Accounting 2301 - First Exam

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Communication of economics events is the part of the accounting process that involves:

C. Preparing accounting reports

The accounting process is correctly sequenced as:

C. identification, recording, communication

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

C. Recording

Generally accepted accounting principles are:

B. Standards that indicate how to report economic events

The cost principle requires that when assets are acquired, they be recorded at:

B. Exchange price paid.

The economic entity assumption requires that the activities...

D. Of an entity be kept separate from the activities of its owner

ON EXAM
The assumption that the unit of measure remains sufficiently constant over time is part of the:

D. Monetary unit assumption

ON EXAM
A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the:

D. Economic entity assumption

The basic accounting equation may be expressed as:

*Assets = Equities
*Assets - Liabilities = Stockholder's Equity
*Assets = Liabilities + Stockholder's Equity
D. All of these

A dividend is:

A. A distribution of the company's earnings to its stockholders

The basic accounting equation (Assets = Liabilities + Stockholder's Equity) CANNOT be restated as:

D. Assets + Liabilities = Stockholder's Equity

Stockholders' equity is increased by

B. Revenues

A balance sheet shows:

D. Assets, Liabilities, and Stockholders' Equity

An income statement:

D. Presents the revenues and expenses for a specific period of time

All of the financial statements are for a period of time, EXCEPT the:

C. Balance sheet

Transactions are initially recorded in the:

A. General ledger

The right side of an account is referred to as the:

D. Credit side

The equality of the accounting equation can be proven by preparing a:

A. Trial balance

Which if the following accounts would be increased with a debit?

D. Dividends

The left side of an account is:

C. The debit side

*ON EXAM*
An account is a part of the financial information system and is described by all EXCEPT which one of the following?

B. An account is a source document
----------------------------------------------------------------------------------
An account has a debit and credit side
An account may be part of a manual or a computerized accounting system
An account has a title

The right side of an account:

D. Is the credit side

An account consists of:

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

An account consists of:

C. Three parts

A T-account is:

A. A way of depicting the basic form of an account

In recording an accounting transaction in a double-entry system:

C. The amount of the debits must always equal the amount of the credits

*ON EXAM* #9
Which of the following correctly identifies normal balances of accounts

D. Assets Debit
Liabilities Credit
Stockholders' Equity Credit
Revenues Credit
Expenses Debit

An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?

D. Credit a different asset account for $500

Which of the following statements in NOT true:

A. Expenses increase stockholders' equity
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Expenses have normal debit balances
Expenses decrease stockholders' equity
Expenses are a negative factor in the computation of net income

On January 14, Franco Industries purchased supplies of $500 on account. The entry to record the purchase will include:

A. A debit to Supplies and a credit to Accounts payable.

The usual sequence of steps in the transaction recording process is:

B. Analyze, Journal, Ledger

The recording of wages earned but not yet paid is an example of an adjustment that

A. Recognizes an accrued expense

A list of accounts and their balances after all adjustments have been made is known as the:

B. Adjusted trial balance

Prior to the recording of entries, revenues exceed expenses by $80,000. Adjusting entries for accrued wages of $10,000 and depreciation expense of $10,000 were made. Net income for the year would be:

C. $60,000

The adjustment for depreciation is an example of:

B. Apportioning costs between two or more periods

Most businesses choose fiscal years which correspond to

A. The calendar year

An accounting time period that is one year in length, but does NOT begin on January 1, is referred to as:

A. A fiscal year

The time period assumption is also referred to as the:

C. Periodicity assumption

Which of the following are in accordance with generally accepted accounting principles?

A. Accrual basis accounting

The revenue recognition principle dictates that revenue should be recognized in the accounting records

B. When it is earned

The matching principle matches

B. expenses with revenues.

Adjusting entries are required:

D. Every time financial statements are prepared.

Adjusting entries are required

A. because some costs expire with the passage of time and have not yet been journalized.

An adjusting entry

C. affects a balance sheet account and an income statement account.

Accounts often need to be adjusted because

B. many transactions affect more than one time period

Adjusting entries are

B. usually required before financial statements are prepared

Expenses incurred but not yet paid or recorded are called

B. Accrued expenses

Accrued revenues are

C. earned but not yet received or recorded.

Prepaid expenses are

A. paid and recorded in an asset account before they are used or consumed.

Accrued expenses are

C. Incurred but not yet paid or recorded

The worksheet is a type of

C. Working paper

In preparing closing entries, which of the following columns of the worksheet are the most helpful?

C. The income statement columns

The proper sequence for the accounting cycle is

A. analyze, journalize, post, adjust, prepare statements, close.

After all the closing entries have been posted, the balance of the income summary will be:

D. Zero

*ON EXAM*
When using a worksheet, adjusting entries are journalized

C. after the worksheet is completed and after financial statements have been prepared.

*ON EXAM*
If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has

C. Suffered a net loss for the period

Adjusting entries are prepared from

B. the adjustments columns of the worksheet.

Closing entries are necessary for

B. temporary accounts only.

*ON EXAM*
Each of the following accounts is closed to Income Summary except:

B. Dividends

Closing entries are made

C. in order to transfer net income (or loss) and dividends to the retained earnings account.

Closing entries are

D. journalized in the general journal.

The income summary account

D. is a temporary account.

If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a

C. credit to the retained earnings account.

Closing entries are journalized and posted

B. after the financial statements are prepared.

In preparing closing entries:

B. each expense account will be credited.

The balance in the income summary account before it is closed will be equal to

A. The net income or loss on the income statement

Income from operations is gross profit less

B. operating expenses

An enterprise which sells goods to customers is known as a

C. Retailer

Which of the following would not be considered a merchandising company?

C. Service Firm

A merchandising company that sells directly to consumers is a

A. Retailer

*ON EXAM*
Two categories of expenses for merchandising companies are

C. cost of goods sold and operating expenses

The primary source of revenue for a wholesaler is

C. the sale of merchandise

Sales revenue less cost of goods sold is called

A. Gross Profit

After gross profit is calculated, operating expenses are deducted to determine

B. Operating income

Cost of goods sold is determined only at the end of the accounting period in

B. a periodic inventory system.

The gross profit rate is computed by dividing gross profit by

C. Net sales

Sales revenue less cost of goods sold is called

A. gross profit

Cost of goods sold is determined only at the end of the accounting period in

B. a periodic inventory system.

Which of the following is a true statement about inventory systems?

B. Perpetual inventory systems require more detailed inventory records

Bryan Company purchased merchandise from Cates Company with freight terms of FOB shipping point. The freight costs will be paid by the

B. buyer

In a perpetual inventory system, the Cost of Goods Sold account is used:

D. whenever there is a sale of merchandise or a return of merchandise sold

Sales revenues are usually considered earned when

C. goods have been transferred from the seller to the buyer

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