: A) Income Statement. B) Statement of Retained Earnings. C) Statement of Cash Flows. D) Statement of Stockholders' Equity.

) The Diamond Store began business on June 1. During the month of June, Diamond had cash payments of $8,000. At the end of June, it had a $20,000 cash balance. Based on this information, the cash receipts for the month of June were: A) $12,000. B) $20,000. C) $28,000. D) $36,000.

) The assets of a company: A) must equal the liabilities of the company. B) include property, plant, and equipment and accounts payable. C) represent economic resources that are expected to produce a future benefit. D) include short-term investments and notes payable.

) The balance sheet includes the: A) amount of net income or net loss. B) beginning balance in retained earnings. C) ending balance in retained earnings. D) amount of cash dividends paid to stockholders.

) The following accounts are up-to-date and need no adjustment at the end of the period: A) Cash, Common Stock and Prepaid Rent. B) Prepaid Rent, Supplies and Unearned Rent Revenue. C) Cash, Land and Common Stock. D) Cash, Dividends and Unearned Rent Revenue.

) The income statement: A) is not dated. B) must cover only a month in time. C) covers a defined period of time. D) reports the results of operations since the inception of the business.

) The ledger: A) is a grouping of all of the balance sheet accounts only. B) is a grouping of all the income statement accounts only. C) contains all the accounts used by a business. D) contains only the permanent accounts used by a business.

) The major types of transactions that affect retained earnings are: A) paid-in capital and common stock. B) assets and liabilities. C) revenues, expenses, and dividends. D) revenues and liabilities.

) The normal balance of an expense account is a ________ because expenses decrease ________. A) debit; assets B) debit; expenses C) debit; retained earnings D) credit; retained earnings

) The purchase of equipment, involving a cash down payment and a promise to pay the balance in the future, includes: A) a debit to Cash and a credit to Equipment. B) a debit to Note Payable and a credit to Cash. C) a credit to Cash and a credit to Accounts Payable. D) a debit to Cash and a debit to Note Payable.

) The revenue principle deals with the following: A) when to record revenue and where to record this revenue. B) where to record revenue and the amount of revenue to record. C) when to record revenue and the amount of revenue to record. D) when to record revenue and when to record related expenses.

) The revenue principle requires that a business record revenue when the business: A) receives an order from a customer. B) prepares the invoice for the customer. C) it has been earned and not before. D) receives payment from a customer.

) The three factors that influence business and accounting decisions are: A) judgment, cost/benefit analysis, and cultural backgrounds. B) minimizing costs, maximizing profits and cost/benefit tradeoff. C) economic, legal, and ethical. D) legal implications, socioeconomic backgrounds, profit maximization.

) The three main components of the fraud triangle are: A) rationalization, opportunity and greed. B) opportunity, motive and lack of ethics. C) motive, opportunity and rationalization. D) none of the above.

) When cash-basis accounting is used, and services are provided on account: A) only the income statement will be incorrect. B) only the balance sheet will be incorrect. C) both the income statement and the balance sheet will be incorrect. D) either the income statement or the balance sheet will be incorrect.

) When listing the assets in the trial balance, the balance for Accounts Receivable was transposed. The correct balance is $4,100 and the amount was written as $1,400. Is the trial balance out of balance? A) No. B) Yes, by $1,400. C) Yes, by $2,700. D) Yes, by $4,100.

) When preparing the financial statements from a spreadsheet that shows the results of a transaction analysis: A) a statement of retained earnings is not required. B) the balance sheet reports the beginning balance of retained earnings. C) assets, liabilities, and stockholders' equity are reported on the balance sheet. D) revenues, expenses, and dividends are reported on the income statement.

) When services are performed on account: A) cash is increased. B) revenue will not be recorded until the cash is received from the customer. C) accounts receivable is increased. D) accounts payable is increased.

) When using the trial balance worksheet to prepare the statement of retained earnings, what information is used from the trial balance worksheet? A) net income or net loss B) revenues and expenses C) beginning balance of retained earnings and dividends D) cash balance

) When working with T accounts, an important rule to remember is: A) when an account is debited, an amount is entered on the right-hand side on the T account. B) an increase to accounts payable will be recorded as a debit. C) to credit an account means to enter an amount on the right-hand side of the T account. D) the debit side of a T account is on the right-hand side of the T account for assets and expenses.

) Which account has a normal debit balance? A) Salaries Payable B) Common Stock C) Advertising Expense D) Service Revenue

) Which account includes balances in multiple checking accounts? A) Accounts Receivable B) Notes Receivable C) Cash D) Prepaid Expenses

) Which accounts are increased by debits? A) Cash and Accounts Payable. B) Salaries Expense and Common Stock. C) Accounts Receivable and Utilities Expense. D) Accounts Payable and Service Revenue.

) Which of the following is a CORRECT statement about the two bases of accounting? A) Cash-basis accounting records revenues when they are earned. B) Cash-basis accounting records expenses only at the end of the month. C) GAAP requires accrual accounting. D) Only the largest companies in the United States use accrual accounting.

) Which of the following is a CORRECT statement? A) Shareholders' equity is also called proprietorship equity. B) A proprietorship has more than one capital account. C) A partnership has a separate owner's equity account for each partner. D) Retained earnings is the owner's investment in the corporation.

) Which of the following is a TRUE statement about the characteristics of partnerships? A) In a limited liability partnership, all partners have limited liability for the partnership's debts. B) General partners in a general partnership have mutual agency and limited liability for the partnership's debts. C) Income and losses of the partnership "flow through" to the partners. D) The partnership agreement must be in writing.

) Which of the following statements is TRUE for a limited liability partnership? A) All partners have limited liability for the debts of the partnership. B) All partners have limited liability for the acts of the other partners. C) The general partner has unlimited liability for the debts of the partnership. D) The limited partners have unlimited liability for the debts of the partnership.

) ________ is the allocation of the cost of an asset over the asset's useful life. A) Accrual B) Deferral C) Depreciation D) Expiration

A bank statement included a NSF check from customer Kim Fields for $2,100. The journal entry to record this reconciling item should: A) debit NSF and credit Cash for $2,100. B) debit Cash and credit Accounts Receivable for $2,100. C) debit Accounts Receivable and credit Cash for $2,100. D) debit Cash and credit NSF for $2,100.

A business received the current month's utility bill for $2,125, and immediately paid it. Which journal entry is prepared? A) Debit Accounts Payable for $2,125 and credit Cash for $2,125. B) Debit Utilities Payable for $2,125 and credit Cash for $2,125. C) Debit Utilities Expense for $2,125 and credit Cash for $2,125. D) Debit Operating Expense for $2,125 and credit Accounts Payable for $2,125.

A business sold equipment for $44,900 cash. The equipment was purchased one month earlier for $44,900 but the plans for the equipment changed. A) Debit Equipment for $44,900 and credit Cash for $44,900. B) Debit Equipment for $44,900 and credit Retained Earnings for $44,900. C) Debit Cash for $44,900 and credit Equipment for $44,900. D) Debit Retained Earnings for $44,900 and credit Equipment for $44,900.

A company declared and paid dividends of $1,300. How does this transaction affect the accounting equation? A) Add $1,300 to Revenue and add $1,300 to Cash. B) Add $1,300 to Dividends and add $1,300 to Accounts Receivable. C) Subtract $1,300 from Retained Earnings and subtract $1,300 from Cash. D) Add $1,300 to Dividend Expense and subtract $1,300 from Cash.

A company performed tax services for a client on account. The amount billed to the client was $7,000. How does this transaction affect the accounting equation? A) Add $7,000 to Cash and add $7,000 to Service Revenue. B) Add $7,000 to Cash and add $7,000 to Retained Earnings. C) Add $7,000 to Accounts Receivable and add $7,000 to Retained Earnings. D) Add $7,000 to Accounts Payable and add $7,000 to Service Revenue.

A company sells travel mugs online for $10. They purchase the mugs for $6 and charge the customers $2 for shipping and handling. The cost of product sold per mug is: A) $4. B) $2. C) $6. D) $8.

A company started the year with $300 of supplies. During the year the company purchased additional supplies costing $1,300. There were $1,100 of supplies on hand at the end of the year. An adjusted trial balance, prepared at the end of the accounting period, will show the following balance in Supplies Expense: A) $800. B) $1,100. C) $500. D) $1,300.

A company's petty cash fund: A) cannot be replaced by the use of debit cards. B) is kept by two or more employees to ensure that disbursements can readily be made. C) is opened with a particular amount of cash. D) balance equals the cash left in the petty cash fund minus the total of the paid vouchers in the cash box.

A trial balance has which of the following features? A) Totals for balance sheet accounts only. B) Totals for income statement accounts only. C) Totals for all accounts listed in the ledger. D) Accounts are listed in alphabetical order.

Accounting transactions are initially recorded in the: A) T-account. B) ledger. C) journal. D) financial statements.

Advantages of a corporation include: A) difficulty in raising large sums of capital. B) double taxation of distributed profits. C) limited liability of the stockholders for the corporation's debts. D) each stockholder can conduct business in the name of the corporation.

All of the following will appear on the book side of the bank reconciliation EXCEPT for: A) service charges. B) electronic funds transfers. C) deposits in transit. D) book errors.

An adjusting journal entry contains a debit to an expense account and a credit to a contra account. This is an example of a(n): A) accrued revenue. B) deferred revenue. C) depreciation expense. D) accrued expense.

An employee claims that he overstated expense reimbursement requests to have extra money for his wife and children because "Everyone is doing it." This is an example of: A) opportunity. B) motive. C) rationalization. D) understanding.

An example of an operating expense is: A) cost of products sold. B) sales returns. C) sales commissions paid to employees. D) interest expense.

An interim period used for reporting purposes is generally: A) more than one year, but less than the life of the company. B) more than one year. C) less than one year. D) the same as the fiscal year.

An internal control system can be circumvented by: A) collusion, encryption and management override. B) collusion, management override and segregation of duties. C) collusion, management override and human limitations. D) nothing, if it is a good internal control system.

Andy Company had a cash balance on May 1 of $27,000. At the end of May, the cash balance has increased to $31,000. During the month of May, Andy received cash of $48,000 from various sources. Based on this information, cash payments for the month of May were: A) $27,000. B) $31,000. C) $44,000. D) $75,000.

Another term for a "hot check" is: A) electronic check. B) outstanding check. C) nonsufficient funds (NSF) check. D) cleared checks.

As a rule of thumb, a strong current ratio is: A) 1.0. B) .50. C) 1.5. D) none of the above.

Assume the balance in the Retained Earnings account at January 1, 2019 is zero, and no dividends are declared in 2019. If a debit balance of $5,000 exists in Retained Earnings after closing out revenues and expenses at the end of 2019, this indicates: A) that the company had net income of $5,000. B) an increase in cash of $5,000. C) the company had a net loss of $5,000. D) a decrease in cash of $5,000.

At the beginning of the year, Butters Company's balance sheet showed current assets of $36,000 and current liabilities of $19,000. During the current year, Butters issued common stock for $5,000 for cash and purchased $3,400 of inventory on account. After these transactions were recorded, Butter's current ratio was: (Round your final answer to two decimal places.) A) 1.38. B) 1.83. C) 1.98. D) 1.89.

Corbin Company was charged $25 for a check printing service fee associated with its checking account. Which journal entry is required? A) Debit Miscellaneous Expense for $25 and credit Accounts Payable for $25. B) Debit Miscellaneous Expense for $25 and credit Accounts Receivable for $25. C) Debit Miscellaneous Expense for $25 and credit Cash for $25. D) No journal entry is required.

Deere Company holds a $14,400 note receivable dated July 1, 2019, with 10% interest. What adjusting entry is needed on December 31, 2019? A) No entry is needed. B) Debit Interest Receivable for $144 and credit Interest Revenue for $144 C) Debit Interest Receivable for $720 and credit Interest Revenue for $720 D) Debit Interest Receivable for $1,440 and credit Interest Revenue for $1,440

Deposits that have been recorded on the company's books, but have not yet been recorded by the bank are: A) nonsufficient funds deposits. B) outstanding deposits. C) deposits in transit. D) electronic funds deposits.

E-commerce pitfalls include all of the following EXCEPT: A) stolen credit card numbers. B) phishing expedition. C) encryption. D) malware.

For good internal control: A) the purchasing agent should also receive the goods. B) the purchasing agent should also approve the invoice for payment. C) the purchasing agent should not receive the goods or approve the invoice for payment. D) the purchasing agent should prepare an EFT for payment.

If a bank statement included a bank collection of a note receivable and the related interest revenue, the journal entry to record this item should include a: A) debit to Note Receivable and a credit to Cash. B) debit to Cash and a credit to Note Receivable. C) debit to Cash, credit to Note Receivable, and credit to Interest Revenue. D) debit to Note Payable, credit to Cash and credit to Interest Revenue.

If the bank records a deposit of $130 as $1,300, the error should be shown on a bank reconciliation as a: A) subtraction from the book balance of $1,430. B) subtraction from the bank balance of $1,430. C) subtraction from the bank balance of $1,170. D) subtraction from the book balance of $1,170.

In a bank reconciliation, a bank service charge for printing checks is: A) added to the bank balance. B) added to the book balance. C) subtracted from the book balance. D) subtracted from the bank balance.

In a bank reconciliation, an EFT cash payment is: A) added to the bank balance. B) added to the book balance. C) subtracted from the book balance. D) subtracted from the bank balance.

In order to compare the financial statements of Toyota Corporation to the financial statements of General Motors, it would be preferable to use: A) U.S. Generally Accepted Accounting Principles for General Motors and International Financial Reporting Standards for Toyota. B) U.S. Generally Accepted Accounting Principles for both companies. C) International Financial Reporting Standards for both companies. D) U.S. Generally Accepted Accounting Principles for Toyota Corporation and International Financial Reporting Standards for General Motors.

In order to determine the balance in an account, you must look at the: A) source documents. B) journals. C) ledger. D) book of original entry.

Liabilities are: A) a form of paid-in capital. B) future economic benefits to which a company is entitled. C) debts payable to outsiders called creditors. D) the outflow of resources that decrease common stock.

On March 31, Baker Company received a bill and paid for advertising costs for the current month. This payment results in a: A) debit to Cash. B) debit to Prepaid Advertising. C) debit to Advertising Expense. D) credit to Advertising Revenue.

On May 10, a business collected $4,200 on account. What journal entry is needed on that date? A) Debit Cash for $4,200 and credit Revenue for $4,200. B) Debit Accounts Receivable for $4,200 and credit Revenue for $4,200. C) Debit Cash for $4,200 and credit Accounts Receivable for $4,200. D) Debit Accounts Payable for $4,200 and credit Revenue for $4,200.

On November 1, 2018, a company using accrual accounting, pays $900,000 for a television advertising campaign. Commercials will run evenly over six months beginning on November 1, 2018. How much Advertising Expense will be reported on an income statement prepared for the year ended December 31, 2018? A) $300,000 B) $450,000 C) $600,000 D) $900,000

On a classified balance sheet: A) Accounts Receivable is a current liability. B) Salaries Payable is a long-term liability. C) Notes Payable due in one year is a current liability. D) Dividends is a current asset.

Owners of an LLC are called: A) partners. B) proprietors. C) members. D) stockholders

Payments by EFT are an important internal control for all of the following reasons EXCEPT for: A) the EFTs provide a record of the payments. B) the EFT must be approved by an authorized official. C) all EFT payments are made by the cashier in the Accounting Department. D) the authorizing official should study the evidence supporting the payment before approving the EFT.

Revenues are: A) decreases in assets resulting from delivering goods or services to customers. B) increases in liabilities resulting from delivering goods or services to customers. C) increases in retained earnings resulting from delivering goods or services to customers. D) decreases in retained earnings resulting from delivering goods or services to customers.

The Accounts Receivable account for Johnny's Mechanic Shop had a beginning balance of $36,000. During the month, Johnny made sales on account of $46,000. The ending balance in the Accounts Receivable account is $32,000. What are cash collections for the month? A) $36,000 B) $46,000 C) $50,000 D) $82,000

The Accumulated Depreciation account: A) is another term for depreciation expense. B) represents the original cost of a plant asset. C) is a contra asset account. D) has a normal balance which is the same as its companion account.

The Financial Accounting Standards Board(FASB) and the International Accounting Standards Board (IASB) are working together to develop similar standards. Which of the following statements is FALSE? A) The FASB and IASB have recently issued a joint new standard that provides a globally consistent, converged, and simplified way to recognize revenue. B) The new revenue standard has five steps. C) The first step in the new revenue standard is to allocate the transaction price to the performance obligations. D) The joint new revenue recognition standard is based on the idea that all business transactions involve contracts that exchange goods or services for cash or claims to receive cash.

The accounting equation can be stated as: A) Assets = Liabilities + Paid-in Capital - Common Stock. B) Assets + Liabilities = Stockholders' Equity. C) Assets = Liabilities + Paid-in Capital + Retained Earnings. D) Assets = Liabilities - Paid-in Capital - Dividends.

The adjustments columns of the Trial Balance Worksheet summarize the: A) day-to-day journal entries. B) closing journal entries. C) adjusting journal entries. D) cash-basis journal entries.

The bookkeeper recorded a deposit of $100 as $10. On the bank reconciliation, this will be a(n): A) addition of $90 to the balance per bank. B) subtraction of $90 from the balance per bank. C) addition of $90 to the balance per books. D) subtraction of $90 to the balance per books.

The bookkeeper recorded a payment on account as $150 instead of the correct amount of $510. What journal entry is required? A) Debit Accounts Payable for $510 and credit Cash for $510. B) Debit Accounts Receivable for $510 and credit Cash for $510. C) Debit Accounts Payable for $360 and credit Cash for $360. D) Debit Cash for $360 and credit Accounts Payable for $360.

The closing entry for the Salaries Expense account includes a debit to: A) Salaries Expense and a credit to Retained Earnings. B) Salaries Expense and a credit to Net Income. C) Retained Earnings and a credit to Salaries Expense. D) Net Income and a credit to Salaries Expense.

The control environment does NOT include: A) a corporation's code of ethics. B) prohibition of bribes and kickbacks. C) risk assessment. D) prohibition of transactions that involve a conflict of interest.

The general rule that all major groups of transactions should be supported by either hard copy documents or electronic records is part of the control procedure of: A) limited access. B) segregation of duties. C) adequate records. D) proper approvals.

The left side of a T-account is always the: A) increase side. B) decrease side. C) debit side. D) credit side.

The order in which current assets are typically listed is: A) accounts receivable, inventory, cash and cash equivalents,prepaid expenses. B) cash and cash equivalents, accounts receivable, prepaid expenses, inventory. C) cash and cash equivalents, accounts receivable, inventory, prepaid expenses. D) prepaid expenses, cash and cash equivalents, accounts receivable, inventory.

The primary way that fraud is prevented, detected, or corrected is through a proper system of: A) ethical standards and a code of ethics. B) policies developed by upper management. C) internal control. D) internal and external audits

The proper order for the accounting process is: A) posting, transaction occurs, journalizing. B) transaction occurs, posting, journalizing. C) transaction occurs, transaction analyzed, journalizing, and posting. D) transaction occurs, posting, transaction analyzed, journalizing.

The requirement to report accounting information at regular intervals is known as the: A) interim reporting concept. B) revenue principle. C) time-period concept. D) expense recognition principle.

The statement of retained earnings reports the amount of dividends declared over a period of time. What is the source of the amount of dividends declared? A) Balance Sheet B) Income Statement C) Adjusted Trial Balance D) Cash Dividend Statement

The two most common types of fraud impacting the financial statements are: A) fraudulent financial reporting and e-commerce fraud. B) misappropriation of assets and embezzlement. C) fraudulent financial reporting and misappropriation of assets. D) cooking the books and fraudulent financial reporting.

Transaction analysis and the accounting equation have been used to record several transactions for a company. The transactions are now recorded on a multi-column spreadsheet. When preparing a statement of retained earnings with this spreadsheet, which column would be used? A) Cash B) Accounts Receivable C) Retained Earnings D) Revenue

Under cash-basis accounting, cash receipts are treated as ________ and cash payments are treated as ________. A) retained earnings; dividends B) retained earnings; income C) revenues; expenses D) gains; losses

Verifiability means that the accounting information: A) is timely and understandable. B) is understandable. C) must be capable of being checked for accuracy, completeness and reliability. D) is material and relevant.

When a business purchases land with a note payable: A) both assets and stockholders' equity are increased. B) assets are decreased and stockholder's equity is increased. C) both assets and liabilities are increased. D) assets are increased and liabilities are decreased.

When an adjustment is made for prepaid rent: A) an asset increases and an expense decreases. B) one asset increases and another decreases. C) an asset decreases and an expense increases. D) a liability decreases and an expense decreases.

When analyzing a company's current ratio: A) the current ratio measures the company's ability to pay all liabilities (current and long-term) with current assets. B) most successful businesses operate with current ratios between 0.1 and 0.5. C) a current ratio of less than 1.00 means that current liabilities exceed current assets. D) the industry in which the company operates should not be considered.

When classifying assets and liabilities on the balance sheet: A) assets are classified as liquid and non-liquid. B) for most businesses the operating cycle is two years. C) furniture and fixtures are long-term assets. D) current liabilities include accounts receivable.

When preparing the balance sheet, the final balancing element of the balance sheet is: A) Cash. B) Net income. C) Retained earnings. D) Dividends.

When using a worksheet to prepare the adjusted trial balance: A) the unadjusted trial balance columns represent amounts from last period's financial statements. B) four columns are needed for the adjustments. C) the adjusted trial balance columns give the final account balances. D) the sum of the debits do not have to equal the sum of the credits in the side-by-side columns.

Which of the following is CORRECT regarding liquidity? A) Liquidity measures how quickly revenue can be earned. B) Accounts receivable is not a liquid asset. C) A balance sheet lists assets and liabilities in the order of relative liquidity. D) Equipment is a highly liquid asset.

Which of the following is NOT a business transaction? A) A company buys goods on account. B) A company sells land for cash. C) A company fired 10 percent of the employees due to lackluster sales. D) A company borrows money from the bank.

Which of the following is a CORRECT statement regarding the bank reconciliation? A) The bank reconciliation is part of the general ledger. B) Journal entries need to be made for all transactions on the bank side to get the accounts up-to-date. C) Journal entries need to be made for all transactions on the book side to get the accounts up-to-date. D) The bank reconciliation is part of the journal.

Which of the following transactions will increase one asset and decrease another asset? A) the purchase of office supplies on account B) the performance of services on account C) the purchase of equipment for cash D) the performance of services for cash

Which of the following transactions would be recorded under accrual accounting but NOT under cash-basis accounting? A) collecting cash from customers B) borrowing money from the bank C) purchasing of inventory on account D) issuing stock for cash

Which statement is TRUE about partnerships? A) A partnership is a taxpaying entity. B) General partnerships have mutual agency and limited liability. C) Individuals, corporations, partnerships, or other types of entities can be partners. D) A written partnership contract must exist.

Wilde Company earned revenues of $170,000 in cash and $230,000 on account during 2018. Of the $230,000 on account, $79,000 was collected in cash in 2018 and the rest in 2019. The company incurred expenses of $145,000 on account in 2018 and made cash payments of $100,000 towards the expenses in 2018. What is net income in 2018 under cash-basis accounting?A)370000...........................................B)100000............................................C)149000...........................................D)23000

________ will be increased when a company receives cash before performing the services. A) Service Revenue B) Accumulated Depreciation C) Unearned Service Revenue D) Accrued Salaries Payable

________ will not be found on the statement of retained earnings. A) Net income B) Dividends C) Cash D) Net loss

) A CPA prepares tax returns for clients and bills them after the work is completed. It usually takes two weeks of work to prepare the tax returns. It takes 30 days on average to receive payment from the clients. The CPA uses cash-basis accounting. The revenue should be recorded when the CPA: A) starts working on the tax returns. B) completes working on the tax returns. C) bills the clients. D) receives payments from the clients.

) A Trial Balance Worksheet can be used to prepare: A) balance sheet. B) income statement. C) statement of retained earnings. D) all of the above.

) A chart of accounts: A) is used by an organization to determine the balance in all of their accounts. B) lists all of the accounts of an organization in alphabetical order. C) must be the same for all organizations. D) lists all of an organization's accounts and account numbers.

) A company performed services for a customer for cash. This transaction increased assets and: A) decreased stockholders' equity. B) increased liabilities. C) increased expenses. D) increased revenues.

) A company purchased supplies of $2,000 on account. How does this transaction affect the accounting equation? A) Add $2,000 to Supplies and add $2,000 to Notes Payable. B) Add $2,000 to Supplies and subtract $2,000 from Cash. C) Add $2,000 to Supplies Expense and add $2,000 to Notes Payable. D) Add $2,000 to Supplies and add $2,000 to Accounts Payable.

) A company received $35,000 cash and issued common stock in exchange. How does this transaction affect the accounting equation? A) Add $35,000 to Cash and add $35,000 to Retained Earnings. B) Add $35,000 to Cash and add $35,000 to Revenue. C) Add $35,000 to Dividends and subtract $35,000 from Retained Earnings. D) Add $35,000 to Cash and add $35,000 to Common Stock.

) A company received a utility bill for $2,300 and decided to pay it next month due to a shortage of cash. How does this transaction affect the accounting equation? A) Add $2,300 to Utilities Expense and add $2,300 to Cash. B) Subtract $2,300 from Cash and add $2,300 to Accounts Payable. C) Add $2,300 to Accounts Receivable and subtract $2,300 from Retained Earnings. D) Add $2,300 to Accounts Payable and subtract $2,300 from Retained Earnings.

) A company received cash in exchange for issuing stock. This transaction increased assets and: A) increased expenses. B) increased revenues. C) increased liabilities. D) increased stockholders' equity.

) A partner in Sturm Company purchased a new yacht, for personal use, with his own funds. Sturm Company would: A) debit an asset account. B) credit a revenue account. C) credit a liability account. D) not record the transaction in its books.

) A receptionist worked one month and was paid $3,800 on the last day of the month. How does this transaction affect the accounting equation? A) Add $3,800 to Cash and add $3,800 to Accounts Payable. B) Add $3,800 to Accounts Receivable and subtract $3,800 from Cash. C) Add $3,800 to Salary Expense and subtract $3,800 from Retained Earnings. D) Subtract $3,800 from Cash and subtract $3,800 from Retained Earnings.

) A record of all the changes in a particular asset during a period of time is found in a(n): A) transaction. B) trial balance. C) prior period's balance sheet. D) account.

) Accounts that relate to a limited period of time are called: A) asset and liability accounts. B) permanent accounts. C) real accounts. D) temporary accounts.

) Accumulated depreciation is normally associated with which asset on the Balance Sheet? A) inventory B) accounts receivable C) intangible assets D) fixed assets

) All of the following are expenses EXCEPT for: A) Cost of products and services. B) Depreciation Expense. C) Salary Expense. D) Dividends.

) All of the following line items are found on the balance sheet EXCEPT for: A) current portion of long-term borrowings. B) accounts payable. C) treasury stock. D) dividends declared.

) All of the following line items are found on the statement of cash flows EXCEPT for: A) net cash used in investing activities. B) net cash provided in operating activities. C) net cash used in financing activities. D) total stockholders' equity.

) An example of a slide-type error is writing: A) $1,300 as $3,100. B) $300 as $600. C) $5,000 as $10,000. D) $500 as $50.

) An example of a transposition error is writing: A) $500 as $50. B) $2,000 as $4,000. C) $300 as $600. D) $1,400 as $4,100.

) An investor, wishing to assess the reasons for a change in retained earnings over a period of a year, would probably examine the: A) statement of cash flows and the income statement. B) income statement only. C) balance sheet. D) statement of retained earnings.

) At December 31, the NBC Company owes an employee for four days of work that will not be paid until January 5th. The weekly rate of pay for a five-day workweek is $500. The adjusting entry to record the accrued wages on December 31 will include a: A) debit to Salaries Payable for $500. B) debit to Salaries Expense for $500. C) debit to Salaries Payable for $400. D) debit to Salaries Expense for $400.

) At the end of the current accounting period, account balances were as follows: Cash, $29,000; Accounts Receivable, $44,000; Common Stock, $18,000; Retained Earnings, $14,000. Liabilities for the period were: A) $73,000. B) $55,000. C) $59,000. D) $41,000.

) Brankov Company has current assets of $115,000 and current liabilities of $140,000. The company decides to issue stock and receives cash of $150,000. After this transaction, the company's current ratio will be: (Round your final answer to two decimal places.) A) 0.82. B) 1.07. C) 1.82. D) 1.89.

) Decision makers who use accounting information include: A) creditors. B) the Internal Revenue Service. C) the Securities and Exchange Commission. D) all of the above.

) Enhancing qualitative characteristics of accounting information do NOT include: A) comparability. B) verifiability. C) timeliness. D) materiality.

) Examples of liabilities include: A) accounts payable and dividends. B) accounts payable and common stock. C) investments and note payable. D) accounts payable and long-term debt.

) Federal income taxes are paid by ________ in a limited liability company. A) the company B) limited partners only C) general partners only D) members

) Following the expense recognition principle, to recognize expenses along with the related revenues, means to: A) add expenses and revenues together to compute net income or net loss. B) recognize the expense of a period against the cash revenues of another period. C) abandon the matching principle. D) subtract expenses from the related revenues to compute net income or net loss.

) Golden Company had the following accounts and balances at the end of the year. What are total assets at the end of the year? Cash $79,000 Accounts Payable $20,000 Common Stock $21,000 Dividends $12,000 Operating Expenses $12,000 Accounts Receivable $54,000 Inventory $44,000 Long-term Notes Payable $33,000 Revenues $110,000 Salaries Payable $30,000 A) $79,000 B) $123,000 C) $133,000 D) $177,000

) In an adjusting entry, the debit to the Unearned Revenue account represents the: A) value of services owed to customers. B) amount of cash to be paid for future services. C) amount of cash to be collected from customers. D) value of services performed in the current period.

) In most reported fraud cases, fraudsters exhibit one or more behavioral red flags. Which of the following is NOT one of these behavioral red flags? A) financial difficulties B) unusually close associations with vendors C) unusually close associations with customers D) living within one's means

) In transaction analysis, revenues and expenses that arise in different transactions are recorded in the ________ column of the accounting equation. A) Multistep B) Common Stock C) Dividends D) Retained Earnings

) In transaction analysis, the declaration and payment of dividends is recorded in the ________ and ________ columns of the accounting equation. A) Dividends; Cash B) Expenses; Accounts Receivable C) Expenses; Accounts Payable D) Retained Earnings; Cash

) Information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. This qualitative characteristic of information is called: A) verifiability. B) faithful representative. C) relevant. D) understandability.

) On August 1 of the current year, Trevor Beck received $7,800 for legal services to be performed evenly throughout the next six months. The adjusting entry on December 31 of the current year would include a: A) credit to Unearned Service Revenue of $6,500. B) debit to Unearned Service Revenue of $1,300. C) debit to Service Revenue of $1,300. D) credit to Service Revenue of $6,500.

) On August 1, 2018, Brian Quinn received $8,400 for legal services to be performed evenly throughout the next twelve months, beginning August 1, 2018. An adjusted trial balance prepared on December 31, 2018 will show a credit balance in Unearned Revenue in the amount of: A) $0. B) $700. C) $3,500. D) $4,900.

) On January 1, 2019, a customer places an order for a new customized vehicle. The contract price is $42,000. The vehicle is delivered to the dealer and customer on April 1, 2019. What amount of revenue does the dealer record on January 1, 2019 and April 1, 2019? A) $42,000; $0 B) $21,000; $21,000 C) $14,000; $14,000 D) $0; $42,000

) On June 1, 2019, Starbucks paid the rent of $66,000 for 40 of its stores in Washington and California. The rent covers the period, June 1, 2019 through November 30, 2019. On June 1, Starbucks will record ________. On June 30, Starbucks will record ________. A) Rent Expense of $66,000; nothing B) nothing; Rent Expense of $66,000 C) nothing; Rent Expense of $11,000 D) Prepaid Rent of $66,000; Rent Expense of $11,000

) Opportunity in the fraud triangle arises from: A) weak control environment. B) improper segregation of duties. C) improper access to assets. D) all of the above.

) Receivables are classified as: A) increases in earnings. B) decreases in earnings. C) liabilities. D) assets.

) Revenues and expenses are closed to: A) Cash. B) Net Income. C) Dividends. D) Retained Earnings.

) Simmons Company began the month with a balance of $84,000 in Accounts Receivable. An analysis of the account determined that sales on account for the month totaled $113,000. At the end of the month, the balance in Accounts Receivable was $86,000. From this information, it can be determined that Simmons Company had collections from customers on account of: A) $29,000. B) $57,000. C) $115,000. D) $111,000.

) Smart hiring practices include: A) background checks. B) clear job descriptions. C) proper training and supervision. D) all of the above

) The International Accounting Standards Board is responsible for establishing: A) the code of professional conduct for accountants. B) an international Securities and Exchange Commission. C) U. S. Generally Accepted Accounting Principles. D) International Financial Reporting Standards.

) The Statement of Retained Earnings is used to prepare the: A) Income Statement. B) Statement of Assets. C) Statement of Cash Flows. D) Balance Sheet.

) The Statement of Retained Earnings is used to prepare the: A) Income Statement. B) Statement of Earnings and Distributions. C) Statement of Cash Flows. D) Balance Sheet.

) The ________ factor recognizes that while certain actions might be both economically profitable and legal, they still may not be right. A) economic B) legal C) profitability D) ethical

) The balance sheet is also known as the: A) statement of profit and loss. B) operating statement. C) assets statement. D) statement of financial position.

) The book value of a plant asset is the: A) accumulated depreciation less the cost of the asset. B) cost of the asset. C) balance in the accumulated depreciation account. D) cost of the asset less the accumulated depreciation.

) The ending balance of Cash and Cash Equivalents is reported on the: A) Balance Sheet. B) Statement of Retained Earnings. C) Statement of Cash Flows. D) A and C.

) The ending balance of Retained Earnings is reported on the: A) Balance Sheet. B) Statement of Retained Earnings. C) Income Statement. D) A and B.

) The first step in recording a transaction in the journal is: A) determining whether each account is increased or decreased by the transaction. B) copying the information from the journal to the ledger. C) entering the debit side of the journal entry on the left margin and the credit side, which is indented to the right. D) specifying each account affected by the transaction and classifying the account by type.

) The net loss for a company is reported on the: A) Statement of Cash Flows. B) Statement of Retained Earnings. C) Income Statement. D) all of the above.

) The normal balance of a revenue account is a ________ because revenues increase ________.

) The normal balance of the Accounts Receivable account is a ________ because it is a(n) ________ account. A) credit; liability B) debit; stockholders' equity C) credit; expense D) debit; asset

) The stable-monetary-unit assumption: A) ensures that accounting records and statements are based on the most reliable data available. B) requires all countries to record transactions in U.S. dollars. C) maintains that each organization or section of an organization stands apart from other organizations and individuals. D) enables accountants to ignore the effect of inflation on the accounting records.

) The statement of retained earnings reports a company's net income or net loss for a period of time. What is the source of the amount of net income or net loss? A) Balance Sheet B) Cash Dividend Statement C) Trial Balance Worksheet D) Income Statement

) Two employees worked one week and were paid salaries of $2,500. The journal entry would: A) debit Cash for $2,500 and credit Salaries Payable for $2,500. B) debit Cash for $2,500 and credit Salary Expense for $2,500. C) debit Accounts Payable for $2,500 and credit Salary Payable for $2,500. D) debit Salary Expense for $2,500 and credit Cash for $2,500.

) Under accrual-basis accounting, if a company fails to record a sale on account: A) revenue will be understated. B) assets will be understated. C) net income will still be correct. D) A and B.

) When a company pays an amount it owes a creditor: A) assets are decreased and net income is decreased. B) assets are decreased and liabilities are increased. C) liabilities are decreased and net income is increased. D) assets are decreased and liabilities are decreased.

) Which account is credited in the adjusting entry to allocate the cost of equipment? A) Equipment Expense B) Depreciation Expense-Equipment C) Accumulated Equipment D) Accumulated Depreciation-Equipment

) Which error will be uncovered by a trial balance? A) The bookkeeper recorded the same journal entry three times. B) The bookkeeper forgot to record a journal entry for a large amount. C) The bookkeeper recorded both the debit and credit of a journal entry as $200 instead of $700. D) The bookkeeper recorded a journal entry with a debit of $400 and a credit of $400, as a debit of $400 and a credit of $40.

) Which financial statement answers the following question: What is the company's financial position at fiscal year end? A) statement of cash flows B) income statement C) statement of retained earnings D) balance sheet

) Which of the following characteristics does NOT apply to verifiability? A) completeness B) reliability C) accuracy D) faithful representation

) Which of the following entities pay federal income taxes? A) limited liability partnership B) general partnership C) limited liability company D) corporation

) Which of the following have unlimited liability for a company's debts? A) owners of a corporation B) members of a limited liability company C) limited partners in a limited liability partnership D) general partner in a limited liability partnership

) Which of the following is a CORRECT statement about a chart of accounts? A) It lists the income statement accounts first. B) It can be used to determine the balance in an account. C) It is a tool used by accountants to help prepare the financial statements. D) It lists the balance sheet accounts first.

) Which of the following statements is FALSE? A) The application of U.S. GAAP for public companies in the Unites States has been overseen by SEC. B) The advantage of a uniform set of global accounting standards is that financial statements from a U.S. company will be comparable to those of a foreign company. C) In the long run, a uniform set of global accounting standards should significantly reduce the costs of doing business globally. D) IFRS has been adapted in the United States.

) Which of the following statements regarding a trial balance is TRUE? A) A trial balance may be prepared at any time during the accounting period. B) A trial balance is a list of all accounts used in a business with their balances. C) A trial balance shows whether total debits equal total credits. D) All of the above are true.

) Which of the following statements, regarding the rules of debits and credits, is CORRECT? A) An asset is increased by a credit. B) Common stock is increased by a debit. C) A liability is increased by a debit. D) Revenue is increased by a credit.

) Which statement below is FALSE? A) Income taxes payable is an accrued liability. B) Accrued liabilities can include liabilities for salaries. C) Assets are divided into current and long-term categories. D) Prepaid expenses include accrued interest payable.

) Which statement is FALSE? A) Sales to customers should be approved by a separate credit department. B) Purchases on credit should be approved by a separate purchasing department. C) Transactions with a large dollar amount should be approved by the Board of Directors or top management. D) The firing of employees should be handled by the department where the employee works.

) Which transaction decreases stockholders' equity? A) Inventory was purchased on account. B) Services were performed on account. C) Services were performed and cash was immediately received from the customers. D) Employees worked one week and were paid at the end of the week.

) Which transaction decreases stockholders' equity? A) sale of common stock B) cash purchase of land C) total revenues greater than total expenses for the period D) total expenses greater than total revenues for the period

) Which type of business organization transacts much more business and is larger in terms of assets, income, and number of employees? A) proprietorship B) partnership C) limited-liability company D) corporation

) Yellow Company had a balance of $31,000 in Accounts Payable at the beginning of June, and purchased $104,000 of merchandise on account during the month. At the end of June, Yellow's Accounts Payable balance was $29,000. What amount did Yellow pay on account during June? A) $44,000 B) $75,000 C) $104,000 D) $106,000

11) Accounting: A) measures business activities. B) processes data into reports and communicates the data to decision makers. C) is often called the language of business. D) is all of the above.

12) A disadvantage of general partnerships is: A) double taxation of distributed profits. B) the partnership's assets are commingled with each partner's personal assets. C) only individuals can be partners. D) each partner may conduct business in the name of the entity and make agreements that legally bind all partners.

28) If a journal entry includes a debit to Accounts Payable and a credit to Cash: A) Cash will have a credit balance. B) Accounts Payable is increased. C) Cash is increased. D) Accounts Payable is decreased.

A Trial Balance Worksheet lists: A) balance sheet accounts only. B) income statement accounts only. C) Retained earnings at the beginning of the accounting period and dividends declared. D) all of the above.

A bank reconciliation included an outstanding check of $850 for the payment of salaries. The journal entry to record this reconciling item: A) should debit Salaries Expense and credit Cash for $850. B) should debit Cash and credit Salaries Expense for $850. C) should debit Accounts Payable and credit Cash for $850. D) is not required.

A business purchased office supplies of $28,000 on account. The business would: A) debit Accounts Receivable for $28,000 and credit Supplies for $28,000. B) debit Supplies for $28,000 and credit Cash for $28,000. C) debit Accounts Payable for $28,000 and credit Supplies for $28,000. D) debit Supplies for $28,000 and credit Accounts Payable for $28,000.

A company has current assets of $105,000 and current liabilities of $35,000. A $6,000 sale on account was made. After this transaction, its current ratio will be: (Round your final answer to two decimal places.) A) 0.33. B) 2.83. C) 3.00. D) 3.17.

A company paid $3,000 for supplies that were purchased earlier in the month on account. How does this transaction affect the accounting equation? A) Add $3,000 to Supplies and add $3,000 to Supplies Expense. B) Add $3,000 to Supplies Expense and subtract $3,000 from Cash. C) Add $3,000 to Supplies Expense and add $3,000 to Cash. D) Subtract $3,000 from Accounts Payable and subtract $3,000 from Cash.

A payment packet of documents: A) reports the arrival of items purchased. B) is sent by the purchasing department to the vendor selling the item. C) identifies the need for merchandise and begins the purchasing process. D) includes the invoice, receiving report and purchase order.

According to the joint new standard for revenue recognition, issued by FASB and IASB, which item below is NOT necessary? A) Identify the contract with the customer. B) Identify the separate performance obligations in the contract. C) Allocate the transaction price to the separate performance obligations in the contract. D) Recognize expenses as the entity satisfies the performance obligations.

Accrual accounting records all of the following transactions EXCEPT: A) earning of unearned revenue received in advance. B) expiration of prepaid insurance. C) accrual of expenses incurred but not paid. D) receipt of Award for Service to the Community of Naperville, Illinois.

Adjusting entries: A) are needed for all balance sheet accounts. B) must be made on a daily basis to record supplies used during that day. C) are needed because errors have been made in previous journal entries. D) are made before the financial statements can be prepared.

Adjusting entries: A) close the revenue accounts. B) close the expense accounts. C) adjust Cash. D) adjust Unearned Revenue.

All of the following are examples of a weak control environment EXCEPT: A) a domineering CEO. B) a weak or conflicted Board of Directors. C) lax ethical practices. D) proper segregation of duties

All of the following line items are found on the income statement EXCEPT for: A) cost of product sold. B) interest expense. C) operating expense. D) dividends declared.

All of the following will appear on the bank statement EXCEPT for: A) checks paid and deposits made before the cutoff date on the bank statement. B) book errors. C) checks paid and deposits made after the cutoff date on the bank statement. D) B and C.

At the end of the accounting period, a company has accrued interest revenue that will not be received until the next accounting period. The adjusting entry would include a: A) debit to Interest Expense. B) debit to Interest Payable. C) debit to Interest Revenue. D) debit to Interest Receivable.

Cash and cash equivalents do NOT include: A) time deposits. B) petty cash. C) bank checking account. D) high-grade U.S. government securities maturing in 5 years.

Cash-basis accounting does NOT record: A) purchase of supplies with cash. B) sale of common stock. C) payment of note payable. D) depreciation expense.

Census Company had the following accounts and balances at the end of the year. What are total liabilities at the end of the year? Cash $78,000 Accounts Payable $13,000 Common Stock $21,000 Dividends $12,000 Operating Expenses $12,000 Accounts Receivable $54,000 Inventory $46,000 Long-term Notes Payable $35,000 Revenues $115,000 Salaries Payable $27,000 A) $13,000 B) $48,000 C) $40,000 D) $75,000

Complicating factors for a global business include: A) what is legal in one country may not be legal in another country. B) what is ethical in one country may not be ethical in another country. C) a foreign government threatening to take over the company's plant. D) all of the above.

Current assets as reported on the balance sheet do NOT include: A) cash equivalents. B) inventory. C) prepaid insurance. D) long-term investments.

Current liabilities as reported on the balance sheet do NOT include: A) current maturities of long-term debt. B) income taxes payable. C) salaries payable. D) treasury stock.

Debit cards are being used: A) in place of petty cash funds. B) for small purchases. C) for package delivery fees. D) all of the above.

Dooley Company sent a deposit of $7,000 to the bank. The bank credited Dooley Company's checking account for a deposit of $700. In reconciling the bank statement, the bookkeeper saw the deposit of $700 instead of the bank recording it at $7,000. Which journal entry should Dooley Company prepare? A) Debit Cash for $6,300 and credit Deposits fo $6,300. B) Debit Cash for $6,300 and credit Revenue for $6,300. C) Debit Cash for $6,300 and credit Accounts Receivable for $6,300. D) No journal entry is required.

Examples of financing activities on the statement of cash flows do NOT include: A) payment of note payable. B) payment of dividends. C) repurchase of company's own stock. D) sale of a piece of equipment for cash.

Examples of internal control procedures do NOT include: A) proper segregation of duties. B) adequate records. C) proper approvals. D) risk assessment.

Examples of items purchased with petty cash are: A) delivery cost for package. B) taxi fare for executive of company. C) box of name tags for convention. D) all of the above.

Fraudulent financial reporting: A) involves employee overstatement of expense reimbursement requests. B) involves bribes and kickbacks. C) involves stealing assets from the company. D) deceives investors into investing.

Hill Company established a petty cash fund of $500. The first transaction was the purchase of stamps for $46. Which of the following statements is CORRECT? A) The petty cash custodian prepares a petty cash voucher to list the item purchased. B) The amount of cash on hand should equal $454. C) The amount of cash on hand and the paid petty cash voucher should be maintained in a cash box or other secure device. D) All of the statements are correct.

If adjusting entries are NOT prepared, which financial statements are misstated? A) income statement only B) balance sheet only C) statement of retained earnings only D) income statement, balance sheet and statement of retained earnings

If an investor wants to know a company's cash balance at the end of the year, this balance is reported on the: A) balance sheet. B) statement of cash flows. C) income statement. D) A and B.

If the trial balance does not balance, several steps can be taken to find the error. Which step will probably NOT help you find the error? A) Tracing each account back and forth from the journal to the ledger. B) Divide the out-of-balance amount by 2. C) Divide the out-of-balance amount by 9. D) Divide the out-of-balance amount by 5.

Internal control procedures do NOT include: A) smart hiring practices. B) adequate records. C) limited access. D) control environment

Internal controls are designed to accomplish five objectives that include compliance with legal requirements, promote operational efficiency, safeguard assets, encourage employees to follow company policy and: A) prevent misappropriation of assets. B) prevent collusion. C) prevent fraud. D) ensure accurate, reliable accounting records.

Kincaid Company's Retained Earnings balance on January 1 was $9,000. During the current year, Kincaid earned $3,100 in revenues and incurred $4,300 in expenses. Kincaid declared and paid $3,000 in dividends, all in cash. After the closing entries are made, Kincaid's Retained Earnings balance on December 31 will be: A) $7,800. B) $9,100. C) $9,000. D) $4,800.

Owners' equity consists of two accounts, Amy Jones, Capital, and Mindy Lenz, Capital. This indicates the entity is a: A) proprietorship. B) corporation. C) not-for-profit. D) partnership.

Payment by check is an important internal control because: A) the check provides a record of the payment. B) the check must be signed by an authorized official who should study the evidence supporting the payment. C) all checks must be approved by the bank's internal audit department before they are paid. D) A and B

Performing services on account: A) decreases both assets and liabilities. B) increases assets and decreases stockholders' equity. C) decreases revenues and decreases stockholders' equity. D) increases both net income and stockholders' equity

Regarding income statement formats, which of the following statements is INCORRECT? A) A single-step income statement lists all the revenues and gains together under a heading such as Revenues and Gains. B) A single-step income statement lists income tax expense separately from all other expenses. C) A multistep income statement reports a number of subtotals to highlight important relationships between revenues and expenses. D) A multistep income statement is the only format that allows users to evaluate the profitability of the business.

The "tone at the top" refers to: A) a component of the control environment. B) a concept that applies only to large corporations. C) owners and top managers behaving honorably to set a good example for employees. D) A and C.

The CORRECT data flow from one financial statement to the next is: A) statement of retained earnings, income statement, balance sheet, statement of cash flows. B) balance sheet, statement of retained earnings, income statement, statement of cash flows. C) statement of retained earnings, income statement, statement of cash flows, balance sheet. D) income statement, statement of retained earnings, balance sheet, statement of cash flows.

The Income Statement is used to prepare the: A) Statement of Retained Earnings only. B) Statement of Cash Flows only. C) Balance Sheet only. D) Statement of Retained Earnings and Statement of Cash Flows.

The Sarbanes-Oxley Act of 2002: A) requires public companies to issue in writing that financial reports are accurate and that internal controls are adequate. B) has stiff penalties and prison time for violators of financial statement fraud. C) allows public companies to avoid a review of internal controls. D) A and B

The adjusting entry to record the accrual of income tax expense includes a: A) debit to Income Tax Payable. B) credit to Income Tax Expense. C) credit to Accounts Payable. D) credit to Income Tax Payable.

The balance sheet reports information about: A) revenues, expenses, and equity. B) liabilities, equity, and expenses. C) assets, revenues, and liabilities. D) assets, liabilities, and equity.

The balance sheet reports the retained earnings balance at the end of a fiscal year. What is the source of this ending balance of retained earnings? A) Trial Balance Worksheet B) Adjusted Trial Balance C) Unadjusted Trial Balance D) Statement of Retained Earnings

The components of internal control do NOT include: A) control environment. B) risk assessment. C) control procedures. D) safeguard assets.

The conceptual foundation of accounting does NOT include: A) accounting objectives. B) fundamental qualitative characteristics. C) enhancing qualitative characteristics. D) decision making.

The debt created by a business when it makes a purchase of inventory on account is a(n): A) revenue. B) account receivable. C) note payable. D) account payable.

The net income shown on the income statement also appears on the: A) balance sheet and statement of operations. B) statement of retained earnings. C) statement of cash flows, if the indirect method is used. D) B and C.

The objectives of internal control do NOT include: A) safeguard assets. B) encourage employees to follow company policy. C) ensure accurate, reliable accounting records. D) strong control environment.

The person who prepares the bank reconciliation: A) should also be responsible for cash receipts. B) should also be responsible for cash disbursements. C) should be responsible for both cash receipts and cash disbursements. D) should have no other cash duties.

The purchase of office computers for cash includes a debit to: A) Cash and a credit to Office Equipment. B) Office Equipment and a credit to Accounts Payable. C) Accounts Receivable and credit to Office Equipment. D) Office Equipment and a credit to Cash.

The trial balance is used to prepare the: A) balance sheet only. B) income statement only. C) statement of retained earnings only. D) all of the above.

To compute ending balance of retained earnings on the statement of retained earnings: A) net loss is added to the beginning balance of retained earnings and dividends that were declared and paid are subtracted from the beginning balance of retained earnings. B) net income and dividends are both added to the beginning balance of retained earnings. C) net loss and dividends are both added to the beginning balance of retained earnings. D) net income is added to the beginning balance of retained earnings.

Transaction analysis and the accounting equation have been used to record several transactions for a company. The transactions are now recorded on a multi-column spreadsheet. When preparing a balance sheet with this spreadsheet, which column(s) would be used? A) final balances of asset columns only B) final balances of liability columns only C) final balances of stockholders' equity columns only D) all of the above

Transaction analysis and the accounting equation have been used to record several transactions for a company. The transactions are now recorded on a multi-column spreadsheet. When preparing an income statement with this spreadsheet, which column would be used? A) Cash B) Accounts Payable C) Dividends D) Retained Earnings

Under accrual accounting, the event that triggers revenue recognition for the sale of goods is the: A) date a contract is signed. B) date the customer pays for the goods. C) date the customer orders the goods. D) delivery of goods to customer.

What is fraud? A) Fraud is the intentional misrepresentation of facts made for the purpose of persuading another individual to act in a way that causes injury or damage to that individual. B) Fraud is the misappropriation of assets. C) Fraud is untruthful financial reporting. D) all of the above

What is the purpose of fraudulent financial reporting? A) Net income and total assets are understated so managers can receive their bonuses. B) Net income and total assets are overstated so managers can receive their bonuses. C) A company can borrow money that would not otherwise be available. D) B and C

When a company borrows money (cash) from the bank, which type of account(s) is(are) increased? A) asset account only B) retained earnings only C) liability account only D) both asset and liability accounts

When customer checks are received in the mail, which employees are involved in processing the checks? A) mailroom employee, treasurer, cashier in the treasurer's department B) mailroom employee, accounting department employee, controller C) mailroom employee, accounting department employee, controller, treasurer D) mailroom employee, accounting department employee, controller, treasurer, cashier in the treasurer's department

When posting a journal entry to the ledger, transfer: A) the dollar amount of debits in the journal entry to the appropriate accounts. B) the dollar amounts of credits in the journal entry to the appropriate accounts. C) the name of the person who prepared the journal entry. D) A and B.

When preparing a bank reconciliation, which of the following items should be added to the book balance? A) EFT receipts B) deposits in transit C) collection of note receivable by bank D) both EFT receipts and collection of a note receivable by the bank

When preparing the bank reconciliation, if the adjusted book balance and the adjusted bank balance disagree, this may indicate: A) a math error made in preparing the bank reconciliation. B) a book error went undetected. C) fraudulent financial reporting. D) A and B.

When preparing the financial statements, why is the income statement prepared first? A) The income statement is used to prepare the balance sheet. B) The income statement is the easiest statement to prepare. C) The income statement is the most important statement to investors and creditors. D) Net income or net loss from the income statement is used for the statement of retained earnings.

When reporting cash on the balance sheet, companies: A) show each bank account separately. B) combine cash with accounts receivable. C) combine cash with long-term investments. D) combine cash and cash equivalents.

Which financial statement reports cash payments and cash receipts over a period of time? A) statement of retained earnings B) income statement C) balance sheet D) statement of cash flows

Which is NOT an objective of an internal control system? A) safeguarding of assets B) compliance with company policies C) compliance with legal requirements D) risk assessment

Which journal entry is prepared for a NSF check returned by the bank? A) No entry is prepared. B) Debit Cash and credit Accounts Payable. C) Debit Cash and credit Notes Payable. D) Debit Accounts Receivable and credit Cash.

Which law or regulation requires that public companies must maintain strong internal control systems? A) Dodd-Frank Act B) Securities and Exchange Act of 1933 C) Internal Control Act D) Sarbanes-Oxley Act

Which of the following are examples of the misappropriation of assets? A) An employee overstates an expense reimbursement request after a company trip. B) an employee theft of inventory C) a kickback scheme in the purchasing function D) all of the above

Which of the following is NOT a way to safeguard controls? A) purchasing a fidelity bond B) rotating employees into different job position C) mandatory vacations D) keeping accurate financial records

Which of the following items from the bank reconciliation require a journal entry? A) bank errors B) deposits in transit C) outstanding checks D) service charge by bank for printing of checks

Which of the following statements regarding cash equivalents is INCORRECT? A) Cash equivalents are sufficiently similar to cash and thus can be reported along with cash on the balance sheet. B) Cash equivalents include high-grade U.S. or foreign government securities that are very close to maturity (three months or less at the time of purchase). C) Most companies include additional information about cash and cash equivalents in the footnotes to their financial statements. D) Because cash equivalents are less liquid than cash, they must be reported separately from the Cash account.

Which of the following statements regarding fraud is INCORRECT? A) Fraud violates the rights of many for the temporary betterment of a few and for the ultimate betterment of no one. B) Motive, opportunity, and rationalization are elements that make up virtually every fraud. C) The perpetrators of fraud usually do so for their own short-term economic gain. D) Misappropriation of assets is a type of fraud that is committed by company managers who make false and misleading entries in the books in order to improve a company's financial results.

Which of the following transactions requires a journal entry? A) The bank charged $50 for a stop payment on a check. B) The bank deducted $50 from your account in error which they will fix. C) The bank collected a note receivable with interest on your behalf. D) A and C

Which of the following transactions would decrease an asset and decrease stockholders' equity? A) payment of an accounts payable B) performance of a service for a client on account C) borrowing money from the bank for thirty days D) declaration and payment of a dividend to the shareholders

Which statement is FALSE? A) The bookkeeper should not handle incoming checks from customers. B) Cashiers should not have access to the accounting records. C) The treasurer's department should be in charge of cash handling as well as signing and approving checks. D) The accounting department should be in charge of record keeping and depositing customers' checks.

Which statement(s) reports the revenues, gains, expenses, and losses of an entity? A) Balance Sheet B) Statement of Cash Flows and Income Statement C) Statement of Retained Earnings and Statement of Operations D) Income Statement

Why are adjusting entries prepared? A) Because some accounts are not up to date. B) Because some day to day transactions have not been recorded. C) Because the unadjusted trial balance is not quite ready for preparing the financial statements. D) A and C

With regard to customer checks received by mail, which statement is TRUE? A) The debit to Cash by the accounting department should equal the amount deposited in the bank by the mailroom employee. B) The customers' Accounts Receivable accounts should be adjusted by the cashier in the treasury department for the payments received. C) The controller compares the customers' checks to the remittance advices sent from the mailroom. D) The accounting department debits Cash and credits Accounts Receivable. The cashier in the treasurer's department deposits the checks in the bank.

) A company did not record the receipt and payment of an utility bill for $2,500. Is the trial balance out of balance? A) No. B) Yes, by $2,500. C) Yes, by $5,000. D) Yes, by an indeterminate amount.

) A company incorrectly recorded a receipt of cash on account. Accounts Receivable was debited for $1,400 and Cash was credited for $1,400. Is the trial balance out of balance? A) No. B) Yes, by $1,400. C) Yes, by $2,800. D) Yes, by $4,200.

) A company issues common stock for $100,000. On a statement of cash flows, this will be reported as a(n): A) financing cash flow. B) investing cash flow. C) operating cash flow. D) noncash activity.

) A company omitted a journal entry to record service revenue of $12,000 on account. Is the trial balance out of balance? A) No. B) Yes, by $12,000. C) Yes, by $24,000. D) Yes, by an indeterminate amount.

) A company receives an utility bill and immediately pays it. With this transaction: A) stockholders' equity is decreased. B) expenses are decreased. C) assets are increased. D) liabilities are increased.

) A company sold land for the same price that they paid for it last year. When entering this transaction in the journal, there will be a: A) credit to Land. B) debit to Land. C) debit to Accounts Payable. D) credit to Accounts Receivable.

) A company's main source of cash should be: A) operating activities. B) financing activities. C) investing activities. D) all of the above.

) A construction company paid $82,000 cash for land used in the business. At the time of purchase, the land had a list price of $90,000. When the balance sheet was prepared, the fair value of the land was $85,000. At what amount should the land be reported on the balance sheet of the company? A) $82,000 B) $85,000 C) $86,000 D) $90,000

) A journal entry that debits Cash and credits Accounts Receivable indicates that: A) payment was received on account. B) payment was made on account. C) revenue increased. D) revenue decreased.

) A single-step income statement reports different types of revenue that include: A) sales revenue and service revenue. B) income tax expense, utilities expense, rent expense. C) operating income, income before income taxes, and net income. D) cost of goods sold and operating expenses.

) An imprest petty cash fund of $600 was established for minor disbursements. At the end of the month the fund included petty cash tickets for the purchase of $185 in supplies, $48 for postage, $83 for fuel and a delivery charge of $65. How much cash should left in the fund? A) $219 B) $284 C) $367 D) $415

) Company A received cash and issued stock to a new stockholder. In recording this transaction: A) Cash would be debited. B) Common Stock would be debited. C) Cash would be credited. D) Retained Earnings would be credited.

) Doorglam paid $35,000 for office furniture. The furniture is depreciated using the straight-line method and has an estimated service life of 7 years and no residual value. After three years of use, the accumulated depreciation of the furniture will be: A) $15,000. B) $20,000. C) $30,000. D) $35,000.

) Equipment would appear on the: A) balance sheet with long-term assets. B) income statement with revenues. C) income statement with operating expenses. D) balance sheet with current assets.

) In 1990, Johnson Company purchased a building for $170,000. In 2020, a real estate professional says the building has a fair value of $1,000,000. In 2020, a similar building down the street recently sold for $900,000. What value, before consideration of accumulated depreciation, is reported for the building on the balance sheet at December 31, 2020? A) $170,000 B) $585,000 C) $900,000 D) $1,000,000

) Interest payable, income tax payable and salary payable are all examples of: A) accrued liabilities. B) prepaid expenses. C) expenses of future periods. D) retained earnings.

) Lorna Company is a new company with a beginning retained earnings balance of zero. It has the following account balances at the end of the first year of operations: Accounts Payable $37,000 Revenues $106,000 Salaries Expense $14,000 Dividends $8,000 Utilities Expense $12,000 Advertising Expense $10,000 Short-term Investments $20,000 Cash $33,000 Land $50,000 Common Stock $53,000 What is the ending balance in Retained Earnings? A) $62,000 B) $32,000 C) $30,000 D) $40,000

) On December 31, 2019, salaries owed to employees total $4,050. These will be paid on January 4, 2020. An adjusted trial balance prepared on December 31, 2019, includes which of the following? A) Salaries Expense, $4,050 and Salaries Payable, $4,050 B) Salaries Payable, $4,050 and Unearned Salaries Revenue, $4,050 C) Unearned Salaries, $4,050 D) Unearned Salaries, $4,050 and Salaries Payable, $4,050

) On a statement of cash flows, cash receipts are reported as: A) positive amounts. B) negative amounts. C) in parenthesis. D) operating activities only.

) On the statement of retained earnings: A) a net loss decreases retained earnings. B) net income decreases retained earnings. C) dividends declared increase retained earnings. D) a deficit ending balance in retained earnings is not allowed.

) Paying a repair bill as soon as it was received would: A) increase expenses. B) increase liabilities. C) increase stockholders' equity. D) decrease revenues.

) The accounting assumption that states that the business, rather than its owners, is the reporting unit is the: A) entity assumption. B) going concern assumption. C) stable-monetary-unit assumption. D) historical cost assumption.

) The adjustment for an accrued revenue: A) is necessary because a business often earns revenue before they receive the cash. B) increases a payable account. C) decreases a receivable account. D) is necessary because a business often receives cash before it performs the service.

) The balance sheet reports: A) assets, liabilities and stockholders' equity. B) the changes in retained earnings. C) assets, liabilities, revenues and expenses. D) revenues and expenses.

) The beginning retained earnings balance is found on the: A) statement of retained earnings. B) income statement. C) balance sheet. D) both the statement of retained earnings and the balance sheet

) The owner of a ________ is personally liable for all the business's debts. A) proprietorship B) corporation C) limited-liability company D) All of the above are correct

) The principle stating that assets acquired by the business should be recorded at their actual cost on the date of purchase is: A) historical cost. B) objectivity. C) reliability. D) stable-monetary-unit.

) Three key duties that must always be separated under a good system of internal controls are: A) asset handling, record keeping and transaction approval. B) asset handling, hiring and safeguarding of assets. C) asset handling, recordkeeping and safeguarding of assets. D) record keeping, transaction analysis and transaction approval.

) Which financial statement is dated at the moment in time when the accounting period ends? A) Balance Sheet B) Income Statement C) Statement of Retained Earnings and Income Statement D) Statement of Cash Flows

) Which is the CORRECT order for items to appear on the income statement? A) revenues, operating expenses, net income B) cost of goods sold, revenues, net income C) revenues, net income, operating expenses D) interest expense, revenues, income from operations

) Which of the following is NOT a correct statement about adjusting entries? A) Every adjusting entry affects cash. B) Every adjusting entry affects the balance sheet. C) Every adjusting entry affects net income. D) Adjusting entries are posted before the adjusted trial balance is prepared.

) Which of the following items would NOT be included in the journal entry for a transaction? A) the names of the employees involved in recording the transaction B) the date the transaction occurred C) the titles of the accounts debited D) the dollar amount of the transaction

) Which of the following must be added to beginning Retained Earnings to compute ending Retained Earnings? A) net income B) expenses C) dividends D) all of the above

) Which of the following statements is TRUE for a limited liability partnership? A) The partnership pays no federal income taxes. B) Only the limited partners pay federal income taxes on their shares of the partnership's profits. C) Only the general partner pays federal income taxes on his or her share of the partnership's profits. D) Only the members pay federal income taxes on their shares of the partnership's profits.

) Which of the following would be considered a financing activity that decreases cash on the statement of cash flows? A) The company pays a long-term loan. B) The company sells common stock. C) The company purchases a building. D) The company pays its monthly utility bill.

) With an accrual of revenue: A) the cash is received after the revenue is recorded. B) the cash is received before the revenue is recorded. C) plant assets can create an accrual adjustment. D) prepaid expenses can create an accrual adjustment.

A company can limit employees' access to assets by: A) keeping the supply of unused checks under lock and key. B) processing the company's cash payments through one employee who handles the bookkeeping and the check preparation. C) allowing persons who have record-keeping responsibilities be part of the mailroom function. D) all of the above

A company recorded a cash payment incorrectly. Accounts Receivable was debited for $1,900 and Cash was credited for $1,900. The correct entry would debit Accounts Payable for $1,900 and credit Cash for $1,900. Is the trial balance out of balance? A) No. B) Yes, by $1,900. C) Yes, by $3,800. D) Yes, by an indeterminate amount.

A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual accounting, the doctor recognizes revenue: A) in March. B) in July. C) in either March or July. D) at a time that cannot be determined from the facts.

All of the following accounts are closed EXCEPT for: A) Cash. B) Service Revenue. C) Dividends. D) Utilities Expense.

All of the following will appear on the income statement EXCEPT for: A) assets. B) expenses. C) gains. D) revenues.

Alpha Company has an account at First Bank. Alpha writes a check payable to Beta Company. In this transaction, Beta Company is the: A) payee. B) payer. C) drawer. D) maker.

An expense occurred in 2018, but it is not paid until 2019. Using accrual accounting, the expense should appear on: A) the 2018 income statement. B) the 2019 income statement. C) whichever income statement the business prefers. D) both the 2018 and 2019 income statements.

An important rule of debits and credits is: A) credits increase revenue accounts. B) debits decrease asset accounts. C) debits increase liability accounts. D) credits increase asset accounts.

Cash equivalents include: A) certificates of deposit. B) inventory held for sale. C) accounts receivable. D) high-grade U.S. or foreign government securities that are very close to maturity (three months or less from the balance sheet date).

Current assets are assets expected to be converted to cash, sold, or consumed during the next: A) 12 months or within the business's operating cycle if longer than a year. B) 12 months or within the business's operating cycle if less than a year. C) 6 months. D) 24 months.

If a bank statement includes an EFT receipt of $200 for interest, the journal entry to record this reconciling item should include a: A) debit to Cash for $200 and a credit to Interest Revenue for $200. B) debit to Accounts Receivable for $200 and a credit to Interest Revenue for $200. C) debit to Interest Revenue for $200 and credit to Cash for $200. D) debit to Interest Expense for $200 and credit to Prepaid Interest for $200.

Michael Company reports Total Assets of $254,000, Common Stock of $50,000, and Retained Earnings of $94,000. What are total liabilities at the end of the first year? A) $110,000 B) $210,000 C) $160,000 D) $204,000

Muddle Company performs a service for one of its customers and immediately collects the cash. This transaction will: A) have no effect on liabilities. B) decrease net income. C) decrease Retained Earnings. D) increase Accounts Receivable.

Notes payable (due in 60 days) would appear on the balance sheet as a: A) current liability. B) current asset. C) long-term asset. D) long-term liability.

Prepaid expenses will become ________ when their future benefits expire. A) expenses B) revenues C) liabilities D) assets

Shareholders of a corporation: A) have limited liability for the corporation's debts. B) can only be individuals. C) have a personal obligation for the corporation's debts. D) receive dividends from the corporation without having to pay tax on the distribution.

Stockholders' equity as reported on the balance sheet does NOT include: A) short-term investments. B) common stock. C) retained earnings. D) additional paid-in capital.

The debt ratio is computed by dividing: A) total liabilities by total assets. B) current liabilities by total assets. C) total assets by total liabilities. D) total assets by current liabilities.

The dollar amount for Accounts Receivable in the Adjusted Trial Balance Debit column of a Trial Balance Worksheet is obtained by taking the: A) Unadjusted Trial Balance Debit column plus the Debit Adjustments column minus the Credit Adjustments column. B) Unadjusted Trial Balance Debit column. C) Unadjusted Trial Balance Credit column. D) Unadjusted Trial Balance Credit column plus closing entries.

The economic factor in decision making requires the decision maker to: A) maximize the economic benefit to the decision maker. B) maximize the economic benefit to the corporation or nonprofit entity. C) maximize the corporation's profits. D) minimize the corporation's costs.

The expense recognition principle requires the recognition of expenses: A) in the same period in which the related revenues are earned. B) in the period they are paid. C) in the period assets are created. D) in the period in which future benefit for the company occurs.

The fair value of a plant asset is equal to: A) the amount the business could sell the asset for. B) the amount of cash paid plus the dollar value of noncash consideration given in exchange for the plant asset at acquisition. C) the amount of cash paid plus the loan taken out to finance the purchase of the plant asset. D) the amount a company can receive for the asset when sold in order to go out of business.

The objectives of internal control do NOT include: A) compliance with standards of social responsibility. B) safeguarding assets. C) promoting operational efficiency. D) compliance with legal requirements.

The relevant measure of the value of the assets of a company that is going out of business is the: A) liquidating value. B) inflation-adjusted book value. C) historical cost. D) carrying value.

The type of fraud committed by employees of an entity, who steal money from the company and cover it up through erroneous entries in the books, is called: A) misappropriation of assets. B) fraudulent financial reporting. C) phishing. D) collusion.

There are three parties to a check. The person who signs the check is the: A) maker. B) payee. C) draftee. D) promisee.

To obtain a new customer, a business sells merchandise to the customer for $130. Normally, the merchandise sells for $260. For this sale, the business should record revenue of: A) $130. B) $260. C) either amount. D) an average of the two amounts.

What is the last step in the journalizing process? A) Record the transaction in the journal. B) Post the journal entry to the ledger. C) Determine whether each account is increased or decreased by the transaction. D) Specify each account affected by the transaction and classify each account by type.

When a company receives customers' checks by mail: A) all incoming mail containing checks from customers should be opened by the mailroom. B) the mailroom sends all customer checks to the accounting department. C) the remittance advices go to the treasurer for deposit. D) the bank deposit is prepared by the mailroom.

When a company receives customers' checks by mail: A) the mailroom sends all customer checks to the treasurer, who has the cashier deposit the checks in the bank. B) the treasurer prepares the journal entries. C) the mailroom employee prepares the journal entries. D) the treasury department cashier prepares the journal entries.

When analyzing a company's debt ratio: A) the ratio measures a company's ability to pay its total liabilities. B) the ratio indicates the proportion of a company's assets that are financed with stockholders' equity. C) a high debt ratio is better than a low debt ratio. D) the norm for debt ratios ranges from 80% to 90%.

When preparing a bank reconciliation: A) deposits in transit are added to the bank balance. B) service charges are subtracted from the bank balance. C) outstanding checks are subtracted from the book balance. D) book errors are subtracted from the bank balance.

Which accounts are used in the adjusting entry to record salaries owed to employees, but not paid until the next accounting period? A) Salaries Expense and Salaries Payable B) Unearned Salaries and Salaries Payable C) Salaries Payable and Deferred Salaries Expense D) Deferred Salaries Payable and Salaries Receivable

Which is NOT a component of comparisons and compliance monitoring? A) control environment B) budgets C) audits D) all of the above

Which of the following statements regarding the time-period concept is NOT correct? A) Interim financial reports are rarely prepared. B) Accountants prepare financial statements for specific periods of time. C) The basic accounting period is one year. D) Most large companies use a calendar year for financial reporting.

Which transaction increases stockholders' equity? A) sale of common stock B) dividends that are declared and paid C) expenses greater than revenues for the period D) payment of operating expenses

________ rearranges messages by a mathematical formula making the message impossible to read by someone who does not know the code. A) Encryption B) Firewall C) Security wall D) Access device

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