FA exam flash cards
48) Which of the following is a liability account? A) Accounts Payable B) Prepaid Expense C) Salaries Expense D) Service Revenue
A) Accounts Payable
40) A customer's promise to pay in the future for services or goods sold is called a(n) ________. A) Accounts Receivable B) Accounts Payable C) Unearned Revenue D) Notes Payable
A) Accounts Receivable
65) Which of the following statements is true of accrual basis accounting? A) Accrual basis accounting is required by Generally Accepted Accounting Principles(GAAP). B) Accrual basis accounting records expenses only when cash has been paid for them. C) Accrual basis accounting records revenue only when cash is received. D) Accrual basis accounting always results in greater net income than cash basis accounting
A) Accrual basis accounting is required by Generally Accepted Accounting Principles(GAAP).
45) Which of the following accounts is an asset? A) Cash B) Accounts Payable C) Service Revenue D) Notes Payable
A) Cash
59) Which of the following accounts decreases with a credit? A) Cash B) Common Stock C) Accounts Payable D) Unearned Revenue
A) Cash
8) ________ are professional accountants who serve the general public, not one particular company. A) Certified public accountants B) Financial managers C) Internal auditors D) Controllers
A) Certified public accountants
23) Which of the following is a characteristic of a corporation? A) Corporations are separate taxable entities. B) Lenders of a corporation do not have the right to claim the corporation's assets to satisfy their obligations. C) Corporations are subjected to less governmental regulation than other forms of businesses. D) Each stockholder has the authority to commit the corporation to a binding contract through his/her actions.
A) Corporations are separate taxable entities.
74) Which of the following is a direct transfer to the balance sheet? A) Ending Retained Earnings B) Beginning Retained Earnings C) Net Income D) All of above
A) Ending Retained Earnings
87) Which of the following is a plant asset? A) Equipment B) Patents C) Trademark D) Accounts Receivable
A) Equipment
13) Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? A) Financial Accounting Standards Board B) Institute of Management Accountants C) American Institute of Certified Public Accountants D) Securities and Exchange Commission
A) Financial Accounting Standards Board
11) ________ review financial data and help explain the story behind the numbers. A) Financial analysts B) Cost accountants C) Internal auditors D) Controllers
A) Financial analysts
42) Which of the following is classified as an asset account? A) Prepaid Insurance B) Notes Payable C) Dividends D) Unearned Revenue
A) Prepaid Insurance
37) The account title used for recording the payment of rent in advance for an office building is ________. A) Prepaid Rent B) Rent Payable C) Rent Revenue D) Rent Expense
A) Prepaid Rent
60) Which of the following accounts increases with a debit? A) Prepaid Rent B) Interest Payable C) Accounts Payable D) Common Stock
A) Prepaid Rent
62) Which of the following accounts increases with a debit? A) Rent Expense B) Service Revenue C) Accounts Payable D) Unearned Revenue
A) Rent Expense
22) Which of the following is a major reason why corporate ownership is popular in the United States? A) Stockholders have limited liability for the debts of the corporation. B) Most corporations are small- or medium-sized. C) The life of a corporation is limited by the death of the owner. D) A corporation is usually managed by the owners.
A) Stockholders have limited liability for the debts of the corporation.
27) Which of the following statements is true of the corporate form of business? A) The board of directors sets policy for the corporation and appoints the officers. B) Changes in the ownership of stock have a negative effect on the continuity of the corporation. C) Any stockholder may commit the corporation to a contract. D) It is easy for stockholders to lodge an effective protest against management.
A) The board of directors sets policy for the corporation and appoints the officers.
76) The financial statements are prepared from the ________. A) adjusted trial balance B) chart of accounts C) statement of retained earnings D) unadjusted trial balance
A) adjusted trial balance
33) The earnings of a sole proprietorship are ________. A) combined with the personal income of the proprietor B) not combined with the proprietor's personal income C) subject to double taxation D) handled similarly to that of a corporation
A) combined with the personal income of the proprietor
86) Under which of the following categories would Accounts Receivable appear? A) current assets B) current liabilities C) long-term assets D) long-term liabilities
A) current assets
53) Distribution of cash or other assets to the stockholders is called ________. A) dividends B) unearned revenues C) salaries expense D) revenues
A) dividends
26) Corporations pay their own income tax on corporate income. Stockholders pay personal income tax on the dividends received from corporations. This is an example of ________. A) double taxation B) continuous life C) mutual agency D) a limited liability company
A) double taxation
52) Common Stock is a separate account in the ________ category of the accounting equation. A) equity B) asset C) liability D) revenue
A) equity
9) Accountants generally work either in public, private or ________ accounting. A) governmental B) personal C) managerial D) state
A) governmental
3 Managerial accounting provides information to ________.A) internal decision makers B) outside investors and lenders C) creditors D) taxing authorities
A) internal decision makers
5) The field of accounting that focuses on providing information for internal decisionmakers is ________.A) managerial accounting B) financial accounting C) nonmonetary accounting D) governmental accounting
A) managerial accounting
99) The merchandise that is currently being held by a business to sell to customers is referred to as: A) merchandise inventory B) wholesale goods C) cost of goods sold D) retail goods
A) merchandise inventory
64) The cash basis of accounting ignores ________. A) payables B) revenue C) cash D) expenses
A) payables
97) An entity that buys goods and sells them to consumers at a markup is a________. A) retailer B) wholesaler C) manufacturer D) producer
A) retailer
54) Which of the following is provided in a typical chart of accounts? A) Account balance B) Account number C) Dates of transactions D) Transaction amounts
B) Account number
58) Which of the following accounts increases with a credit? A) Dividends B) Common Stock C) Accounts Receivable D) Prepaid Expense
B) Common Stock
10) ________ typically work in a manufacturing business and help analyze accounting data. A) Financial analysts B) Cost accountants C) Internal auditors D) Controllers
B) Cost accountants
29) Which of the following is a characteristic of a limited-liability company (LLC)? A) An LLC's life is terminated at any member's choice or death. B) Each member of an LLC is liable only for his or her own actions. C) An LLC must have more than five members. D) The earnings of an LLC are subject to double taxation.
B) Each member of an LLC is liable only for his or her own actions.
19) ________ allows users of the information to make a decision. A) Relevant information B) Faithful representation C) Neutral information D) Generally Accepted Accounting Principles
B) Faithful representation
7) Which of the following is a decision made by an internal user? A) Should we lend money to the business? B) How much money should the business budget for production? C) Should I invest in the business? D) All of the above are correct.
B) How much money should the business budget for production?
17) Which of the following statements regarding the primary objective of financial reporting is correct? A) The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. B) Information that is faithfully representative is complete, neutral, and free from error. C) Relevant information ensures that users of the information will make the correct decisions. D) To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission.
B) Information that is faithfully representative is complete, neutral, and free from error.
14) The Financial Accounting Standards Board (FASB) works with the following groups. Which of these groups was congressionally created? A) Institute of Management Accountants B) Public Company Accounting Oversight Board C) International Accounting Standards Board D) American Institute of CPAs
B) Public Company Accounting Oversight Board
46) ________ represents a debt owed for renting a building. A) Prepaid Rent B) Rent Payable C) Rent Revenue D) Rent Expense
B) Rent Payable
28) Which of the following statements is true of a sole proprietorship? A) A sole proprietorship joins two or more individuals as co-owners. B) The sole proprietor is personally liable for the liabilities of the business. C) A sole proprietorship is taxed separately from the owner. D) A sole proprietorship has to pay business income taxes.
B) The sole proprietor is personally liable for the liabilities of the business.
66) Which of the following accounts would be used under the accrual basis of accounting, but not under cash basis accounting? A) Cash B) Unearned Revenue C) Service Revenue D) Salaries Expense
B) Unearned Revenue
2) The Pathways Vision Model emphasizes that good decisions have an impact on A) accounting judgments and economic activity. B) accounting judgments only. C) economic activity only. D) neither accounting judgments nor economic activity.
B) accounting judgments only.
79) Property, plant, and equipment are ________.A) presented in order of the category name, with Land being presented last B) also called fixed or plant assets C) either tangible or intangible assets D) easily converted to cash
B) also called fixed or plant assets
72) Which financial statement is prepared last? A) income statement B) balance sheet C) statement of retained earnings D) The financial statements can be prepared in any order.
B) balance sheet
36) Stuart Allen Corporation manufactures computer hardware. The president of the corporation bought a new car as a gift for his daughter and paid for it using cash from the business. Since the corporation paid for the car, it was recorded in its books as an asset. Which of the following concepts or principles of accounting did the corporation violate? A) monetary unit assumption B) economic entity assumption C) cost principle D) going concern assumption
B) economic entity assumption
The field of accounting that focuses on providing information for external decision makers is ________.A) managerial accounting B) financial accounting C) cost accounting D) nonmonetary accounting
B) financial accounting
89) Assets with no physical form are ________.A) current assets B) intangible assets C) not listed on the balance sheet because they have no value D) included in stockholders' equity
B) intangible assets
30) Jason Ford has been the sole owner of a bicycle sales and repair shop for several years. Which of the following business types would limit Jason's personal liability exposure to the entity's debts? A) partnership B) limited-liability company C) sole proprietorship D) Any of the above.
B) limited-liability company
90) Buildings, land, and equipment are classified as ________. A) current assets B) long-term assets C) current liabilities D) long-term liabilities
B) long-term assets
78) The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash, is called the ________.A) production time B) operating cycle C) accounting cycle D) sales time
B) operating cycle
92) The worksheet helps accountants to ________.A) prepare the trial balance B) prepare the financial statements C) prepare the unadjusted trial balance D) maintain books of accounts without a journal
B) prepare the financial statements
73) Net Income is transferred to the ________.A) Balance Sheet B) statement of retained earnings C) Income Statement D) it is not transferred to any financial statement
B) statement of retained earnings
35) The ultimate control of the corporation rests with the ________. A) board of directors B) stockholders C) chairperson of Board of Directors D) chief operating officer
B) stockholders
69) Under the revenue recognition principle, a good or service is considered transferred when ________. A) all performance obligations have been satisfied B) the customer obtains control of the good or service C) the business has received cash from the customer D) the transaction price has been determined
B) the customer obtains control of the good or service
49) A liability created when a business receives cash from customers in advance of providing services or delivering goods is called a(n) ________. A) notes receivable B) unearned revenue C) accrued liability D) service revenue
B) unearned revenue
21) Regarding a business organized as a partnership, which of the following is an incorrect statement? A) Partners pay tax on their share of the partnership earnings. B) Partners are personally liable for the debts of the business. C) A partnership's life is not dependent on a specific individual's ownership. D) Mutual agency is present in a partnership.
C) A partnership's life is not dependent on a specific individual's ownership.
100) Which of the following line items will appear on the income statement of a merchandiser but not of a service company? A) Salaries Expense B) Depreciation Expense C) Cost of Goods Sold D) Supplies Inventory
C) Cost of Goods Sold
82) Which of the following is a measure of how quickly an item can be converted to cash? A) Debt ratio B) Return on assets ratio C) Liquidity D) Accounting cycle
C) Liquidity
38) The account title used for recording a WRITTEN promise that a customer will pay the business a fixed amount of money and interest by a certain date in the future is ________.A) Prepaid Note B) Notes Payable C) Notes Receivable D) Accounts Receivable
C) Notes Receivable
1) A model called the ________ was created to help students and the public understand what accounting is. A) Decision Making Model B) Business Model C) Pathways Vision Model D) Cost Model
C) Pathways Vision Model
16) Regarding generally accepted accounting principles (GAAP), which of the following statements is INCORRECT?A) GAAP rests on a conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements. B) The primary objective of financial reporting is to provide information useful for making investment and lending decisions. C) Relevant information is complete, neutral, and free from error. D) GAAP is currently formulated by the Financial Accounting Standards Board.
C) Relevant information is complete, neutral, and free from error.
44) Which of the following accounts is NOT an asset? A) Furniture B) Fixtures C) Service Revenue D) Equipment
C) Service Revenue
24) Which of the following actions determines when a corporation comes into existence? A) The charter is obtained from the federal government. B) The incorporators pay fees, sign the charter, and file required documents with the state. C) The first share of stock is issued. D) The corporate bylaws are written.
C) The first share of stock is issued.
70) The matching principle states that ________.A) financial statements can be prepared for specific periods B) a business's activities can be sliced into small time segments C) all expenses should be recorded when they are incurred during the period D) companies should record revenue when it has been earned
C) all expenses should be recorded when they are incurred during the period
75) The financial statement that reports assets, liabilities, and stockholders' equity as of the last day of the period is called the ________. A) income statement B) statement of retained earnings C) balance sheet D) unadjusted trial balance
C) balance sheet
81) Salaries Payable, Accounts Payable, and Unearned Revenue are examples of________. A) short-term investments B) fixed assets C) current liabilities D) long-term liabilities
C) current liabilities
71) The matching principle ________.A) guides accounting for revenues and expenses B) results in the matching of expenses incurred during the period to the cash paid for expenses C) ensures that all expenses are recorded when they are incurred during the period D) results from a natural link between all expenses and revenues
C) ensures that all expenses are recorded when they are incurred during the period
20) Information that is faithfully representative is complete, neutral, and ________ A) follows GAAP. B) identifies objectives. C) free from error. D) states basic accounting assumptions.
C) free from error.
61) Which one of the following account groups will decrease with a debit? A) assets and expenses B) revenues and expenses C) liabilities and revenues D) assets and liabilities
C) liabilities and revenues
91) Assets are listed in the order of their ________ on the balance sheet. A) magnitude B) dates of purchase C) liquidity D) durability
C) liquidity
85) Under which of the following categories would bonds held as an investment for more than a year appear? A) current assets B) long-term liabilities C) long-term assets D) current liabilities
C) long-term assets
88) Notes Payable due within two years are classified as ________. A) current liabilities B) current assets C) long-term liabilities D) long-term assets
C) long-term liabilities
68) Which of the following assumes that the financial statements of a business can be prepared for specific periods? A) matching principle B) revenue recognition principle C) time period concept D) adjusting entry principle
C) time period concept
67) Which of the following is considered a fiscal year? A) six months B) three months C) twelve months D) four months
C) twelve months
56) Regarding T-accounts, which of the following statements is correct? A) A T-account is a more detailed form of an account in the journal. B) The right side of a T-account is a debit for asset accounts and a credit for equity accounts. C) Debits are posted on the right side of the vertical line. D) A T-account is a summary device with credits posted on the right side of the vertical line.
D) A T-account is a summary device with credits posted on the right side of the vertical line.
39) Which of the following is an asset account? A) Wages Payable B) Notes Payable C) Unearned Revenue D) Accounts Receivable
D) Accounts Receivable
84) Which of the following is a current asset that is expected to be converted to cash, sold, or consumed during the next year (or the normal operating cycle, if longer)? A) Land B) Equipment C) Building D) Accounts Receivable
D) Accounts Receivable
83) Which of the following is the most liquid asset? A) Building B) Prepaid Expenses C) Accounts Receivable D) Cash
D) Cash
55) A listing of all accounts in numerical order is called a(n) ________. A) Ledger B) Journal C) Income statement D) Chart of accounts
D) Chart of accounts
12) ________ compile financial statements, interact with auditors, and over see regulatory reporting. A) Financial analysts B) Cost accountants C) Internal auditors D) Controllers
D) Controllers
15) GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________.A) Globally Accepted Accounting Policies B) Government Approved Accounting Principles C) Generally Accredited Accounting Policies D) Generally Accepted Accounting Principles
D) Generally Accepted Accounting Principles
43) Which of the following accounts is an asset? A) Salaries Expense B) Accounts Payable C) Service Revenue D) Land
D) Land
41) Which of the following accounts is an asset? A) Salaries Expense B) Accounts Payable C) Service Revenue D) Prepaid Expense
D) Prepaid Expense
50) Saturn, Inc. paid the rent for the current month in cash. Which of the following accounts will be used to record the transaction? A) Prepaid Rent B) Rent Payable C) Rent Revenue D) Rent Expense
D) Rent Expense
95) The income statement section of the worksheet includes ________. A) Land and Salaries Payable B) Common Stock, Retained Earnings, and Dividends C) Furniture and Cash D) Service Revenue and Utilities Expense
D) Service Revenue and Utilities Expense
25) Regarding the separation of corporate ownership and management, which of the following is a true statement? A) The corporate officers elect the board of directors. B) The corporation runs better with day-to-day input from stockholders. C) Stockholders are required to manage the business. D) Stockholders own the business, but a board of directors appoints corporate officers to manage the business.
D) Stockholders own the business, but a board of directors appoints corporate officers to manage the business.
34) Which of the following statements is true of a corporation? A) Corporations pay the same variety of taxes as partnerships. B) Although a corporation is a separate legal entity, it cannot be sued. C) Any stockholder of a corporation can commit the corporation to a binding contract. D) The owners of a corporation are called stockholders.
D) The owners of a corporation are called stockholders.
47) Which of the following is a liability account? A) Prepaid Advertising B) Cash C) Building D) Unearned Rent
D) Unearned Rent
31) Marcus has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client. If he does all of the work himself and takes no legal steps to form a special organization, which type of business organization, in effect, has he chosen? A) a limited-liability company B) a partnership C) a corporation D) a sole proprietorship
D) a sole proprietorship
93) The worksheet includes ________.A) trial balance B) adjusting entries C) unadjusted trial balance D) all of the above
D) all of the above
6) Which of the following users would rely on managerial accounting information for decision-making purposes? A) potential investors B) creditors C) customers D) company managers
D) company managers
77) Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called ________ assets. A) intangible B) plant C) long-term D) current
D) current
96) For a merchandiser, the term "inventory" refers to ________. A) raw materials that are used for production B) equipment that are used in production process C) the cost of goods sold D) goods held for sale to customers
D) goods held for sale to customers
80) Patents, copyrights, and trademarks are examples of ________. A) short-term investments B) fixed assets C) long-term investments D) intangible assets
D) intangible assets
32) In a limited-liability company, the ________. A) members are personally liable to pay the company's debts B) business terminates at the death of a member C) members are liable for each other's actions D) members pay income tax on their share of earnings
D) members pay income tax on their share of earnings
51) Amounts earned from delivering goods or services to customers are called________. A) notes receivable B) unearned revenues C) equity D) revenues
D) revenues
57) The left side of a T-Account always represents ________.A) an increase to that account B) a decrease to that account C) the credit side D) the debit side
D) the debit side
63) When does a company account for revenue if it uses cash basis accounting? A) when services are performed, even though cash may be received at a later date B) before services are performed C) when the services are being performed D) when cash is received, either prior to, at the time of, or after the services are performed
D) when cash is received, either prior to, at the time of, or after the services are performed
98) A ________ is a merchandiser who buys goods from a manufacturer and then sells them to retailers. A) vendor B) retailer C) cost of goods sold D) wholesaler
D) wholesaler
