Financial Accounting Exam 1 Questions

The three principal forms of business organization are: Select one:

A corporation, a partnership, and a sole proprietorship

In a double-entry accounting system:

A debit entry is recorded on the left side of an account

An adjusting entry will not take the format of which one of the following entries? Select one:

A debit to an expense account and a credit to a revenue account

Which of the following situations has the potential to create ethical pressure on an accountant? Select one:

A. Preparing an individual's income tax return when much of the supporting documentation is missing B. Informing a sales manager that the travel and entertainment expenses turned in by the top performing sales representative exceed company allowances C. Discovering that the company has made a mistake in computing refunds granted to customers, causing the refunds to be too small

Which of the following is not a source document?

Account in general ledger

A company provides services to clients during the period that are neither paid for, nor billed to the clients. What must the company do?

Accrue revenue by making an adjusting entry at the end of the period

On which statement are assets, liabilities and stockholders' equity reported? Select one:

Balance sheet

A company's fiscal year may: Select one:

Be the same as the calendar year

Which of the following is not an advantage of the corporate form of business organization?

Both the business and the owners are taxed

Which of the following journal entries will record the payment of a $2,550 accounts payable originally incurred for Office Supplies?

Debit Accounts Payable; credit Cash

As of the beginning of 2019, the Logistics Company had equipment totaling $1,800,000 which was depreciated at $150,000 per year. If Let's Move makes the appropriate adjusting entry at year end, which of the following is one part of the journal entry that will be made?

Debit Depreciation Expense for $150,000

Which of the following would be reported on a statement of retained earnings?

Dividends

Which of the following is a correct statement of the accounting equation in economic terms?

Economic resources = creditor financing + owner financing

The area of accounting dealing with the preparation of financial statements showing a business's results of operations, financial position, and cash flow is referred to as:

Financial accounting

The The three types of business activities in which every business, regardless of organizational form, its industry or its size, is involved are:

Financing activities, operating activities, investing activities

Which of the following statements is true regarding generally accepted accounting principles (GAAP)?

GAAP is subject to change as conditions warrant.

Which of the following will properly record the payment of a two-year insurance policy?

Increase and decrease assets

Cash collected on accounts receivable would produce what effect on the balance sheet?

Increase assets and decrease assets

An accrual of wages expense would produce what effect on the balance sheet?

Increase liabilities and decrease equity

Owl Company calculates that interest of $5,400 has accrued at December 31 on outstanding notes payable. How should Owl record this on December 31?

Interest Expense 5,400 Interest Payable 5,400

Financial accounting oversight in the United States is provided by all of the following organizations except the:

International Accounting Standards Board (IASB)

Which of the following items are disclosed on the balance sheet? Select one:

Inventory, accounts receivable, equipment

Which of the following is a distinguishing characteristic of a deferral?

It includes the adjustment of an amount previously recorded in a balance sheet account

Which of the following is not true of the general journal?

It receives postings of dollar amounts from the general ledger

What are the obligations or debts that a business must pay in cash or in goods and services at some future time because of past transactions or events called and how are they reported?

Liabilities on the balance sheet

The expense recognition (matching) principle states that:

Net income is determined by linking expenses incurred with related earned sales revenue.

Which of the following accounts normally has a credit balance?

Notes Payable

Which of the following is not among the five major steps in the accounting cycle? Select one:

Prepare a chart of accounts

The communication activity of the accounting process must:

Prepare financial reports and help interpret financial results to meet users' needs

Anisha Company had a transaction that caused a $30,000 increase in both assets and liabilities. This transaction could have been a(n):

Purchase of office equipment for $44,000, paying $14,000 cash and issuing a note payable for the balance

Equity financing involves: Select one:

Selling shares of stock to investors

When adjusting for depreciation, which of the following is one effect of the adjustment?

The asset's book value declines

Which of the following is not part of the standard heading of a financial statement?

The company's industry

Which one of the following is not a reason for which adjusting entries are made?

To close the income statement accounts and prepare them for the following year's activity

A trial balance that balances is useful because it indicates with certainty that:

Total debits in the general ledger equal total credits.

The Cash T-account of Rainbow, Inc. has a beginning balance of $52,000. During the year, $244,000 was debited and $241,000 was credited to the account.

$55,000

Which of the following forms of business organizations exists as a legal entity for tax purposes?

A corporation

Which of the following accounts is closed to Income Summary at the end of the accounting period?

Advertising Expense

The first two steps of the accounting cycle, in proper sequence, are: Select one:

Analyze transactions from source documents and record transactions in a journal.

Which of the following is the correct order of the steps in the accounting cycle?

Analyze, record, adjust, report, and close

As supplies and PPE assets on the balance sheet are consumed, they are reflected:

As an expense on the income statement

The accounting equation states: Select one:

Assets = Liabilities + Stockholders' Equity

On December 31, the end of the accounting period, $10,600 in service fees had been earned but not billed or received. The Wilk Company uses the account Fees Receivable to reflect amounts due but not yet billed. The proper adjusting entry would be:

Fees Receivable 10,600 Service Fees Earned 10,600

Which one of the following is not an external user of financial information?

Senior company management

Which of the following is a temporary account? Select one:

Wages Expense