Financial Accounting Chapter 3

*What is the impact on the accounting equation when a current month's utility expense is paid?* a. both sides decrease b. both sides increase c. only the Asset side changes d. neither side changes

a. both sides decrease

*What is the impact on the accounting equation when a payment of account payable is made?* a. both sides decrease b. both sides increase c. only the Asset side changes d. neither side changes

a. both sides decrease

*Which of the following is the principle that a company must recognize revenue in the period in which it is earned; it is not considered earned until a product or service has been provided?* a. revenue recognition principle b. expense recognition (matching) principle c. cost principle d. full disclosure principle

a. revenue recognition principle

*Which set of accounts has the same type of normal balance?* a. Accounts payable, retained earnings b. Cash, accounts payable c. Prepaid rent, unearned service revenue d. Dividends, common stock

a. Accounts payable, retained earnings

*Which of the following pairs of accounts are impacted the same with debits and credits?* a. Electricity Expense and Office Supplies b. Cash and Unearned Service Revenue c. Accounts Receivable and Accounts Payable d. Buildings and Common Stock

a. Electricity Expense and Office Supplies

*Which of the following financial statements should be prepared first?* a. Income Statement b. Balance Sheet c. Retained Earnings Statement d. Statement of Cash Flows

a. Income Statement

*________ takes all transactions from the journal during a period and moves the information to a general ledger (ledger).* a. Posting b. Hitching c. Vetting d. Laxing

a. Posting

*Which of the following accounts will normally have a debit balance?* a. Supplies b. Common Stock c. Fees Earned d. Accounts Payable

a. Supplies

*Which of these accounts is an asset?* a. Supplies b. Common Stock c. Accounts Payable d. Fees Earned

a. Supplies

*The step-by-step process to record business activities and events to keep financial records up to date is ________.* a. accounting cycle b. day-to-day cycle c. general ledger d. journal

a. accounting cycle

*Which of these transactions requires a debit entry to Cash?* a. collected balance due from customers b. paid balance due to suppliers c. sold merchandise on account d. purchased supplies for cash

a. collected balance due from customers

*These are used by the FASB, and it is a set of concepts that guide financial reporting.* a. conceptual framework b. Financial Accounting Standards Board (FASB) c. generally accepted accounting principles (GAAP) d. Securities and Exchange Commission (SEC)

a. conceptual framework

*Which of the following is the principle that a business must report any business activities that could affect what is reported on the financial statements?* a. full disclosure principle b. revenue recognition principle c. expense recognition (matching) principle d. cost principle

a. full disclosure principle

*Which of the following terms is used when assuming a business will continue to operate in the foreseeable future?* a. going concern assumption b. separate entity concept c. monetary measurement concept d. time period assumption

a. going concern assumption

*Which process of the accounting cycle often requires the most analytical thought?* a. making a journal entry b. posting transactions to accounts c. summarizing the trial balance d. preparing the financial statements

a. making a journal entry

*That companies can present useful information in shorter time periods such as years, quarters, or months is known as which of the following?* a. time period assumption b. separate entity concept c. monetary measurement concept d. going concern assumption

a. time period assumption

Which of the following accounting records is the main source of information used to prepare the financial statements? a. trial balance b. journal entries c. T-accounts d. chart of accounts

a. trial balance

*Which of the following pairs increase with credit entries?* a. unearned service revenue and accounts payable b. supplies and retained earnings c. rent expense and unearned revenue d. prepaid rent and common stock

a. unearned service revenue and accounts payable

*Which of the following accounts is increased by a debit?* a. Supplies b. Common Stock c. Accounts Payable d. Service Revenue

c. Accounts Payable

*What is the impact on the accounting equation when stock is issued, in exchange for assets?* a. both sides increase b. both sides decrease c. only the Asset side changes d. neither side changes

c. only the Asset side changes