Accounting Midterm

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An invoice is an example of a source document. T or F: True
Liquidity means having enough funds on hand to pay debts when they fall due. T or F: True
If accounts payable has debit postings of $32000, credit posting of $25000, and an ending normal balance of $47000, which of the following was its beginning balance? A. 7000 B. 39000 C. 40000 D. 47000 E. 54000: E 54000
The statement of retained earnings is a link between the income stmt and the balance sheet. T or F: False
Which of the following accounts would not need to be adjusted at year end? a. Office Supplies b. Prepaid Advertising c. Unearned Revenue d. Land: Land
The heading "September 30, 20xx" would be appropriate for A. the statement of cash flows. B. The income statement. C. The statement of retained earnings. D. The balance sheet E. All of the above statements.: D. The balance sheet.
Which of the following accounts is increased with a debit. A. Retained Earnings. B. Common Stock C. Advertising Fees Earned D. Dividends E. Wages Payable.: D Dividends
The operating officers are responsible for setting major corporate policy. T or F: False
An adjusted trial balance must be prepared before the adjusting entries can be recorded. T or F: False
Which of the following, if any, is NOT a satisfactory statement of the accounting equation. A. Assets + Liabilities =OE B. A-OE=L C. A=L + OE D. A-L=OE E. All of the above: Assets + Liabilities =Owners Equity
Which of the following is not expressed in terms of a percentage? a. Return on Equity b. Debt to Equity ratio c. Current Ratio d. Profit Margin: Current Ratio
The purpose of the income statement is to show cash inflows and outflows. T or F: False
Profitability is best determined from cash flow information. T or F: False
Which of the following groups is a financial statement user with a direct financial interest A. Investors B. Regulatory agencies. C. Labor unions. D. Financial Analysts E. Taxing Authorities: A Investors
Which of the following would be found on the credit side of the adjusted trial balance? a. Prepaid Insurance b. Depreciation Expense c. Dividends d. Accumulated Depreciation: Accumulated depreciation
The accounts in the trial balance are normally listed in the same ordder as in the general ledger. T or F: True
For accounting information to be useful, it must be both relevant and reliable. T or F: True
Net assets equal assets minus liabilities. T or F: True
Which of the following is not a measure of profitability? a. Current ratio b. Return on Assets c. Debt to Equity ratio d. Return on Equity: Current Ratio
The declaration and pymt of dividends has the effect of A. decreasing assets and increasing owners equity. B. increasing assets and owners equity. C. Increasing assets and decreasing owner's equity. D. decreasing assets and owners equ: Decreasing assets and owners equity.
Windows Excel and Lotus are examples of spreadsheet programs. T or F: True
Dividends are disclosed on the income statement. T or F: False
Which of the following will not affect stockholders' equity? a. Dividends b. Land c. Advertising Expense d. Sales: Land
The balance sheet figure for buildings should be based on the buildings' current market value. T or F: False
Recording incurred but unpaid expenses is an example of an accrual. T or F: True
The Internet Revenue Service is the primary determiner of generally accepted accounting principles. T or F: False
Which of the following accounting cycle steps comes before the others? a. The financial statements are prepared b. Closing entries are recorded and posted c. Source documents are analyzed d. Adjusting entries are entered and posted: Source documents are analyzed.
A revenue usually has the effect of: A. decreasing net income. B. increasing assets and decreasing owner's equity C. Increasing assets and owner's equity. D. increasing assets and liabilities. E. Leaving the entire balance sheet: Increasing assets and owners equity.
Dividends are classified as an expense. T or F: False
A company's owners equity is 1/3 of its total assets. Its liabilities total $200,000. What is the amount of total assets? A. 50,000 B. 100,000 C. 150,000 D. 200,000 E. 300,000: 300,000
Which of the following could not possibly be a closing entry? a. Debit Income Summary and credit Retained Earnings b. Debit Retained Earnings and credit dividends c. Debit Income Summary and credit revenues d. Debit Retained Earnings: Debit income summary and credit revenues
An investment by the owners of a business A. Increases owner's equity only. B. Increases assets only. C. Increases assets and owners equity. D. Increases assets and liabilities. E. Increases assets and decreases owners equity.: Increases assets and owners equity.
The balance sheet is also known as the statement of financial position. T or F: True
The refusal of a CPA to audit a business in which he or she has a direct financial interest relates most closely to the ethical standard of... A. Subjectivity B. Independence C. Due Care D. Integrity E. Objectivity: Independence
In accounting, $1,000 is considered the dividing line between material and immaterial amounts. T or F: False
Which of the following forms of business organization is (are) considered entities separate from their owners for accounting purposes. A. sole proprietorship. B. partnership C. Corporation D. Sole proprietorships and partnerships.: All of the above.
A decrease in a liability is recorded by a debit. T or F: True
Generally accepted accounting principles: A. apply only to the corporate form of business. B. may be found in their entirety in the Internal Revenue Code. C. Are unwritten but generally understood. D. are based on laws of science and: Constitute accepted accounting theory and practice at a certain point in time.
Revenues should be recorded when a. they are earned b. a contract is signed c. cash is received from the customer d. work is begun on a job: They are earned
The Revenue from Services account is increased with a debit. T or F: False
Financial Accounting information is used primarily by management. T or F: False
The recognition issues refers to the difficulty in deciding when a business transaction should be recorded. T or F: True
Wages Payable were $350 at the end of November. Wages expense was $1,800. How much cash was paid for wages during November? a. $1,870 b. $2,410 c. $1,730 d. $1,170: $1870
Unearned Art Fees is classified as a liability. T or F: True
The condensed form of the income statement refers only to the single-step type. T or F: False
Notes Payable is an account used by a company that issues a promissory note to a creditor. T or F: False
A single-step and multi-step income statements result in different net income figures. T or F: False
All transactions are initially recorded in the general ledger. T or F: False
Which of the following could be a component of a reversing entry? A. A credit to wages expense B. A credit to retained earnings. C. A debit to cash. D. A debit to income summary E. A credit to accumulated depreciation: A credit to wages expense.
Under accrual accounting, expenses are recorded when they have been incurred. T or F: True
Which of the following financial statements is concerned with the enterprise at a point in time? a. Balance Sheet b. Income Statement c. Statement of Retained Earnings d. Statement of Cash Flows: Balance Sheet
The going concern assumption recognizes that A. the value of an assets may vary from year to year. B. all financial stmts should cover a fiscal year. C. net income is at best an estimate. D. A company's major objective is to earn a pr: The company may continue indefinitly.
Not all increases to cash represent revenues. T or F: True
A companys weekly 5 day payroll is $350, paid on fridays. If the last day of the month falls on Tuesday, the adjusting entry would be.. A. a debit to salaries expense and a credt to cash for $140. B. A debit to salaries payable and a credit to: A debit to salaries expense and a credit to salaries payable for $140
Which of the following is an asset? a. Retained Earnings b. Notes Payable c. Supplies Expense d. Prepaid Rent: Prepaid Rent
Which of the following errors can cause the trial balance to be out of balance? A. An entire journal entry has been omitted from the posting procedure. B. The debit portion of an entry is posted as a credit, and the credit portion is posted as: C The debit balance of an account is transferred to the credit column of the trial balance.
A major purpose of closing entries is to A. allocate revenues and expenses to the proper accounting periods. B. make all real accounts zero. C. Transfer net income into the income summary account. D. enable the nominal accounts to beg: Enable the nominal accounts to begin the new period with zero balances.
Assets become liabilities when they expire. T or F: False
Current Assets divided by Current Liabilities is known as the a. Working Capital b. Current Ratio c. Profit Margin d. Capital Structure: Current ratio.
Which of the following is not an application of accrual accounting? A. Recording depreciation. B. Recognizing expenses when incurred. C. Adjusting the accounts at year end. D. Recognizing revenues when the related cash is received.: Recognizing revenues when the related cash is received.
Accrual accounting is an application of the matching rule. T or F: True
The entry to record depreciation on equipment is A. debit deprec. expense and credit equipment. B. debit accumulated depreciationg and credit equipment. C. Debit Deprec. Expense and credit Acccumulated Deprec. D. Debit Equipment and: C Debit Depreciation Expense and credit accumulated depriciation.
The accounting convention that is most responsible for the increase in the number of notes to financial statements is a. consistency b. materiality c. conservatism d. full disclosure: Full Disclosure
A contra account is an account whose balance is added to an associated account in the financial stmt. T or F: False
Adjusting entries, like any other entries, are posted to the general ledger. T or F: True
Which of the following lists gives the correct sequecne of accounting procedures? A. Ledger, journal, trial balance, financial stmt. B. Financial stmt, journal, ledger, trial balance. C. Journal, ledger, trial balance, financial stmt.: C Journal, Ledger, Trial Balance, Financial Stmt.
The separate entity concept requires that a. tax records be kept separate from financial reporting records. b. the personal assets and liabilities of an owner not be shown on the business financial statements c. transactions that involve: The personal assets and liabilities of an owner not to be shown on the buiness financial stmt.
Which of the following does not result in the recording of an expense? A. The expiration of insurance. B. Payment of an account payable. C. The recording of wages incurred. D. The receipt of a utility bill. E. The purchase of gas: B. Payment of an account payable.
Unearned revenues are classified as liabilities on the balance sheet. T or F: True
Which of the following pairs of accounts could not be included in the same adjusting entry? A. Interest Payable and Interest expense. B. salaries Expense and Salaries Payable. C. Prepaid rent and rent payable. D. Revenue from services: C. Prepaid rent and Rent Payable
Which of the following is not a temporary account? a. Interest Income b. Depreciation Expense, Vehicles c. Service Revenue d. Accumulated Depreciation, Vehicles: Accumulated depriciation, vehicles
The failure to record depreciation for the period would result in A. overstated assets B. understated liabilites. C. understated stockholders equity D. understated net income. E. overstated liabilities: A Overstated assets.
The entry to close out dividends is A. debit cash and credit dividends. B. debit Income Summary and credit dividends. C. Debit retained earnings and credit dividends. D. Debit dividends and credit income summary E. Debit dividend: C Debit retained earnings and credit dividends.
The post ref column in the general ledger might contain which of the following? A. The ledger page number. B. The account number. C. The journal page number. D. A check mark. E. An X: C The journal page number
The group of users of accounting information charged with achieving the goals of the business is its a. investors b. creditors c. management d. auditors: Management
A fiscal year is an example of an interim period. T or F: False
The term net worth is a more accurate term than owners' equity. T or F: False
When cash is received in advance of performing a service, the accountant A. makes no journal entry because performance of the service has not yet begun. B. Debits Unearned Revenue and Credits Cash. C. Debits Cash and credits revenue from s: E Debits Cash and credits Unearned Revenue.
On which financial statement does Income Summary appear? a. Income Statement b. Statement of Retained Earnings c. Balance Sheet d. On no financial statement: On no financial statment
In March, a company pays for 3 years insurance in advance. The December 31 adjusting entry is A. debit Insurance expense and credit insurance payable. B. Debit prepaid insurance and credit cash. C. Debit Insurance expense and credit prepa: Debit insurance expense and credit prepaid insurance.
Independence is the avoidance of all relationships that impair or appear to impair the objectivity of the accountant. T or F: True
Prepaid Insurance is classified as a(n) A. asset B. liability C. stockholders' equity account D. Revenue E. Expense: Asset
An adjusting entry would not include which of the following accounts? a. Interest Receivable b. Income Tax Payable c. Unearned Revenue d. Cash: Cash
A deferral is the postponement of the recognition of a revenue or of an expense. T or F: True
The worksheet is a type of accountant's working paper. T or F: True
The figure for cash receipts from revenues appears in the income stmt. True or False: False
Generally accepted accounting principles a. have eliminated all the weaknesses in accounting practice b. are accounting rules formulated by the IRS c. are sound in theory but rarely used in practice d. are changing continually: Are changing continually.
The financial stmts can be prepared by referring to the adjusted trial balance. T or F: True
Which of the following accounts is NOT closed out. A. Income Summary B. Retained Earnings C. Dividends D. Utilities Expense E. Advertising Fees Earned: B Retained Earnings
The journal entry to record the completion of a service for which payment has not been received is. A. A debit to revenue from services and a credit to accounts payable. B. A debit to Accounts Receivable and a credit to Revenue for Service.: B. A debit to accounts receivable and a credit to revenue from services.
Payment on a portion of Accounts Payable will a. not affect total assets b. increase total liabilities c. not affect stockholders' equity d. decrease net income: not affect stock holders equity
Which of the following stmts is not true about a proper journal entry? A. A line is skipped between every debit and every credit. B. The Post Ref. column is left blank until after the entry has posted. C. All debits must be recorded before: A A line is skipped between every debit and every credit.
When preparing financial statements, the accountant assumes that the business will continue to operate indefinitely. T or F: True
The entry to accrue estimated income taxes is A. Debit Income Taxes Expense and credit income taxes payable. B. Debit Income Taxes payable and credit cash. C. Debit prepaid income taxes and credit income taxes payable. D. Debit incom: A Debit Income Taxes Expense and Credit Income taxes payable.
A revenue a. increases assets and liabilities b. increases assets and stockholders' equity c. increases assets and decreases stockholders' equity d. leaves total assets unchanged.: Increases assets and stockholders equity.
The Internet is the world's largest computer network. T or F: True
A company that receives money in advance of performing a service a. debits cash and credits prepaid fees b. debits unearned fees and credits accounts payable c. debits cash and credits unearned fees d. debits cash and credits accounts: Debits cash and credits unearned fees.
Which of the following steps in the accounting cycle is accomplished before the others listed. A Balance sheet B. Adjusting entry C. Income Statement D. Closing entry E. Adjusted trial balance: B Adjusting entries
The best definition of assets is the a. collection of resources belonging to the company ant the claims on these resources b. cash owned by the company c. resources belonging to a company having a future benefit to the company d. own: Resources belonging to a company having a future benefit to the company.
The work sheet is intended for internal purposes only. T or F.: True
A company's ability to attract and hold investment capital ultimately depends on its a. Liquidity b. Profitability c. Planning d. Budgeting: B Profitability
The Failure to adjust for office supplies consumed during the period would result in A. understated net income B. overstated stockholders equity C. overstated liabilities D. understated assets E. Understated liabilities: B Overstated stockholders equity.
The cost of doing business is also known as a. revenue b. an expense c. a liability d. an asset: An expense
A graphical user interface (GUI) A. is a type of hardware B. is a way of presenting financial statements. C. employs symbols called icons. D. is a type of internet. E. is used in manual accounting: employs symbols called icons
Whih of the following software is most useful in financial planning and analysis. A. general ledger software B. spreadsheet C. Graphical User Interface (GUI) D. Network E. Internet: B Spreadsheet
The Income Summary account can be found in the income statement. T or F: False
A computer system would require all of the following elements except: A. worksheets B. hardware C. software D. personnel E. documents for input and output: worksheets
Closing entries may be prepared by referring exclusively to the balance sheet column of the work sheet. T or F: False
After all closing entries have been posted, the balance in the Income Summary account will equal zero. T or F: True
In a microcomputer system, which of the following pairs of documents and software programs do not match? A. check and cash disbursements. B.Time cards and purchases/accounts payable C. Deposits and cash receipts. D. Customer invoice a: Time cards and purchases/accounts payable.
An expense is closed with a debit to the expense and a credit to the income statement account. T or F: False
In October, cash was received in advance of rendering a service. If much of the service was earned by December 31, the adjusting entry would be. A. Debit Prepaid Services and Credit Revenue from Services B. Debit Unearned Services and Credit Re: B Debit unearned services and credit revenue from services.
In designing an accounting system, a system designer will try to acheive all the following objectives except: A. cost effectiveness. B. flexibility C. compatibility D. static and unchanging design. E. good controls.: D static and unchanging design.
Compatibility means the accounting system should be in harmony with the organizational and human factors of a business. T or F: True

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