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Test 1

Which of the following is/are true about a credit?

1. It is part of the double entry procedure that keeps the accounting equation in balance
2. It represents a decrease to assets
3. It represents an increase to liabilities
4. It is on the right of the T account

All the above

When a payment is made on account payable what happens?

Assets and liabilities decrease

When a magazine sells subscriptions to customers, it is an example of:

Unearned Revenue

A Two or more people acting in coordination to circumvent internal controls

act of collusion

Purchasing office supplies on account will:

Increase assets and increase liabilities

The accounting equation is defined as:

Assets=liabilities+stockholder's equity

Transactions of a company that included the purchase and sale of long-term productive assets are referred to as:

Investing activities

Which of the following is an example of detective controls?

Reconciliations

Receiving assets from customers before services are performed results in:

Unearned Revenue

Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket means what?

Limited liability

Which of the following is/are true about a "debit"?

It is part of the double entry procedure that keeps the accounting equation in balance
It represents an increase to assets
It represents a decrease to liabilities

All of the above

When the company pays stockholders a dividend, what is the effect on the accounting equation for that company?

Decrease assets and decrease stockholder's equity

Common examples of cash equivalents include all of the following except:

Accounts receivable

What is the concept behind separation of duties in establishing internal controls?

Employee fraud is less likely to occur when access to assets and access to accounting records are separated

The financial statement that record activity over an interval of time is (are) the:

Income statement and statement of cash flow

Pumpkin Inc. Sold $500 in pumpkins to a customer on account on January 1. On January 11 Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?

No net effect to the accounting

The costs of providing goods and services to customers are referred to as:

Expenses

Adjusting entries are primarily needed for:

Accrual-basis accounting

Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as

Operating Costs

Which definition below best describes financial accounting?

Measuring

Air France collected cash on Feb. 4 from the sale of a ticker to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue?

April

The following data were obtained from the bank statement and from the process of reconciling it:

Deduct checks outstanding; add deposit outstanding

On July 1, 2012, Rents-A-Lot Inc. Paid $72,000 for 36 months of advance rent on its warehouse. What would be the amount of rent expense in the 2013 financial statements for Rents-A-Lot under both cash basis and accrual basis accounting?

Cash basis $0 Accrual basis $24,000

Sooner Company has had a net income of $8000, $5000, $12000, and $10000 over the first four years of the company's existence. If the average amount of dividends paid over the last four years is $3000, what is the retained earnings balance?

$23000

Purchase drill in Nov. 14 on account Drill delivered 2 weeks later customer paid on Dec. 5. When should sears record revenue.

November

A customer purchased a $2000 item at Appliance WOrld, paying with a credit card. Appliance World is charged 2% fro by the credit card company. When recording this sale, Appliance World would:

Credit Sales Revenue for $2000

After preparing a bank reconciliation, a check outstanding for the payment of advertising would be recorded with:

No entry needed

Always involve at least one income statement account and one balance sheet account

Adjusting entries

Emmitt had the following final balances after the first year of operations: assets-55000 stockholders- 25000 dividends- 3000 net income- 10000 What is the amount of Emits liabilities

30000

The following data were obtained from the bank statement and from the process of reconciling it
Bank service charges=120
Deposit outstanding=150
Interest earned on the bank account=10
Checks outstanding=400
Which items should be deducted from and added to the bank balance in completing the reconciliation

Deduct check outstanding; and deposit outstanding

A company provide 1500 of services to customers during the month of May. The customers paid in June. What would the impact of these transaction be during May on each of the following 3 items

cash balance (no effect)
Cash-basis Net Income (no effect)
Accrual-basis Net Income (increase)

1. Income statement
2. Statement of stockholders' equity
3. Balance sheet
4. Statement of cash flows
Are called what?

Financial Statements

a financial statement that reports the company's revenues and expenses over an interval of time.

Income Statement

a financial statement that summarizes
the changes in stockholders' equity over an interval of time.

Statements of Stockholder's Equity

a financial statement that presents the financial position of the company on a particular date.

Balance Sheet

a financial statement that measures activities involving cash receipts and cash payments over an interval of time.

Statement of Cash Flow

generally include cash transactions for the purchase and sale of investments and productive long-term assets.

Investing Cash Flow

include cash receipts and cash payments for transactions involving revenues and expenses.

Operating Cash Flow

include cash transactions with lenders, such as borrowing money and repaying debt, and with stockholders, such as issuing stock and paying dividends.

Financing Cash Flow

a list of all accounts and their balances at a particular date, showing that total debits equal total credits.

Trial Balance

in which we record revenues when we earn them (the revenue recognition principle) and we record expenses with related revenues (the matching principle).

accrual-basis accounting

states that we record revenue in the period in which we earn it.

The revenue recognition principle

states that we recognize expenses in the same period as
the revenues they help to generate.

The matching principle

we record revenues at the time we receive cash and expenses at the time we pay cash.

cash-basis accounting

record events that have occurred but that we have not yet recorded.

adjusting entries

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