question

In what order are the financial statements generally prepared?

answer

Income statement, statement of retained earnings, and balance sheet

question

All of the following accounts will be closed EXCEPT for:

answer

Cash.

question

Closing entries:

answer

prepare the accounts for the next periods transactions.

question

After the closing entries are prepared and posted:

answer

the retained earnings account will have the correct ending balance.

question

Accounts that relate to a limited period of time are called:

answer

temporary accounts

question

Which of the following accounts are considered permanent accounts?

answer

Land and Accounts Receivable

question

The entry made to close Service Revenue would include a debit to:

answer

Service Revenue and a credit to Net Income.

question

The closing entry for the Salaries Expense account would include a debit to:

answer

Retained Earnings and a credit to Salaries Expense.

question

On a classified balance sheet:

answer

Notes Payable due in one year is a current liability.

question

When preparing the financial statements for a company:

answer

the account format for the balance sheet lists the assets on the left and liabilities and stockholders' equity on the right.

question

Which of the following is CORRECT regarding liquidity?

answer

A balance sheet lists assets and liabilities in the order of relative liquidity.

question

The following accounts are listed in order of liquidity:

answer

Cash, Accounts Receivable, Inventory, Furniture

question

When classifying assets and liabilities:

answer

furniture and fixtures are long - term assets.

question

On a multiple - step income statement, the heading or classification "Other income" refers to:

answer

Interest income and Investment income.

question

On a multiple step income statement, several indicators of profitability are reported that include:

answer

operating income, income before taxes, and net income.

question

Net working capital:

answer

is computed by subtracting total current liabilities from total current assets.

question

A measure of a company's ability to pay current liabilities with current assets is the:

answer

current ratio

question

When analyzing a company's debt ratio:

answer

the ratio measures a company's ability to pay its total liabilities.

question

The debt ratio is computed by dividing

answer

total liabilities by total assets

question

Which of the following combinations of ratios is preferable?

answer

A high current ratio and a low debt ratio.

question

The following accounts are up to date and need no adjustment at the end of the period:

answer

Cash, Land and Common Stock.

question

Adjusting entries:

answer

adjust unearned revenue

question

Adjusting entries:

answer

are made before the financial statements can be prepared.

question

Prepaid expenses will:

answer

become expenses when their future benefits expire.

question

______ is the allocation of the cost of an asset over the assets useful life.

answer

Depreciation

question

______ will be increased when a company receives cash before performing the services.

answer

Unearned Service Revenue

question

The book value of a plant asset is the:

answer

cost of the asset less the accumulated depreciation.

question

With the accrual of revenue:

answer

the cash is received after the revenue is recorded.

question

When an adjustment is made for prepaid rent:

answer

an asset decreases and an expense increases

question

Which account is credited in the adjusting entry to allocate the cost of equipment to an expense account?

answer

Accumulated depreciation

question

Which accounts are used in the adjusting entry to record salaries owed to employees, but not paid until the next accounting period?

answer

Salaries Expense and Salaries Payable

question

At the end of the accounting period, a company has accrued interest revenue that they will not receive until the next accounting period. The adjusting entry would include a:

answer

debt to Interest Receivable.

question

The Accumulate Depreciation account:

answer

is a contra asset account.

question

Which of the following financial statements are prepared using the adjusted trial balance?

answer

Balance sheet, income statement, and statement of retained earnings.

question

A tired accountant failed to record the adjusting entry for accrued revenues. How does this error affect the balance sheet?

answer

The assets for the period will be understated.

question

Which of the following is NOT a correct statement about adjusting entries?

answer

Every adjusting entry affects Cash.

question

The adjustment for an accrued expense:

answer

increases expenses and increases liabilities

question

The adjustment for an accrued revenue:

answer

is necessary because a business often earns revenue before they receive the cash.

question

The adjusting entry to record the accrual of income tax expense includes a:

answer

credit to Income Tax Payable.

question

If adjusting entries are not prepared, which financial statements are misstated?

answer

income statement, balance sheet and statement of retained earnings.

question

A doctor performed surgery in March and did not receive cash from the patient until July, Under accrual - basis accounting, the doctor recognizes revenue:

answer

in March

question

A doctor performed surgery in April and did not receive cash payment from the patient until August. Under cash - basis accounting, the doctor recognizes revenue:

answer

In August.

question

Under accrual - basis accounting, revenue is recorded:

answer

when the services are performed, regardless of when the cash is received.

question

Which of the following transactions would be recorded under accrual - basis accounting but NOT under cash - basis accounting?

answer

Purchasing of inventory on account.

question

Which of the following is a CORRECT statement about the different accounting methods?

answer

GAAP requires accrual - basis accounting

question

The method of accounting that records revenues ONLY when cash is received is the:

answer

cash - basis method

question

When cash - basis accounting is used, and services are provided on account

answer

both the income statement and the balance sheet will be incorrect.

question

An expense occurred in 2013, but is is not paid until 2014. Using the accrual basis of accounting, the expense should appear on:

answer

the 2013 income statement.

question

An interim period used for reporting purposes is generally:

answer

less than one year.

question

The requirement to report accounting information at regular intervals is known as the:

answer

time - period concept.

question

Under cash - basis accounting, cash receipts are treated as _____ and cash payments are treated as _________.

answer

revenues; expenses

question

The revenue principle governs two things:

answer

when to record revenue and the amount of revenue to record.

question

The revenue principle requires that a business record revenue when the business:

answer

deleivers goods or services to a customer.

question

Following the expense recognition principle, recognizing expenses along with the related revenues means to:

answer

subtract expenses from the related revenues to compute net income or net loss.

question

The left side of a T - account is always the:

answer

debit side

question

An important rule to remember when working with T accounts is:

answer

to credit an account means to enter an amount on the right - hand side of the T account.

question

Which of the following statements about the rules of debits and credits is CORRECT?

answer

Revenue is increased by a credit.

question

Decreases in stockholders equity that result from the cost of operating the business are:

answer

expenses

question

Which accounts are increased by debits?

answer

Accounts Receivable and Utilities Expense

question

Accounting transactions are initially recorded in the:

answer

Journal

question

An account will have a debit balance if:

answer

the amount of the debits exceeds the amount of the credits.

question

The proper order for the accounting process is:

answer

transactions occurs, transactions analyzed, journalizing, and posting.

question

The ledger:

answer

contains all the accounts used by a business.

question

Posting is:

answer

copying the information from the journal to the ledger.

question

Every Journal entry:

answer

must debit at least one account and credit at least one account.

question

An owner makes an investment of cash into the business and receives shares of stock. This transaction would include a:

answer

debit to Cash and a credit to Common Stock.

question

A business paid $40,000 cash to purchase equipment. The business would:

answer

debit Equipment for $40,000 and credit cash for $40,000.

question

A business purchased office supplies of $15,000 on account. The business would:

answer

debit supplies for $15,000 and credit Accounts Payable for $15,000.

question

A business paid $1,900 on account. The journal entry would:

answer

debit Accounts Payable for $1,900 and credit Cash for $1,900.

question

The normal balance of an account:

answer

falls on the side where increases are recorded.

question

When computing the normal balance of an account:

answer

accounts payable should have a credit balance.

question

A chart of accounts:

answer

lists all of an organizations accounts and account numbers.

question

A trial balance has which of the following features?

answer

Totals for all accounts listed in the ledger.

question

The debt created by a business when it makes a purchase of inventory on account is an:

answer

account payable

question

Which of the following transactions will increase Stockholders Equity.

answer

The company issues common stock to new shareholders.

question

Which of the following transactions will increase one asset and decrease another asset?

answer

The purchase of equipment for cash

question

A company performed services for a customer for cash. This transaction increase assets and:

answer

increased revenues

question

A company receives an utility bill and immediately pays it. With this transaction:

answer

stockholders equity is decreased.

question

Company Z sells land for the same amount it paid for it three years ago. When the company records this transaction:

answer

one asset is increased and another asset is decreased.

question

When a company borrows money from the bank, which type of accounts are increased?

answer

asset and liability accounts

question

When a company pays an amount it owes a creditor:

answer

assets are decreased and liabilities are decreased.

question

Purchasing supplies on account would:

answer

increase total assets and increase total liabilities.

question

Which of the following transactions would decrease an asset and decrease a stockholders equity?

answer

The declaration and payment of a dividend to the shareholders.

question

A company received $31,000 cash and issued common stock in exchange. In transaction analysis, how does this transaction affect the accounting equation?

answer

Add $31,000 to cash account and add $31,000 to common stock account.

question

A company purchased supplies of $6000 on account. In transaction analysis, how does this transaction affect the accounting equation?

answer

Add $6,000 to supplies account and add $6,000 to Accounts payable account.

question

On May 1, a company provided legal services for a new client. The lawyer asked for $1,100 and the client paid with a check on May 1 before leaving the office. In transaction analysis, how does this transaction affect the accounting equation?

answer

Add $1,100 to cash account and add $1,100 to Retained Earnings account.

question

A company went to the bank and borrowed $13,000 on a long term note. In this transaction analysis, how does this transaction affect the accounting equation?

answer

Add $13,000 to Cash account and add $13,000 to Notes Payable account.

question

A company declared and paid dividends of $600. In transaction analysis, how does this transaction affect the accounting equation?

answer

Subtract $600 from retained earnings account and subtract $600 from Cash account.

Accounting Test #1 UMD – KAREN SAMELA – Flashcards

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