Financial Accounting Exam 1

An account consists of a. a title, a debit side, and a credit side b. a title, a debit balance and a credit balance c. a title, a right side and a debit balance d. a title, a left side and a debit balance

a. a title, a debit side and a credit side

Which of the following financial statements is concerned with the company at a point in time? a. balance sheet b. income statement c. retained earnings statement d. statement of cash flows

a. balance sheet -Balance sheet--concerned with company at a point in time

Liabilities are generally classified on a balance sheet as a. current liabilities and long-term liabilities b. present liabilities and future liabilities c. tangible liabilities and intangible liabilities d. small liabilities and large liabilities

a. current liabilities and long-term liabilities

The left side of an account is a. the debit side b. the balance of the account c. blank d. a description of the account

a. the debit side

The usual sequence of steps in the transaction recording process is a. journalize, post to the ledger, analyze b. analyze, journalize, post to the ledger c. post to the ledger, journalize, analyze d. journalize, analyze, post to the ledger

b. analyze, journalize, post to the ledger

Which of the following is not a current liability? a. salaries and wages payable b. bonds payable c. accounts payable d. taxes payable

b. bonds payable

Which of the following is not considered an asset? a. equipment b. dividends c. inventory d. accounts receivable

b. dividends

A corporation has which of the following set of characteristics? a. simple to set up and maintains control with founder b. easier to transfer ownership and raise funds, no personal liability c. harder to raise funds and gives owner control d. Shared control, tax advantages, increased skills and resources

b. easier to transfer ownership and raise funds, no personal liability -A corporation is easier to transfer ownership and raise funds, no personal liability

The double-entry system requires that each transaction must be recorded a. in a journal and in a ledger b. in at least two different accounts c. in two sets of books d. first as a revenue and then as an expense

b. in at least two different accounts

Trademarks would appear in which balance sheet section? a. current assets b. intangible assets c. property plant and equipment d. investments

b. intangible assets

Buying assets needed to operate a business is an example of a(n) a. operating activity b. investing activity c. financing activity d. delivering activity

b. investing activity

A T-account is a. a special account used instead of a journal b. a special account used instead of a trial balance c. a way of depicting the basic form of an account d. used for accounts that have both a debit and credit balance

c. a way of depicting the basic form of an account

Borrowing money is an example of a(n) a. operating activity b. delivering activity c. financing activity d. investing activity

c. financing activity -Financing--borrowing money and issuing shares of stock in exchange for cash

On a classified balance sheet, companies usually list current assets a. alphabetical order b. with the largest dollar amounts first c. in the order in which they are expected to be converted into cash d. in the order of acquisition

c. in the order in which they are expected to be converted into cash

The right side of an account a. reflects all transactions for the accounting period b. shows all the balances of the accounts in the system c. is the credit side d. is the correct side

c. is the credit side

Which activities involve putting the resources of the business into action to generate a profit? a. delivering b. financing c. operating d. investing

c. operating

Ratios that measure the income or operating success of a company for a given period of time are a. trending ratios b. liquidity ratios c. profitability ratios d. solvency ratios

c. profitability ratios

Equipment is classified on the balance sheet as a. a current asset b. a long-term investment c. property, plant and equipment d. an intangible asset

c. property, plant and equipment

Retained earning at the end of the period is equal to a. retained earnings at the beginning of the period plus net income minus liabilities b. net income c. retained earnings at the beginning of the period plus net income minus dividends d. assets plus liabilities

c. retained earnings at the beginning of the period plus net income minus dividends -Retained earnings at the end of the period is equal to retained earnings at the beginning of the period plus net income minus dividends.

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

c. revenues exceed expenses -Net income will result during a time period when revenues exceed expenses

The normal balance of any account is the a. side which decreases that account b. right side c. side which increases that account d. left side

c. side which increases that account

Which of the following is the most appropriate and modern definition of accounting? a. electronic collection, organization, and communication of cast amounts of information b. a means of collecting information c. the information system that identifies, records, and communicates the economic events of an organization to interested users d. the interconnected network of subsystems necessary to operate a business

c. the information system that identifies, records, and communicates the economic events of an organization to interested users -Accounting is the information system that identifies, records and communicates the economic events of an organization to interested users

Which statement about an account is true? a. there are separate account for specific assets and liabilities but only one account for stockholders' equity items b. the left side of an account is the credit or decrease side c. in its simplest form, an account consists of two parts d. an account is an individual accounting record of increases and decreases in specific asset, liability and stockholders' equity items

d. an account is an individual accounting record of increases and decreases in specific asset, liability and stockholders' equity items

In a classified balance sheet, assets are usually classified as a. current assets; long-term investments; tangible assets; and intangible assets b. current assets; long-term assets; property, plant and equipment; and intangible assets c. current assets; long-term investments; property, plant and equipment; and common stocks d. current assets; long-term investments; property, plant and equipment; and intangible assets

d. current assets; long-term investments; property, plant and equipment; and intangible assets

Which of the following is not a principle type of business activity? a. operating b. investing c. Financing d. delivering

d. delivering -Delivering is not a principle type of business activity, the three principle type of business activities are operating, investing, and financing.

A current asset is a. usually found as a separate classification in the income statement b. an asset which is currently being used to produce a product or service c. the last asset purchased by a business d. expected to be converted to cash or used in the business within a relatively short period of time

d. expected to be converted to cash or used in the business within a relatively short period of time

To show how successful your business performed during a period of time, you would report its revenues and expenses in the a. retained earnings statement b. balance sheet c. statement of cash flows d. income statement

d. income statement -An income statement shows how successful your business performed during a period of time, you report its revenues and expenses

A business organized as a corporation a. is not a separate legal entity in most states b. requires that stockholders be personally liable for the debts of the business c. has tax advantages over a proprietorship d. is owned by its stock holders

d. is owned by its stock holder -A business organized as a corporation is owned by its stock holders

The most important information needed to determine if companies can pay their current obligations is the a. projected net income for next year b. relationship between short-term and long-term liabilities c. net income for this year d. relationship between current assets and current liabilities

d. relationship between current assets and current liabilities

In recording accounting transactions, evidence that a transaction has taken place is obtained from a. the Internal Revenue Service b. the public relations department c. the Securities and Exchange Commission d. source documents

d. source documents