question

Which of the following is the best description of accounting's role in business?

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Accounting provides information to managers to operate the business and to other stakeholders to make decisions regarding the economic condition of the company

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The business entity concept means that

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the entity is an individual economic unit for which data are recorded, analyzed, and reported

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Owned resources of a business are referred to as

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assets

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Debts owed by a business are referred to as

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liabilities

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The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a

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income statement

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Which of the following financial statements reports information as of a specific date?

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balance sheet

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Revenue should be recognized when

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the service is performed

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The debt side of an account

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is the left side of the account

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Which of the following groups of accounts have a normal debit balance?

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assets, expenses

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Which of the following entries records the payment of an account payable?

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debit Cash; credit Accounts Payable

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The process of initially recording a business transaction is called

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journalizing

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A patient has a physical examination and asks the bookkeeper to mail the bill. The bookkeeper should

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debit Accounts Receivable, credit Fees Earned

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In which order are the accounts listed in the chart of accounts?

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assets, liabilities, revenues, expenses, stockholders' equity

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Net income will result when

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revenue (credits) is more than expenses (debits)

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The process of rewriting the information from the journal into the ledger is called

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posting

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If the two totals of a trial balance are not equal, it could be due to

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an error in determining the account balances, such as a balance being incorrectly computed

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The matching concept

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determines that expenses related to revenue be reported as the same time the revenue is reported

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Using accrual accounting, revenue is recorded and reported only

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when the services are rendered without regard to when cash is received

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Using accrual accounting, expenses are recorded and reported only when

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they are incurred, whether or not cash is paid

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Adjusting entries are

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needed to bring accounts up to date and match revenue and expense

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By matching revenues and expenses in the same period in which they incur

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net income or loss will always be underestimated

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As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

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depreciation

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What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

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gross profit

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Merchandise inventory is classified on the balance sheet as a

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Current Asset

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Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

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debit to Cash and a credit to Sales

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Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on

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debit to Merchandise Inventory

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Who pays the freight cost when the terms are FOB destination

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the seller

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Inventory shortage is recorded when

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there is a difference between a physical count of inventory and inventory records

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Taking a physical count of inventory

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should be done near year-end

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The inventory costing method that reports the most current prices in ending inventory is

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LIFO

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Under the ? inventory method, accounting records maintain a continuously updated inventory value.

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perpetual

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During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory.

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cannot tell without more information

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When using a perpetual inventory system, the journal entry to record the cost of merchandise sold is:

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debit Cost of Merchandise Sold; credit Merchandise Inventory

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When does an account become uncollectible?

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there is no general rule for when an account becomes uncollectible

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One of the weaknesses of the direct write-off method is that it

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violates the matching principle

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When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method

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is used primarily by small companies with few receivables

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The amount of the promissory note plus the interest earned on the due date is called the

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maturity value

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A characteristic of a fix asset is that it is

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used in the operations of a business

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Fixed assets are ordinarily presented in the balance sheet

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at replacement costs

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Current liabilities are

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due and receivable within one year

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Which of the following taxes would be deducted in determining an employee's net pay?

answer

FICA taxes

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The process of transferring the cost of mental ores and other minerals removed from the earth to an expense account is called

answer

depletion

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A bond indenture is

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a contract between the corporation issuing the bonds and the bondholders.

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When the corporation issuing the bonds has the right to repurchase the bonds prior to the maturity date for a specific price, the bonds are

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callable bonds

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When the maturities of a bond issue are spread over several dates, the bonds are called

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serial bonds

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The interest rate specified in the bond indenture is called the

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contract rate

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If the market rate of interest is greater than the contractual rate of interest, bonds will sell

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at a discount

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Which of the following is not an internal control activity for cash?

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The functions of record keeping and maintaining custody of cash should be combined.

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A bank reconciliation should be prepared periodically because

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any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected.

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The amount of deposits in transit is included on the bank reconciliation as an

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addition to the balance per bank statement

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Accompanying the bank statement was a debit memo for an NSP check. This item would be included on the bank reconciliation as a

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deduction from the balance per company's records

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Entries are made to the petty cash account when

answer

establishing the fund

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Cash equivalents

answer

will be converted to cash within 90 days

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