Intro To Financial Accounting – Flashcards
50 test answers
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true
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expenses and dividends are increased when they are debited
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false
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after posting a transaction to the general ledger one should then record the transaction in the general journal
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false
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dez's diner purchased supplies on account. in order to record a journal entry for this event would-- Debit Supplies and Debit Cash
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true
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romos construction co purchased a piece of equipment for cash. in order to record a journal entry for this event one would-- Debit Equipment and Credit Cash
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True
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the trial balance lists all accounts balances in the general ledger
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true
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the debt ratio = total liabilities/ total assets
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false
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companies that use accrual accounting recognize revenues and expenses at the time that cash is paid or received
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false
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cash basis accounting is compliant with GAAP while accrual basis accounting is not compliant with GAAP
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true
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the adjusting entry for expired prepaid insurance is a -- Debit to an Expense and a Credit to the Prepaid Insurance
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false
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depreciation represents a plant asset's decline in a market value
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true
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accumulated depreciation is shown on the balance sheet as a subtraction from the cost of an asset
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false
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another name for unearned revenue is accrued revenue
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true
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an accrued expense is a transaction where a company pays cash after an expense is recognized
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true
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adjustments are necessary to bring an asset or liability account to its proper amount and also update a related expense or revenue account
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true
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a deferral describes a transaction in which cash is paid prior to the recognition of an expense or in which cash is received prior to the recognition of a revenue
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false
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a prepaid expense is NOT an example of a deferral
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false
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goods sold on consignment are included in the consignees merchandise inventory
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true
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under the fifo costing method, the oldest cost is of goods available for sale is used
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true
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when the purchase price of inventory is rising, the fifo method produces a lower of cost of goods sold than lifo
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false
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inventory cost= invoice cost+ cost necessary to receive inventory + selling expenses
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false
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an understatement of the ending inventory balance will understate cost of goods sold and overstate net income
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false
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the its requires that companies use the same costing method for tax purposes as it does for its financial statements, regardless of the method used
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false
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errors in the period-end inventory balances only have an impact on the current periods records and financial statements
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false
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whether prices are rising or falling, fifo always will yield the highest gross profit and net income
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true
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accounting principles require that inventory be reported at the market value of replacing inventory when market value is lower than cost
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true
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goods that are damaged or obsolete are not counted in inventory if they are unsellable
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false
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plant assets refer to nonphysical assets that are used in the operations of a business
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true
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salvage value is an estimate of an asset's value at the end of its benefit period
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true
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depreciation does not measure the decline in the market value of an asset each period
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false
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depreciation is higher in earlier years and is lower in the later years when using the straight-line method
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true
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an assets cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use
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true
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the purchase of a property that included land, building, and related improvements is called a lump sum or basket purchase
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false
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total asset cost plus depreciation expense equals book value
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true
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the units of production method of depreciation charges a varying amount of expense for each period of an assets useful life depending on its usage
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true
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a plant assets useful life is the length of time it is productively used in a company's operation.
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cost-salvage/ total units of capacity
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depletion per unit
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depletion per unit x units extracted and sold
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depletion expense
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2 methods of accounting bad debts
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1) direct write off 2) allowance method
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method of bad debts that shows -what customers can pay off -does not match best w/ sales and expenses -materiality -can use this method if its not a big amount
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direct write off
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method of bad debts that shows -estimated bad debts -reports AR on balance sheets and estimated amount of cash to be collected
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allowance method
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cash flow that deals with current assets and liabilities
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operating
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cash flow that deals with long term assets
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investing
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cash flow that deals with long term liabilities and equity
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financing
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total liabilities / total assets
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debt ratio
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opportunity, rationalization, financial pressure
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fraud triangle
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net income/average total assets
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return on assets
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