ACCT207 Ch. 1-4 Study Guide Questions

1. Ability to easily evaluate one company's results relative to another's. 2. Belief that a company will continue to operate for the foreseeable future. 3. The judgment concerning whether an item is large enough to matter to decision makers. 4. The reporting of all information that would make a difference to financial statement users. 5. The practice of preparing financial statements at regular intervals. 6. The quality of information that indicates the information makes a difference in a decision. 7. Belief that items should be reported on the balance sheet at the price that was paid to acquire the item. 8. A company's use of the same accounting principles and methods from year to year. 9. Tracing accounting events to particular companies. 10. The desire to minimize errors and bias in financial statements. 11. Reporting only those things that can be measured in dollars.

1. Comparability 2. Going concern 3. Materiality 4. Full disclosure 5. Periodicity 6. Relvance 7. Cost 8. Consistency 9. Economic entity 10. Faithful Representation 11. Monetary Unit

State whether each of the following items is most closely associated with the management discussion and analysis (MD&A), the notes to the financial statements, or the auditor's report. 1. Descriptions of significant accounting policies: 2. Unqualified opinion: 3. Explanations of uncertainties and contingencies: 4. Description of ability to fund operations and expansion: 5. Description of results of operations: 6. Certified Public Accountant (CPA):

1. Notes 2. Auditor's report 3. Notes 4. MD&A 5. MD&A 6. Auditor's report

Which of the following financial statements is prepared as of a specific date? a. Balance sheet. b. Income statement. c. Retained earnings statement. d. Statement of cash flows.

a. Balance sheet.

Cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called: a. Current assets. b. Intangible assets. c. Long-term investments. d. Property, plant, and equipment.

a. Current assets.

Which of the following is not a long-term liability? a. Bonds payable b. Current maturities of long-term obligations c. Long-term notes payable d. Mortgages payable

b. Current maturities of long-term obligations

The primary GAAP standard setter is: a. PETA b. FASB c. IASB d. SEC

b. FASB

Patents and copyrights are a. Current assets. b. Intangible assets. c. Long-term investments. d. Property, plant, and equipment.

b. Intangible assets.

What is the primary criterion by which accounting information can be judged? a. Consistency. b. Predictive value. c. Usefulness for decision making. d. Comparability.

c. Usefulness for decision making.

A trial balance will not balance if: a. a correct journal entry is posted twice. b. the purchase of supplies on account is debited to Supplies and credited to Cash. c. a $100 cash dividends is debited to the Dividends account for $1,000 and credited to Cash for $100. d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

c. a $100 cash dividends is debited to the Dividends account for $1,000 and credited to Cash for $100.

Debits: a. increase both assets and liabilities. b. decrease both assets and liabilities. c. increase assets and decrease liabilities. d. decrease assets and increase liabilities.

c. increase assets and decrease liabilities.

Adjusting entries are made to ensure that: a. expenses are recognized in the period in which they are incurred. b. revenues are recorded in the period in which they are earned. c. balance sheet and income statement accounts have correct balances at the end of an accounting period. d. All of the above.

d. All of the above.

Which one of these statements about the accrual basis of accounting is false? a. Companies record events that change their financial statements in the period in which events occur, even if cash was not exchanged. b. Companies recognize revenue in the period in which it is earned. c. This basis is in accord with generally accepted accounting principles. d. Companies record revenue only when they receive cash, and record expense only when they pay out cash.

d. Companies record revenue only when they receive cash, and record expense only when they pay out cash.

Which of the following did not result from the Sarbanes-Oxley Act? a. Top management must now certify the accuracy of financial information. b. Penalties for fraudulent activity increased. c. Independence of auditors increased. d. Tax rates on corporations increased.

d. Tax rates on corporations increased.

Accounts that normally have debit balances are: a. assets, expenses, and revenues. b. assets, expenses, and equity. c. assets, liabilities, and dividends. d. assets, dividends, and expenses.

d. assets, dividends, and expenses.

Net income will result during a time period when: a. assets exceed liabilities. b. assets exceed revenues. c. expenses exceed revenues. d. revenues exceed expenses.

d. revenues exceed expenses.

Posting: a. normally occurs before journalizing. b. transfers ledger transaction data to the journal. c. is an optional step in the recording process. d. transfers journal entries to ledger accounts.

d. transfers journal entries to ledger accounts.