Accounting Exam #1
Which of the following would not be considered an internal user of accounting data for the Xanadu Company?
President of the employees' labor union
Accumulated depreciation-equip.
Property, plant, and equipment
Information that makes a difference in a decision.
Relevance
Which of the following financial statements is concerned with the company at a point in time?
Balance Sheet
A company uses the same accounting principles from year to year.
Consistency
A business organized as a separate legal entity is a
Corporation
Inventory
Current assets
Prepaid insurance
Current assets
Salaries and wages payable
Current liabilities
Information that is free from error.
Faithful representation
Economic events can be identified with a particular unit of accountability.
Economic entity assumption
Which of the following steps in the accounting process is done after analyzing business transactions? a. Preparing the financial statements b. Preparing a trial balance c. Entering transactions in a journal d. Posting journal entries
Entering transactions in a journal
Information accurately depicts what really happened
Faithful representation
What organization issues U.S. accounting standards?
Financial Accounting Standards Board
Circumstances and events that make a difference to financial statement users should be disclosed.
Full disclosure principle
The business will continue in operation long enough to carry out its existing objectives.
Going concern assumption
Assets should be recorded at their cost.
Historical cost principle
Patents
Intangible assets
Trademarks would appear in which balance sheet section?
Intangible assets
Land (held for investment)
Investments
Which of the following accounts is increased with a debit? a. Land b. Service Revenue c. Interest Payable d. Common Stock
Land
Which of the following describes the classification and normal balance of the Unearned Rent Revenue account?
Liability, credit
Mortgage payable
Long-term liabilities
Only transaction data that can be expressed in terms of money should be included in the accounting records.
Monetary unit assumption
Interest expense
Not on the balance sheet
The economic life of a business can be divided into artificial time periods.
Periodicity assumption
A debit is NOT the normal balance for which account listed below?
Revenue
Which accounts normally have credit balances?
Revenues, liabilities, and retained earnings
Common stock
Stockholders' equity
Retained earnings
Stockholders' equity
Information presented in a clear and concise fashion.
Understandability
Accounts Receivable is classified on the balance sheet as
a current asset.
On July 7, 20XX, Shireman Enterprises received cash $1,400 for services rendered. The entry to record this transaction will include
a debit to Cash of $1,400
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
account payable
The right to receive money in the future is called a(n)
account receivable
The cost of assets consumed or services used is also known as
an expense
Powers Corporation received a cash advance of $500 from a customer. As a result of this even
assets increased by $500.
Debits
increase assets and decrease liabilities.
When a company performs a service but has not yet received payment, it a. debits Service Revenue and credits Accounts Receivable. b. debits Accounts Receivable and credits Service Revenue. c. debits Service Revenue and credits Accounts Payable. d. makes no entry until cash is received.
debits Accounts Receivable and credits Service Revenue.
A current asset is
expected to be converted to cash or used in the business within a relatively short period of time
The concept that a business has a reasonable expectation of remaining in business for the
going concern assumption.
In order for accounting information to be relevant, it must
help predict future events or confirm prior expectations.
On a classified balance sheet, companies usually list current assets
in the order in which they are expected to be converted into cash.
To show how successfully your business performed during a period of time, you would report its revenues and expenses in the
income statement
The purchase of an asset for cash
leaves total assets unchanged.
The assumption that requires only those things that can be expressed in money are included in the accounting records is the
monetary unit assumption.
An income statement
presents the revenues and expenses for a specific period of time.
Equipment is classified on the balance sheet as
property, plant, and equipment.
The primary purpose of the trial balance is to
prove the equality of the debit and credit amounts after posting.
The two fundamental qualities of useful information are
relevance and faithful representation.
The best definition of assets is the
resources belonging to a company that have future benefit to the company.
Dividends are reported on the
retained earnings statement
If services are rendered on account, then
stockholders' equity will increase.
The right side of a t-account is
the credit side.
